As filed with the Securities and Exchange Commission on May 16, 2000
Registration No. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PAINEWEBBER ASSET ACCEPTANCE CORPORATION
(Exact name of Registrant as specified in its Charter)
Delaware
(State of Incorporation)
13-4112735
(I.R.S. Employer Identification Number)
1285 Avenue of the Americas
New York, New York 10019
212-713-2000
(Address and telephone number of Registrant's principal executive offices)
John L. Fearey, Esq.
PaineWebber Asset Acceptance Corporation
1285 Avenue of the Americas
New York, New York 10019
212-713-2000
(Name, address and telephone number of agent for service)
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Copies to:
Michael S. Gambro, Esq.
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
212-504-6000
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Approximate date of commencement of proposed sale to the public:
From time to time on or after the effective date of this Registration Statement,
as determined by market conditions.
If the only securities being registered on this Form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
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
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Title of each Proposed Proposed maximum
class of maximum aggregate Amount of
securities to be Amount to be offering price offering registration
registered (1) registered per unit (2) price (2) fee
Asset-Backed $1,000,000 100% $1,000,000 $264
Certificates and
Asset-Backed
Notes, issued in
series
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(1) This Registration Statement and the registration fee pertain to the initial
offering of the Asset-Backed Certificates and Asset-Backed Notes registered
hereunder by the Registrant and to offers and sales relating to market-making
transactions by PaineWebber Incorporated, an affiliate of the Registrant. The
amount of Asset-Backed Certificates and Asset-Backed Notes that may be initially
offered hereunder and the registration fee shall not be affected by any offers
and sales relating to any such market-making transactions.
(2) Estimated solely for the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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EXPLANATORY NOTE
This Registration Statement includes two base prospectuses and four forms of
prospectus supplement. Version 1 of the base prospectus may be used in offering
a series of certificates or notes backed by equipment leases and equipment
loans. Version 2 of the base prospectus may be used in offering a series of
certificates or notes backed by receivables consisting of auto loans, auto
leases, recreational vehicle loans, boat loans, lottery proceeds, litigation
settlement proceeds and other structured settlements. Version 1 of the form of
prospectus supplement may be used in offering a series of certificates backed by
equipment leases and equipment loans. Version 2 of the form of prospectus
supplement may be used in offering a series of notes backed by equipment leases
and equipment loans. Version 3 of the form of prospectus supplement may be used
in offering a series of certificates backed by receivables consisting of auto
loans, auto leases, recreational vehicle loans, boat loans, lottery proceeds,
litigation settlement proceeds and other structured settlements. Version 4 of
the form of prospectus supplement may be used in offering a series of notes
backed by receivables consisting of auto loans, auto leases, recreational
vehicle loans, boat loans, lottery proceeds, litigation settlement proceeds and
other structured settlements. Each form of prospectus supplement is meant to be
illustrative of the type of disclosure that might be presented for a series of
certificates or notes, but is not meant to be, and necessarily cannot be,
exhaustive of all possible features that might exist in a particular series.
These forms assume the possibility of credit enhancement in the form of
overcollateralization and a security insurance policy, but as described in each
base prospectus, the types of credit support may vary from series to series.
Each base prospectus used (in either preliminary or final form) will be
accompanied by the applicable prospectus supplement.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until we deliver a final prospectus and prospectus
supplement. This prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS
_______________, 2000
PAINEWEBBER ASSET ACCEPTANCE CORPORATION,
Depositor
EQUIPMENT CONTRACT BACKED SECURITIES
(Issuable in Series)
PaineWebber Asset Acceptance Corporation from time to time will offer
equipment contract backed certificates or equipment contract backed notes. We
will offer the certificates or notes through this prospectus and a separate
prospectus supplement for each series.
For each series we will establish a trust fund consisting primarily of any
combination of the following receivables:
o finance leases,
o installment sale contracts,
o loan contracts, and
o participation interests in finance leases and installment sale and loan
contracts.
Each trust fund may also include a security interest in the underlying
equipment and any related property and proceeds.
The certificates of a series will represent beneficial ownership interests
in the trust fund. The notes of a series will represent indebtedness of the
trust fund. The certificates or notes of a series may be divided into two or
more classes which may have different interest rates and which may receive
principal payments in differing proportions and at different times. In addition,
the rights of certain holders of classes may be subordinate to the rights of
holders of other classes to receive principal and interest.
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YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 15 IN THIS
PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
The securities will not represent obligations of PaineWebber Asset
Acceptance Corporation or any of its affiliates. No governmental agency will
insure the certificates or the collateral securing the securities.
You should consult with your own advisors to determine if the offered
securities are appropriate investments for you and to determine the applicable
legal, tax, regulatory and accounting treatment of the offered securities.
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THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR NOTES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
No secondary market will exist for a series of certificates or notes prior
to its offering. We cannot assure you that a secondary market will develop for
the certificates or notes of any series, or, if it does develop, that it will
continue.
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PAINEWEBBER INCORPORATED
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We may offer the certificates or notes, as applicable, through one or more
different methods, including offerings through underwriters, as more fully
described under "Methods of Distribution" in this prospectus and as may be
described in the related prospectus supplement. Our affiliates may from time to
time act as agents or underwriters in connection with the sale of the offered
certificates or notes, as applicable. We may retain or hold for sale, from time
to time, one or more classes of a series of certificates, or notes, as
applicable. We may offer some classes of the certificates or notes, if so
specified in the related prospectus supplement, in one or more transactions
exempt from the registration requirements of the Securities Act of 1933. These
offerings will not be made under this prospectus or the related registration
statement.
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We will acquire the receivables in the trust fund for a series from one or
more affiliated or unaffiliated receivables sellers. Each receivables seller
will be an entity, including vendors, generally in the business of originating
or acquiring their particular type of receivables. We will acquire the
receivables from the related receivables seller(s) on or prior to the date of
issuance of the related securities, as described in this prospectus and in the
related prospectus supplement. The receivables included in a trust fund will be
serviced by a servicer described in the related prospectus supplement.
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This prospectus may not be used to consummate sales of the offered
certificates or notes, as applicable, unless accompanied by a prospectus
supplement.
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TABLE OF CONTENTS
PAGE
SUMMARY OF TERMS..............................................................1
RISK FACTORS.................................................................15
Limited Liquidity of Securities May Adversely Affect the
Market Value of Your Securities........................................15
Competing Claims to Ownership of Finance Leases or Installment
Sale or Loan Contracts May Result in Reduced Payments
on Your Securities.....................................................15
Security Interests of Other Persons May be Superior to the
Trustee's Interests Which May Result in Reduced Payments
on Your Securities.....................................................16
Issuer May Not Fully Recover Upon Repossession and Disposition............16
Insolvency and Bankruptcy Proceedings Could Adversely
Affect Payments on the Securities......................................17
Equipment May Become Obselete.............................................18
Levels of Delinquencies May Increase......................................18
Some Classes of Securities May Be Subordinated in Priority
of Payment.............................................................18
Securityholders Must Rely on Limited Receivables for Repayment............19
The Issuance of Another Series by a Master Trust May Adversely
Affect Payments on the Securities......................................19
Book-Entry Registration May Decrease Liquidity and Delay Payment..........19
A Reduction in the Rating of a Credit Enhancer Could Result
in a Reduced Rating for the Securities.................................20
Yield is Sensitive to Rate of Principal Prepayments on Receivables........20
UCC Provisions May Affect Enforcement of Leases...........................22
Contracts Related to Software and Services May Not Be Paid................22
DEFINED TERMS................................................................22
THE TRUST FUNDS..............................................................22
THE ISSUERS..................................................................25
THE RECEIVABLES..............................................................26
Receivables Pools.........................................................26
Delinquencies, Repossessions, and Net Losses..............................26
Maturity and Prepayment Considerations....................................26
Acquisition of Receivables From Receivables Sellers.......................27
USE OF PROCEEDS..............................................................27
THE DEPOSITOR................................................................28
THE TRUSTEE..................................................................28
DESCRIPTION OF THE SECURITIES................................................28
General...................................................................28
General Payment Terms of Securities.......................................29
Master Trusts.............................................................31
Book-Entry Registration...................................................33
Definitive Securities.....................................................36
Reports to Securityholders................................................37
DESCRIPTION OF THE TRUST AGREEMENTS..........................................37
Acquisition of the Receivables Under a Receivables Acquisition
Agreement..............................................................38
Accounts..................................................................38
The Servicer..............................................................39
Servicing Procedures......................................................39
Payments on Receivables...................................................40
Servicing Compensation....................................................40
Distributions.............................................................41
Credit and Cash Flow Enhancements.........................................41
Statements to Indenture Trustees and Trustees.............................42
Evidence as to Compliance.................................................42
Certain Matters Regarding the Servicers...................................43
Servicer Default..........................................................43
Rights Upon Servicer Default..............................................44
Waiver of Past Defaults...................................................44
Amendment.................................................................44
Termination...............................................................45
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES.....................................46
General...................................................................46
The Equipment.............................................................46
FEDERAL INCOME TAX CONSIDERATIONS............................................48
FASITs....................................................................49
Issuers Treated as Partnerships...........................................49
Tax Characterization of the Issuer as a Partnership....................49
Tax Consequences to Holders of the Notes...............................50
Tax Consequences to Holders of the Certificates........................52
Issuers Treated as Grantor Trusts.........................................57
Tax Characterization of Grantor Trusts.................................57
Strip Certificates.....................................................61
ERISA CONSIDERATIONS.........................................................65
General...................................................................65
Certain Requirements Under ERISA and the Code.............................66
General................................................................66
Parties in Interest/Disqualified Persons...............................66
Delegation of Fiduciary Duty...........................................67
Applicability to Non-ERISA Plans.......................................67
Non-ERISA Plans and Exempt Plans..........................................67
Unrelated Business Taxable Income--Residual Certificates..................68
METHODS OF DISTRIBUTION......................................................68
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................70
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LEGAL MATTERS................................................................71
FINANCIAL INFORMATION........................................................71
ADDITIONAL INFORMATION.......................................................71
RATING.......................................................................71
GLOSSARY OF TERMS............................................................73
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Two separate documents contain information about the offered certificates
or notes, as applicable. These documents progressively provide more detail:
(1) this prospectus, which provides general information, some of which may
not apply to the offered securities; and
(2) the accompanying prospectus supplement for each series, which
describes the specific terms of the offered securities.
The description of terms in the accompanying prospectus supplement will
include:
o details regarding the class or classes of the securities;
o the rate of interest, other applicable rate or the manner of determining
the rate and authorized denominations of each class of the securities;
o information concerning the receivables and insurance policies, cash
accounts, letters of credit, financial guaranty insurance policies, third
party guarantees or other forms of credit enhancement relating to one or
more pools of receivables or the related securities;
o the specified interest of each class of securities in the distributions
from the trust fund and the manner and priority of the distributions from
the trust fund;
o information as to the nature and extent of subordination of a series of
securities;
o the date of payment to securityholders;
o information regarding the servicer(s) for the related receivables;
o information regarding the receivables seller(s) for the related
receivables and the underwriting guidelines used by the receivables
seller(s) for the receivables;
o the circumstances under which each trust fund may be subject to early
termination;
o information regarding tax considerations; and
o additional information with respect to the method of distribution of the
securities.
IF THE TERMS OF THE OFFERED SECURITIES VARY BETWEEN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to provide
you with information that is different from that contained in this prospectus
and the related prospectus supplement. The information in this prospectus is
accurate only as of the date of this prospectus.
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If you require additional information, the mailing address of our principal
executive offices is PaineWebber Asset Acceptance Corporation, 1285 Avenue of
the Americas, New York, NY 10019 and the telephone number is (212) 713-2000. For
other means of acquiring additional information about us or a series of
securities, see "Incorporation of Certain Information by Reference" in this
prospectus.
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SUMMARY OF TERMS
THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION FROM THIS DOCUMENT. IT DOES
NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN
INVESTMENT DECISION. PLEASE READ THIS ENTIRE PROSPECTUS AND THE ACCOMPANYING
PROSPECTUS SUPPLEMENT CAREFULLY TO UNDERSTAND ALL OF THE TERMS OF A SERIES OF
SECURITIES.
RELEVANT PARTIES
Issuer.................... With respect to each series of securities the
issuer will be:
o the depositor;
o a special-purpose company organized and
established by the depositor; or
o a trust to be formed by the depositor.
See "The Issuers" in this prospectus.
Depositor................. PaineWebber Asset Acceptance Corporation, the
depositor, is a corporation organized under the
laws of the state of Delaware. The depositor's
principal executive offices are located at 1285
Avenue of the Americas, New York, New York 10019,
and its telephone number is (212) 713-2000. See
"The Depositor" in this prospectus.
Servicer.................. The servicer for each trust fund will be specified
in the related prospectus supplement. The servicer
will service the receivables comprising each trust
fund and administer each trust fund according to
the related servicing agreement. The servicer may
subcontract all or any portion of its obligations
as servicer under each servicing agreement to
qualified subservicers but the servicer will
remain liable with respect to its obligations. See
"The Servicer" in this prospectus.
Receivables Seller(s)..... The depositor will acquire the receivables from
one or more affiliated or unaffiliated receivables
sellers.
Trustee................... The trustee for each series of securities will be
specified in the related prospectus supplement. In
addition, the issuer may separately enter into an
indenture and may issue notes under the indenture.
If the issuer is a trust and separately enters
into an indenture and then issues notes under the
indenture, the issuer and the indenture will be
administered by separate, independent trustees as
required by the rules and regulations under the
Trust Indenture Act of 1939 and the Investment
Company Act of 1940.
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SECURITIES
Description of
Securities................ Each class of securities of any series will either
be:
o certificates which evidence beneficial ownership
in a segregated pool of receivables; or
o notes which represent indebtedness of the issuer
secured by the trust fund, as described in this
prospectus and in the related prospectus
supplement.
For each series we will establish a trust fund
consisting primarily of any combination of the
following receivables, together with all related
monies that are received:
o finance leases;
o installment sale contracts;
o loan contracts; or
o participation interests in the finance leases
and installment sale and loan contracts.
Each trust fund also may include a security
interest in the underlying equipment and related
property together with the related proceeds.
The equipment underlying the receivables included
in each trust fund will be limited to personal
property which is leased or financed by the
related receivables seller to a lessee. This lease
or financing will be under installment sale or
loan contracts. These installment sale contracts
or loan contracts are either "chattel paper," as
defined in the Uniform Commercial Code, or would
be "chattel paper" but for a technical
definitional matter, but in any event are not
treated materially differently from "chattel
paper" for purposes of title transfer, security
interests or remedies on default. This equipment
will be further limited to personal property which
is subject to:
o UCC provisions relating to title transfer,
security interests and remedies on default; and
o equipment leased to the related lessee for use
by the lessee in the ordinary course of business
or for home use such as:
o medical equipment;
o restaurant equipment;
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o film and video production equipment;
o other industrial and production equipment;
o data processing equipment;
o telecommunications equipment; or
o office equipment and furniture.
No trust fund will include receivables with
respect to which the related finance lease or
installment sale or loan contract or the related
equipment is subject to federal or state
registration or titling requirements which differ
materially from, or replace, standard UCC
provisions governing:
o the manner in which title or security interests
in "chattel paper" or the related equipment is
determined or perfected; or
o remedies on default.
For example, no trust fund will include
receivables for which the underlying finance lease
or installment sale or loan contract or equipment
relate to:
o motor vehicles;
o aircraft;
o ships or boats;
o firearms or other weapons;
o railroad rolling stock;
o facilities such as factories, warehouses or
plants subject to state laws governing the
manner in which title or security interest in
real property is determined or perfected.
However, the receivables may include finance
leases and installment sale and loan contracts and
a security interest in the equipment relating to
individual, discrete components of assets like
those listed above.
The related prospectus supplement will specify if
there is credit enhancement with respect to a
trust fund or any class of securities. Credit
enhancement may include any one or more of the
following:
o a financial guaranty insurance policy issued by
an insurer specified in the related prospectus
supplement;
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o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support; or
o cash deposits or other arrangements.
In addition, credit enhancement may be provided by
means of subordination, cross-support among the
receivables or over-collateralization. The
depositor will acquire the receivables from the
related receivables seller(s) on or prior to the
date of issuance of the related securities, as
described in this prospectus and in the related
prospectus supplement.
With respect to securities representing beneficial
ownership interests in a trust, each trust will be
established under a pooling agreement between the
depositor and the trustee named in the pooling
agreement. Each pooling agreement will describe
the related pool of receivables held by the trust.
With respect to securities that represent debt
issued by the issuer, the issuer will enter into
an indenture between the issuer and the trustee
named in the indenture. Each indenture will
describe the related pool of receivables
comprising the trust fund and securing the debt
issued by the related issuer.
The receivables comprising each trust fund will be
serviced by the servicer under a servicing
agreement between the servicer and the related
issuer.
Any individual trust fund may contain in a single
agreement, or in several agreements:
o the contractual arrangements relating to the
establishment of a trust, if any;
o the servicing of the related receivables;
o and the issuance of the related securities.
These agreements may combine certain aspects of
the pooling agreement, the servicing agreement and
the indenture. For example, the agreement may be
in the form of a pooling and servicing agreement,
or a servicing and collateral management
agreement.
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The trustee is any and all persons acting as
trustee under a trust agreement. For purposes of
this prospectus, the term "trust agreement" as
used with respect to a trust fund means:
o any and all agreements relating to the
establishment of a trust, if any;
o the servicing of the related receivables; and
o the issuance of the related securities.
Securities Will
Be Non-Recourse........... Except for certain non-recourse debt described
under "Federal Income Tax Considerations," the
securities will not be obligations of the
depositor, the related servicer, the related
receivables seller(s) or any person other than the
related issuer in the case of securities issued as
debt. The notes of a given series will represent
obligations of the issuer. The certificates of a
given series represent beneficial interests in the
related issuer only. In each case, the sole source
of payment for the securities will be the
receivables of the issuer. As may be described
further in the related prospectus supplement,
certain types of credit enhancement, including the
following, may constitute a full recourse
obligation of the issuer of the credit
enhancement:
o a letter of credit;
o a financial guaranty insurance policy;
o a reserve fund; or
o any other credit enhancement provided in the
related prospectus supplement.
General Nature of
the Securities as
Investments............... All of the securities offered under this
prospectus and the related prospectus supplement
will be rated in one of the four highest rating
categories by one or more rating agencies.
Additionally, all of the securities offered under
this prospectus and the related prospectus
supplement will be of the fixed-income type. Fixed
income securities generally, but not always, have
a principal balance and a specified interest rate.
Each series or class of fixed income securities
offered under this prospectus and the related
prospectus supplement may have a different
interest rate, which may be a fixed or adjustable
rate. The related prospectus
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supplement will specify the interest rate for each
series or class of fixed income securities or the
initial interest rate and the method for
determining subsequent changes to the interest
rate.
A series may include one or more classes of fixed
income securities, known as strip securities.
These strip securities will be entitled to:
o principal distributions, with disproportionate,
nominal or no interest distributions; or
o interest distributions, with disproportionate,
nominal or no principal distributions.
In addition, a series of securities may include
two or more classes of fixed income securities:
o that differ as to timing, sequential order,
priority of payment, interest rate, amount of
distribution of principal or interest or both;
or
o as to which 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 portions of
the related pool of receivables.
These series may include one or more classes of
fixed income securities known as accrual
securities. Accrual securities will not have a
portion of their accrued interest distributed.
Rather, the accrued interest will be added to the
principal balance, or nominal balance, in the case
of accrual securities which are also strip
securities, of those classes of fixed income
securities on each payment date, or in the manner
described in the related prospectus supplement.
A series may include one or more other classes of
fixed income securities that are senior to one or
more other classes of fixed income securities in
respect of a portion of the distributions of
principal and interest and allocations of losses
on receivables, if provided for in the related
prospectus supplement. In addition, certain
classes of senior fixed income securities, or
subordinate fixed income securities may be senior
to other classes of senior or subordinate fixed
income securities in respect of these
distributions or losses.
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General Payment
Terms of Securities....... The holders of the securities will be entitled to
receive payments on their securities on specified
payment dates. Payment dates with respect to fixed
income securities will generally occur monthly,
quarterly or semi-annually, as described in the
related prospectus supplement.
The related prospectus supplement will describe a
record date preceding the payment date, as of
which the trustee or its paying agent will fix the
identity of the securityholders for the purpose of
receiving payments on the next succeeding payment
date. The payment date will be a specified day of
each month described in the related prospectus
supplement.
Each trust agreement will provide for, and the
related prospectus supplement will describe, a
remittance period preceding each payment date. For
example, in the case of monthly-pay securities,
the remittance period may be the calendar month
preceding the month in which a payment date
occurs. Collections received on or with respect to
the related receivables constituting a trust fund
during a remittance period will be required to be
remitted by the servicer to the related trustee
prior to the related payment date and will be used
to fund payments to securityholders on the payment
date.
The related trust agreement may provide that all
or a portion of the payments collected on the
related receivables may be applied by the related
trustee to the acquisition of additional
receivables during a specified period rather than
be used to fund payments of principal to
securityholders during that period. The result of
this application of funds is that the related
securities will possess an interest-only period,
also commonly referred to as a revolving period,
which will be followed by an amortization period.
Any interest only or revolving period may, upon
the occurrence of specified events that may be
described in the related prospectus supplement,
terminate prior to the end of the specified period
and result in the earlier than expected
amortization of the related securities. In
addition, the related trust agreement may provide
that all or a portion of the collected payments
may be retained by the trustee, and held in
certain temporary investments for a specified
period prior to being used to fund payments of
principal to securityholders.
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The retention and temporary investment by the
trustee of the collected payments may be required
by the related trust agreement for the purpose of:
o slowing the amortization rate of the related
securities relative to the rent payment schedule
of the related receivables; or
o attempting to match the amortization rate of the
related securities to an amortization schedule
established at the time the securities are
issued.
This retention and temporary investment feature
may terminate upon the occurrence of events to be
described in the related prospectus supplement,
resulting in distributions to the specified
securityholders and an acceleration of the
amortization of those securities.
Neither the securities nor the underlying
receivables will be guaranteed or insured by any
governmental agency or instrumentality or the
depositor, the related servicer, the related
receivables seller, any trustee, or any of their
affiliates.
MASTER TRUSTS; ISSUANCE OF
ADDITIONAL SERIES............ A trust agreement may authorize the trustee to
issue equity certificates which evidence the
equity interest in a master trust. The trust
agreement may provide that the depositor may cause
the related trustee to issue one or more new
series of securities which would cause a reduction
in the related equity interest in the master trust
represented by the related equity certificate.
Under this type of trust agreement, the depositor
may determine the terms of any new series. See
"Description of the Securities--Master Trusts" in
this prospectus.
The depositor may cause the related trustee to
offer any new series to the public or other
investors, in transactions:
o either registered or exempt from registration
under the Securities Act of 1933; and
o directly or through one or more underwriters or
placement agents, in fixed-price offerings or in
negotiated transactions or otherwise.
A new series to be issued by a master trust which
has a series outstanding may, as may be described
in the related prospectus supplement, only be
issued upon satisfaction of the conditions
described under "Description of the
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Securities--Master Trusts" in this prospectus.
These conditions will include the condition that
the subsequent issuance will not effect the rating
given to any existing series issued by the master
trust. Securities secured by receivables held by a
master trust will be entitled to monies received
relating to those receivables on a pari passu
basis with the other securities issued under the
other trust agreements by that master trust.
CROSS-COLLATERALIZATION...... The source of payment for securities of each
series will be the receivables of the related
trust fund only. However, a series or class of
securities may include the right to receive monies
from a common pool of credit enhancement which may
be available for more than one series of
securities.
Common pools of credit enhancement include:
o a master reserve account;
o a master insurance policy; or
o a master collateral pool consisting of similar
receivables.
TRUST FUNDS.................. As may be specified in the related prospectus
supplement, each trust fund will consist of the
related finance leases and installment sale and
loan contracts, and may include a security
interest in the related equipment. To the extent
specified in the related prospectus supplement,
credit enhancement with respect to a trust fund or
any class of securities may include any one or
more of the following:
o a policy issued by an insurer specified in the
related prospectus supplement;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o repurchase obligations;
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o third party payments or other support; or
o cash deposits or other arrangements.
Credit enhancement also may be provided by means
of subordination, cross-support among the
receivables or over-collateralization. See
"Description of the Trust Agreements--Credit and
Cash Flow Enhancements" in this prospectus. The
finance leases and installment sale and loan
contracts are either obligations for the lease or
purchase of the equipment, or evidence borrowings
used to acquire the equipment. These finance
leases and installment sale and loan contracts
entitle the related lessor to payments of rent and
related payments and to either:
o the return of the equipment at the termination
of the finance leases and installment sale and
loan contracts; or
o with respect to some of the sale and loan
contracts, the payment of a purchase price for
the equipment at the election of the lessee.
The leases will consist of finance leases. Finance
leases usually have a term greater than three
years. In a finance lease, the lessor transfers
substantially all benefits and risks of ownership
to the lessee.
In accordance with Statement of Financial
Accounting Standards No. 13, a lease is classified
as a finance lease if the collectibility of lease
payments are reasonably certain and it meets one
of the following criteria:
o the lease transfers title and ownership of the
equipment to the lessee by the end of the lease
term;
o the lease contains a bargain purchase option;
o the lease term at inception is at least 75% of
the estimated life of the equipment; or
o the present value of the minimum lease payments
is at least 90% of the fair market value of the
equipment at beginning of the lease.
Installment sale contracts and loan contracts
secured by the related equipment provide for
scheduled payments which fully amortize the amount
financed by an obligor. The related prospectus
supplement will describe the type and
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characteristics of the sale and loan contracts
included in each trust fund relating to the
securities offered pursuant to this prospectus and
the related prospectus supplement.
With respect to the receivables comprising each
trust fund, the depositor will acquire the related
receivables from the receivables seller through a
receivables acquisition agreement or another
agreement as may be specified in the related
prospectus supplement. The finance lease or
installment sale or loan contract so acquired may
consist of participation interests in the finance
lease or installment sale or loan contracts that
evidence the obligor's obligation to pay.
The receivables will either be:
o transferred to an issuer under a pooling
agreement; or
o pledged to a trustee on behalf of
securityholders under an indenture.
The rights and benefits of the depositor or
transferor under a receivables acquisition
agreement will be assigned to the trustee on
behalf of the related securityholders.
PRE-FUNDING ACCOUNT.......... In addition, if specified in the related
prospectus supplement, the trust fund will include
monies on deposit in a pre-funding account to be
established with the trustee. The pre-funding
account will be used to acquire additional
receivables from time to time during the
pre-funding period specified in the related
prospectus supplement. The amount in the
pre-funding account, if any, will be reduced
during the related pre-funding period by the
amount used to purchase additional receivables.
Any amount remaining in the pre-funding account at
the end of the related pre-funding period will be
distributed to the related securityholders in the
manner described in the related prospectus
supplement.
If specified in the related prospectus supplement,
the depositor may be obligated to acquire from the
related receivables seller(s) and to either
transfer to an issuer or pledge to a trustee on
behalf of securityholders, additional receivables
from time to time during any pre-funding period
specified in the related prospectus supplement.
REGISTRATION OF SECURITIES... Securities may be represented by global securities
registered in the name of Cede & Co., as nominee
of DTC, or another nominee. In this case,
securityholders will not be entitled to receive
definitive securities representing the
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securityholders' interests, except in the
circumstances that may be described in the related
prospectus supplement. See "Description of the
Securities--Book-Entry Registration" in this
prospectus.
CREDIT AND CASH FLOW
ENHANCEMENT.................. Credit enhancement with respect to a trust fund or
any class of securities may include any one or
more of the following:
o a policy issued by an insurer specified in the
related prospectus supplement;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support; and
o cash deposits or other arrangements.
Any form of credit enhancement will have certain
limitations and exclusions from coverage which
will be described in the related prospectus
supplement. See "Description of the Trust
Agreements--Credit and Cash Flow Enhancements" in
this prospectus.
RECEIVABLES ACQUISITION
AGREEMENT.................... The depositor or the related receivables seller
may be obligated to acquire from the related
trust fund any receivable transferred under a
pooling agreement or pledged under an indenture if
the interest of the securityholders in that
receivable is materially and adversely affected by
an uncured breach of any representation or
warranty made by the depositor or the related
receivables seller with respect to that
receivable. To the extent that the depositor
acquires any receivables, the related receivables
seller may be obligated to acquire those
receivables from the depositor under the related
receivables acquisition agreement at the same time
as the depositor's acquisition of the receivables
from the applicable trust fund. The obligation of
the depositor to acquire any receivables for which
the related receivables seller has breached a
representation or warranty may be subject to the
related receivables seller's acquisition of those
receivables from the depositor. In addition, if so
specified in the related prospectus supplement,
the depositor may reacquire certain receivables or
substitute other receivables for those receivables
held by a trust fund, subject to specified
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conditions set forth in the related trust
agreement and receivables acquisition agreement.
SERVICER'S COMPENSATION...... The servicer will be entitled to receive a fee for
servicing the finance leases and installment sale
and loan contracts of each trust fund equal to a
specified percentage of the value or principal
balance of the receivables held in the related
trust fund, as set forth in the related prospectus
supplement. See "Description of the Trust
Agreements--Servicing Compensation" in this
prospectus.
OPTIONAL TERMINATION......... The related servicer, the related receivables
seller, the depositor, or other entities may cause
early retirement of a series of securities under
the circumstances and in the manner set forth in
this prospectus under "Description of the Trust
Agreements--Termination" and as may be described
in the related prospectus supplement.
MANDATORY TERMINATION........ The trustee, the related servicer or other
entities that may be specified in the related
prospectus supplement may be required to cause the
early retirement of all or any portion of a series
of securities. The applicable party would cause
the early retirement by soliciting competitive
bids for the purchase of the related trust fund or
otherwise, in the manner specified under "The
Trust Agreements-- Termination" in this
prospectus.
TAX CONSIDERATIONS........... Securities of each series offered by this
prospectus will, for federal income tax purposes,
constitute either:
o interests in an issuer treated as a grantor
trust under applicable provisions of the Code;
o debt issued by an issuer or by the depositor; or
o interests in an issuer which is treated as a
partnership.
The prospectus supplement for each series of
securities will summarize federal income tax
considerations relevant to the purchase, ownership
and disposition of the securities. Investors are
advised to consult their tax advisors and to
review "Federal Income Tax Considerations" in this
prospectus and in the related prospectus
supplement.
ERISA CONSIDERATIONS......... The prospectus supplement for each series of
securities will summarize considerations under
ERISA, relevant to the purchase of those
securities by employee benefit plans and
individual retirement accounts. See "ERISA
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Considerations" in this prospectus in the related
prospectus supplement.
RATINGS...................... Each class of securities offered under this
prospectus and the related prospectus supplement
will be rated in one of the four highest rating
categories by one or more rating agencies. The
ratings will address, in the opinion of the rating
agencies, the likelihood that the issuer will be
able to make timely payment of all amounts due on
the related securities in accordance with the
terms of the securities. The ratings will neither
address any prepayment or yield considerations
applicable to any securities nor constitute a
recommendation to buy, sell or hold any
securities.
The ratings expected to be received with respect
to any securities will be set forth in the related
prospectus supplement.
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RISK FACTORS
Before making an investment decision, you should carefully consider the
following risks and the risks described under "Risk Factors" in the prospectus
supplement for the applicable series of securities. We believe these sections
describe the principal factors that make an investment in the securities
speculative or risky. In particular, distributions on your securities will
depend on payments received on and other recoveries with respect to the loans.
Therefore, you should carefully consider the risk factors relating to the loans
and the properties.
LIMITED LIQUIDITY OF SECURITIES MAY ADVERSELY AFFECT THE MARKET VALUE OF YOUR
SECURITIES
We cannot assure you that a secondary market for the securities of any
series will develop or, if it does develop, that it will provide you with
liquidity of investment or will continue for the life of your securities. The
market value of your securities will fluctuate with changes in prevailing rates
of interest. Consequently, if you sell your security in any secondary market
that develops, you may sell it for less than par value or for less than your
purchase price. You will have optional redemption rights only to the extent the
related prospectus supplement so specifies. The prospectus supplement for any
series may indicate that an underwriter intends to establish a secondary market
in the securities, but no underwriter must do so.
COMPETING CLAIMS TO OWNERSHIP OF FINANCE LEASES OR INSTALLMENT SALE OR LOAN
CONTRACTS MAY RESULT IN REDUCED PAYMENTS ON YOUR SECURITIES
In connection with the issuance of any series of securities, the related
receivables seller(s) will transfer finance leases or installment sale or loan
contracts to the depositor.
The related trust agreement may provide either that:
o the trustee will be required to maintain possession of the original
copies of all finance leases and installment sale and loan contracts that
constitute chattel paper; or
o the depositor, the related receivables seller(s) or the related servicer
will retain possession of the finance leases and installment sale and
loan contracts.
If the depositor or a receivables seller retains possession of the related
finance lease or installment sale or loan contract, the servicer may take
possession of the original copies as necessary for its enforcement. If any
finance lease or installment sale or loan contract remains in the possession of
the depositor or a receivables seller, the related prospectus supplement may
describe specific trigger events that will require delivery to the trustee. If
the depositor, the servicer, the trustee, the receivables seller or other third
party, sells or pledges and delivers the finance leases or installment sale or
loan contracts to another party, in violation of the receivables acquisition
agreement or the trust agreement, there is a risk that the other party could
acquire an interest that has a priority over the issuer's interest.
Furthermore, if the depositor, the servicer, a receivables seller or a
third party, while in possession of the finance lease or installment sale or
loan contract, is rendered insolvent, the event of insolvency may result in
competing claims to ownership or security interests in the
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finance lease or installment sale or loan contract. The attempt, even if
unsuccessful, could result in delays in payments on the securities. If
successful, the claim could result in losses to the securityholders or an
acceleration of the repayment of the securities. If provided in the related
prospectus supplement, the related receivables seller(s) and the depositor will
make certain representations and warranties with respect to the ownership of the
finance lease or installment sale or loan contract as of the date of the
transfer to the depositor and the issuer.
SECURITY INTERESTS OF OTHER PERSONS MAY BE SUPERIOR TO THE TRUSTEE'S INTERESTS
WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR SECURITIES
Pursuant to the trust agreement for a particular series of securities, the
trustee will be granted or assigned a security interest in the related
equipment, and the receivables acquisition agreement will require the
receivables seller to make certain representations and warranties with respect
to the security interest in the equipment.
As described in this prospectus and as may be described in the related
prospectus supplement, because of the administrative burden and expense that
would be entailed in so doing, neither the receivables seller nor the depositor
will file, or necessarily will be required to file, UCC financing statements
identifying the equipment as collateral pledged in favor of the related trustee
on behalf of the securityholders. In the absence of these filings any security
interest in the equipment will not be perfected in favor of the related trustee.
As a result the trustee could lose priority of its security interest in the
equipment. Neither the receivables seller nor the depositor will have any
obligation to reacquire equipment as to which a loss of priority of security
interest results in the loss of lien priority after the date the trust fund
receives an interest in the equipment unless otherwise obligated in the related
prospectus supplement.
ISSUER MAY NOT FULLY RECOVER UPON REPOSSESSION AND DISPOSITION
If the depositor or the trustee must rely on repossession and disposition
of equipment to recover scheduled payments due on defaulted finance lease or
installment sale or loan contracts, the issuer may not receive the full amount
due on a finance lease or sale or loan contract or may not receive the full
amount on a timely basis. Other factors that may affect the ability of the
issuer to receive the full amount due on a finance lease or installment sale or
loan contract include:
o whether financing statements to perfect the security interest in the
equipment were filed;
o depreciation;
o obsolescence;
o damage or loss of any equipment; and
o the application of federal and state bankruptcy and insolvency laws.
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As a result, you may be subject to delays in receiving payments and may
suffer losses of your investment in the securities.
INSOLVENCY AND BANKRUPTCY PROCEEDINGS COULD ADVERSELY AFFECT PAYMENTS ON THE
SECURITIES
The depositor will take steps in structuring the transactions contemplated
by this prospectus that are intended to ensure that the voluntary or involuntary
application for relief by the related receivables seller or the depositor under
insolvency laws like the United States Bankruptcy Code or similar applicable
state laws will not result in the receivables of the related trust fund becoming
property of the estate of the receivables seller or the depositor within the
meaning of those insolvency laws. These steps may involve the creation by the
related receivables seller or the depositor of a separate, limited-purpose
company or trust whose organizational documents contain certain limitations,
including:
o restrictions on the nature of its business; and
o restrictions on its ability to commence a voluntary case or proceeding
under any insolvency law without the prior unanimous affirmative vote of
all its directors.
However, there can be no assurance that the activities of any
limited-purpose company or trust would not result in a court concluding that the
receivables and liabilities of the limited-purpose company or trust should be
consolidated with those of the related receivables seller or depositor in a
proceeding under any insolvency law.
If provided in the related prospectus supplement, the equity interest in a
trust fund, if any, may be transferred to the related limited-purpose
subsidiary.
If the receivables seller is the servicer, cash collections held by the
receivables seller may be commingled and used for the benefit of that
receivables seller prior to each payment date. In the event of the bankruptcy of
that receivables seller, the trustee may not have a perfected interest in those
collections.
In the event of an insolvency of the transferor of receivables, a court,
among other remedies, could attempt to recharacterize the transfer of the
receivables as a borrowing by the transferor of receivables or the related
securityholders, secured by a pledge of the receivables.
The attempt to recharacterize, even if unsuccessful, could result in delays
in payments on the securities. If the attempt to recharacterize were successful,
a court could elect to accelerate payment of the securities and liquidate the
receivables. The securityholders would then be entitled to the then outstanding
principal and interest on the receivables at the applicable interest rate to the
date of payment. As a result, you could lose the right to future payments of
interest and might incur reinvestment losses. The related prospectus supplement
may provide that, in the event the related issuer is rendered insolvent, the
related trustee will promptly:
o sell;
o dispose of; or
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o otherwise liquidate the related receivables.
The proceeds from this sale, disposition or liquidation of the receivables will
be treated as collections on the receivables. If the proceeds from the
liquidation of the receivables and any amount available from any credit
enhancement, if any, are not sufficient to pay securities of the related series
in full, the amount of principal returned to you will be reduced and you will
incur a loss.
Lessees of the equipment may be entitled to assert against the related
receivables seller, the depositor, or the issuer, claims and defenses which they
have against the receivables seller with respect to the receivables.
EQUIPMENT MAY BECOME OBSOLETE
In the event that there is a default on a finance lease or installment sale or
loan contract and the lessee and any guarantor has insufficient assets available
to pay the finance lease or sale or loan contract payments on the scheduled
payment dates, the only other source of moneys, other than the applicable credit
enhancements, if any, for those amounts will be the income and proceeds from the
disposition of the related equipment. Because the market value of equipment
generally declines with age and may be subject to sudden, significant declines
in value because of technological advances, in the event of a repossession and
sale of equipment subject to a default on a finance lease or installment sale or
loan contract, the issuer may not recover the entire amount due on the finance
lease or sale or loan contract. As a result, you may be subject to delays in
receiving payments and suffer losses of your investment in the securities.
LEVELS OF DELINQUENCIES MAY INCREASE
We cannot assure you that:
o the historical levels of delinquencies and losses experienced by the
related receivables seller on its portfolio of finance lease and
installment sale and loan contracts will be the same as the performance
of the finance leases and sale and loan contracts included in any trust
fund; or
o that those levels will continue in the future.
Delinquencies and losses could increase significantly for various reasons,
including changes in the federal income tax laws, changes in the local, regional
or national economies.
SOME CLASSES OF SECURITIES MAY BE SUBORDINATED IN PRIORITY OF PAYMENT
Distributions of interest and principal on one class of securities of a
series may be subordinated in priority of payment to interest and principal due
on other classes of securities of a related series. Moreover, each trust fund
will not have, nor is it permitted or expected to have, any significant assets
or sources of funds other than:
o the related receivables;
o a pre-funding account;
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o any related reserve account; and
o any other credit enhancement.
SECURITYHOLDERS MUST RELY ON LIMITED RECEIVABLES FOR REPAYMENT
The securities solely represent interests in the related trust or debt
secured by the related trust fund, and will not represent a recourse obligation
to other assets of the related receivables seller(s) or of the depositor. No
securities of any series will be insured or guaranteed by any receivables
seller, the depositor, the servicer, or the applicable trustee. Consequently,
holders of the securities of any series must rely for repayment primarily upon
payments on:
o the related receivables;
o any amounts on deposit in any pre-funding account;
o any reserve account; and
o any other credit enhancement, all as may be specified in the related
prospectus supplement.
THE ISSUANCE OF ANOTHER SERIES BY A MASTER TRUST MAY ADVERSELY AFFECT PAYMENT ON
THE SECURITIES
A master trust may issue more than one series. While the terms of any
additional series will be specified in a supplement to the related master trust
agreement, the provisions of the supplement and the terms of any additional
series, will not be subject to prior review by, or consent of, holders of the
securities of any series previously issued by the master trust. The terms may
include:
o methods for determining applicable investor percentages and allocating
collections;
o provisions creating different or additional security or credit
enhancements; and
o any other provisions which are made applicable only to that series.
The obligation of the related trustee to issue any new series is subject to
the condition, among others, that the issuance will not result in any rating
agency reducing or withdrawing its rating of the securities of any outstanding
series. We cannot assure you, however, that the terms of any series might not
have an impact on the timing or amount of payments received by a securityholder
of another series issued by the same master trust. See "Description of the
Securities--Master Trusts" in this prospectus.
BOOK-ENTRY REGISTRATION MAY DECREASE LIQUIDITY AND DELAY PAYMENT
Issuance of the securities in book-entry form may reduce the liquidity of
the securities in the secondary trading market since investors may be unwilling
to purchase securities for which they cannot obtain definitive physical
securities representing the securityholders' interests, except in the
circumstances as may be described in the related prospectus supplement.
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Since transactions in securities usually will be effected only through:
o DTC,
o direct or indirect participants in DTC's book-entry system, or
o certain banks,
the ability of a securityholder to pledge a security to persons or entities that
do not participate in the DTC system, or otherwise to take actions in respect to
the securities, may be limited due to lack of a physical security representing
the securities.
Securityholders may experience some delay in their receipt of distributions
of interest on and principal of the securities since distributions may be
required to be forwarded by the trustee to DTC. In this event, DTC will credit
the distributions to the accounts of its participants which then will credit
them to the accounts of the applicable class of securityholders either directly
or indirectly through indirect participants. See "Description of the
Securities--Book-Entry Registration" in this prospectus.
A REDUCTION IN THE RATING OF A CREDIT ENHANCER COULD RESULT IN A REDUCED RATING
FOR THE SECURITIES
The rating of securities credit enhanced by:
o a letter of credit,
o a financial guaranty insurance policy,
o a reserve fund,
o a credit or liquidity facilities,
o cash deposits, or
o other forms of credit enhancement,
will depend primarily on the creditworthiness of the credit enhancer that is the
issuer of the external credit enhancement device.
Any reduction in the rating assigned to the claims-paying ability of the
related credit enhancer to honor its obligations under any credit enhancement
below the rating initially given to the securities would likely result in a
reduction in the rating of the securities.
YIELD IS SENSITIVE TO RATE OF PRINCIPAL PREPAYMENTS
Because the rate of payment of principal on the securities will depend on
the rate of payment on the related finance leases and installment sale and loan
contracts, the rate of payment of principal on the securities cannot be
predicted. Payments on finance leases and installment sale and loan contracts
will include:
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o scheduled payments as well as partial and full prepayments, to the extent
not replaced with substitute finance leases and installment sale and loan
contracts;
o payments upon the liquidation of defaulted finance leases and installment
sale and loan contracts;
o payments upon acquisitions by the related receivables seller, the related
servicer or the depositor of finance leases and installment sale and loan
contracts from the related trust fund on account of a breach of
representations and warranties;
o payments upon an optional acquisition by the related receivables seller,
the related servicer or the depositor of finance leases and installment
sale and loan contracts from the related trust fund; and
o residual payments.
The rate of early terminations of finance leases and installment sale and
loan contracts due to prepayments and defaults may be influenced by a variety of
economic and other factors, including:
o obsolescence;
o current economic conditions; and
o tax considerations.
The risk of reinvesting distributions of the principal of the securities
will be borne by the securityholders. The yield to maturity on strip securities
or securities purchased at premiums or discounts to par will be extremely
sensitive to the rate of prepayments on the related receivables. In addition,
the yield to maturity on certain other types of classes of securities, including
strip securities, accrual securities, or other classes in a series including
more than one class of securities, may be relatively more sensitive to the rate
of prepayment of the related finance leases and installment sale and loan
contracts than other classes of securities.
The depositor does not have available to it any statistics as to prepayment
rates historically experienced in the equipment leasing industry. The rate of
prepayments of finance leases and installment sale and loan contracts cannot be
predicted and is influenced by a wide variety of economic, social, and other
factors, including:
o prevailing interest rates;
o the availability of alternate financing; and
o local and regional economic conditions.
Therefore, we cannot assure you as to the level of prepayments that a trust
fund will experience.
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You should consider the risk that a slower than anticipated rate of
prepayments on the receivables could result in an actual yield that is less than
the anticipated yield, in the case of securities purchased at a discount.
You should also consider the risk that a faster than anticipated rate of
prepayments on the receivables could result in an actual yield that is less than
the anticipated yield, in the case of any securities purchased at a premium.
UCC PROVISIONS MAY AFFECT ENFORCEMENT OF LEASES
Almost every state has adopted a version of Article 2A of the UCC. Although
there is little precedent regarding how Article 2A will be interpreted, it may,
among other things:
o limit enforceability of any "unconscionable" lease or "unconscionable"
provision in a lease; and
o provide a lessee with remedies, including the right to cancel the lease
contract, for certain lessor breaches or defaults.
In addition, Article 2A validates reasonable liquidated damages provisions
in the event of lessor or lessee defaults. Article 2A also recognizes the
concept of freedom of contract and permits the parties in a commercial context a
wide degree of latitude to vary provisions of the law.
CONTRACTS RELATED TO SOFTWARE AND SERVICES MAY NOT BE PAID
Some finance leases and installment sale and loan contracts, as described
in the related prospectus supplement, may relate to software and services that
are not owned by the related receivables seller and in which no related interest
will be transferred to the issuer. Accordingly, if there is a default on any of
these finance leases or installment sale or loan contracts, the issuer will not
realize any proceeds from the related software and services from which to
satisfy any unpaid payments under those contracts.
DEFINED TERMS
We define and use capitalized terms in this prospectus to assist you in
understanding the terms of the securities and this offering. We define the
capitalized terms used in this prospectus under the caption "Glossary of Terms"
in this prospectus on page 73.
THE TRUST FUNDS
The property of each trust fund, as will be specified in the related
prospectus supplement, will include:
o a pool of Receivables, including any Receivables conveyed to the issuer
after the applicable closing date;
o all monies, including accrued interest, due under the security interest
in the Receivables on or after the applicable cut-off date;
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o the amounts as from time to time may be held in one or more accounts
established and maintained by the servicer under the related Trust
Agreement, as further described in the related prospectus supplement;
o the security interests, if any, in the Equipment relating to the pool of
Receivables;
o the right to proceeds from claims on physical damage policies, if any,
covering the Equipment or the related obligors, as the case may be;
o the proceeds of any repossessed Equipment related to the pool of
Receivables;
o the rights of the depositor under the related Receivables Acquisition
Agreement; and
o interest earned on certain short-term investments held by the trust fund,
unless the related prospectus supplement specifies that the earnings may
be paid to the related servicer or Receivables seller(s).
The trust fund may also include, if so specified in the related prospectus
supplement, monies on deposit in a pre-funding account. The pre-funding account
will be used by the trustee to acquire or receive a security interest in
additional Receivables during the pre-funding period specified in the related
prospectus supplement. In addition, some combination of credit enhancements may
be issued to or held by the trustee on behalf of the related trust fund for the
benefit of the holders of one or more classes of securities.
The Receivables comprising a trust fund, as specifically described in the
related prospectus supplement, will be either:
o originated by the related Receivables seller;
o originated by various vendors and acquired by the related Receivables
seller;
o acquired by the related Receivables seller from originators or other
lessors of Receivables.
The Equipment underlying the Contracts included in each trust fund will be
limited to personal property which is leased or financed by the related
Receivables seller to the lessee under Contracts which either:
o are "chattel paper" or
o would be "chattel paper" but for a technical definitional matter, but are
not treated materially differently from "chattel paper" for purposes of
title transfer, security interests or remedies on default.
The Equipment underlying the Contracts will be further limited to personal
property which is subject to UCC provisions relating to title transfer, security
interests and remedies on default and Equipment leased to the related lessee for
use by the lessee in the ordinary course of business or for home use such as:
o medical equipment;
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o restaurant equipment;
o film and video production equipment;
o other industrial and production equipment;
o data processing equipment;
o telecommunications equipment;
o office equipment and furniture.
No trust fund will include Receivables with respect to which the related
Contracts or the related Equipment is subject to federal or state registration
or titling requirements which differ materially from, or supplant, standard UCC
provisions governing:
o the manner in which title or security interests in "chattel paper" or the
related Equipment is determined or perfected or
o remedies on default.
For example, no trust fund will include Receivables with respect to which
the underlying Contracts or Equipment relate to:
o motor vehicles;
o aircraft;
o ships or boats
o firearms or other weapons;
o railroad rolling stock; or
o facilities such as factories, warehouses or plants subject to state laws
governing the manner in which title or security interest in real property
is determined or perfected.
However, the Receivables may include Contracts and a security interest in
the Equipment relating to individual, discrete components of assets such as
those listed above.
The Receivables will be acquired by the depositor from the related
Receivables seller under a Receivables Acquisition Agreement or under provisions
of the Trust Agreements between the Receivables seller and the depositor. The
Receivables included in each trust fund will be selected from those Receivables
held by the Receivables sellers based on the criteria specified in the
applicable Trust Agreement and described in this prospectus or in the related
prospectus supplement.
With respect to each series of securities, on or prior to the closing date
on which the securities are delivered to securityholders, the depositor will
form a trust fund by either:
o transferring the related Receivables to a trust under a Trust
Agreement; or
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o entering into an indenture, or causing a special-purpose company or trust
to enter into an indenture, with an indenture trustee, relating to the
issuance of the securities, secured by the related Receivables.
The Receivables comprising each trust fund will generally have been
originated by the related Receivables seller or acquired by the Receivables
seller from others in accordance with the Receivables seller's specified
underwriting criteria. The underwriting criteria applicable to the Receivables
included in any trust fund will be described in all material respects in the
related prospectus supplement.
THE ISSUERS
With respect to each series of securities, the issuer will be:
o the depositor;
o a special-purpose company organized and established by the depositor; or
o a trust to be formed by the depositor.
For purposes of this prospectus and the related prospectus supplement, the
depositor, if the depositor issues the related securities, the related
special-purpose company, if a special-purpose company issues the related
securities, or the related trust, if a trust issues the related securities, will
be referred to as the "issuer" with respect to those securities.
Upon the issuance of the securities of a given series, the proceeds from
the issuance will be used by the depositor to acquire the related Receivables
from the related Receivables seller. The related servicer will service the
related Receivables under the applicable servicing agreement, and will be
compensated for acting as the servicer. To facilitate servicing and to minimize
administrative burden and expense, the servicers may be appointed custodians for
the related Receivables by each trustee and the depositor, as may be set forth
in the related prospectus supplement.
The following protection may be provided to the securityholders of a given
class by:
o the subordination of another class of securities of that series;
o the availability of the funds in the reserve account; or
o any other credit enhancement for that series as may be specified in the
related prospectus supplement.
If this protection is insufficient, the issuer must rely solely on the payments
from the obligors on the related Contracts, and the proceeds from the sale of
property which secure or are leased under the defaulted Contracts. It may be
difficult for the issuer to realize on the collateral securing those Contracts,
and thus the proceeds to be distributed to the securityholders of that series.
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THE RECEIVABLES
RECEIVABLES POOLS
Information with respect to the Receivables in each trust fund will be set
forth in the related prospectus supplement, including:
o the identity of the related Receivables seller(s);
o the related underwriting criteria and collection policies;
o the composition of the Receivables and the distribution of the
Receivables by geographic location;
o the annual percentage rate; and
o remaining principal balance as of the applicable cut-off date.
DELINQUENCIES, REPOSSESSIONS, AND NET LOSSES
Certain information relating to the related Receivables seller's
delinquency, repossession and net loss experience with respect to Contracts it
has originated or acquired will be set forth in each prospectus supplement. This
information may include, among other things, the experience with respect to all
Contracts in the Receivables seller's portfolio during certain specified
periods, including Contracts which may not meet the criteria for selection as a
Receivable for any particular trust fund. We cannot assure you that the
delinquency, repossession and net loss experience on any trust fund will be
comparable to the related Receivables seller's prior experience.
MATURITY AND PREPAYMENT CONSIDERATIONS
As may be more fully described in the related prospectus supplement, if a
Contract permits a prepayment, the prepayment, together with accelerated
payments resulting from defaults, will shorten the weighted average life of the
related pool of Receivables and the weighted average life of the related
securities. The rate of prepayments on the Receivables may be influenced by a
variety of economic, financial and other factors. In addition, under certain
circumstances, the depositor or the related Receivables seller will be obligated
to acquire Receivables from the related trust fund under the applicable Trust
Agreement or Receivables Acquisition Agreement as a result of breaches of
representations and warranties. Any reinvestment risks resulting from a faster
or slower amortization of the related securities which results from prepayments
will be borne entirely by the related securityholders.
The related prospectus supplement may set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of Receivables and the related series of
securities, together with a description of any applicable prepayment penalties.
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ACQUISITION OF RECEIVABLES FROM RECEIVABLES SELLERS
The Receivables underlying a series of securities may be acquired by the
depositor, either directly or through affiliates, from the related Receivables
seller under a Receivables Acquisition Agreement between the depositor or its
affiliate and each related Receivables seller.
The depositor expects that each Receivable so acquired will be one
originated by the Receivables seller in accordance with the underwriting
criteria to be specified in the related prospectus supplement. The related
prospectus supplement may specify that:
o each Receivables seller which is an originator will be an institution
experienced in originating and servicing retail installment sale and
installment loan contracts similar to the Contracts in accordance with
accepted industry practices and prudent guidelines;
o each Receivables seller under the related Receivables Acquisition
Agreement will make certain representations and warranties to the
depositor or the related trustee in respect of the related Receivables;
o in the event the representations and warranties are not made to the
related trustee, the depositor will assign its rights relating to those
representations and warranties, except certain rights of indemnification,
and interest in the related Receivables Acquisition Agreement to the
related trustee for the benefit of the securityholders of that series,
and the Receivables seller will then be liable to the trustee for
defective or missing documents or an uncured breach of the Receivables
seller's representations or warranties.
USE OF PROCEEDS
The proceeds from the sale of the securities of a given series will be
applied by the depositor to the acquisition of the related Receivables from the
related Receivables seller. The depositor will apply all or substantially all of
the net proceeds from the sale of each series of securities for one or more of
the following purposes:
o to purchase the related assets of the trust fund;
o to repay indebtedness which was incurred to obtain funds to acquire the
assets of the trust fund;
o to establish any reserve funds or other funds described in the related
prospectus supplement; and
o to pay costs of structuring, guaranteeing and issuing the securities,
including the costs of obtaining credit support, if any.
The purchase of the assets of the trust fund for a series may be effected by an
exchange of securities with the seller of the assets of the trust fund.
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THE DEPOSITOR
PaineWebber Asset Acceptance Corporation, the depositor, was incorporated
in the State of Delaware on April 19, 2000 as a wholly-owned, limited purpose
finance subsidiary of PaineWebber Group Inc. The depositor's principal executive
offices are located at 1285 Avenue of the Americas, New York, New York 10019.
Its telephone number is (212) 713-2000.
As described in this prospectus under "The Trust Funds," the only
obligations, if any, of the depositor with respect to a series of securities may
be limited representations and warranties and limited undertakings to repurchase
or substitute Receivables under limited circumstances. We do not expect that the
depositor will have any servicing obligations or responsibilities with respect
to any trust fund. The depositor does not have, nor is it expected in the future
to have, any significant assets.
The servicer with respect to any series of securities may be an affiliate
of the depositor. As described in this prospectus under "The Trust Funds," the
depositor may acquire Receivables through or from an affiliate.
Neither the depositor nor PaineWebber Group Inc., nor any of their
respective affiliates, will insure or guarantee the securities of any series.
THE TRUSTEE
The trustee for each series of securities will be specified in the related
prospectus supplement. The trustee's liability in connection with the issuance
and sale of the related securities is limited solely to the express obligations
of the trustee set forth in the related Trust Agreement.
With respect to each series of securities, no resignation or removal of the
trustee and no appointment of a successor trustee will become effective until
the acceptance of appointment by the successor trustee. The related prospectus
supplement will describe the manner in which the trustee may resign. If no
successor trustee is appointed by the depositor or the securityholders, or if no
successor trustee accepts appointment within a specified period following any
resignation or removal, the trustee or any securityholder may petition any court
of competent jurisdiction for the appointment of a successor trustee.
DESCRIPTION OF THE SECURITIES
GENERAL
The securities will be issued in series. Each series of securities, or,
multiple series of securities, will be issued under a Trust Agreement. All of
the securities offered under this prospectus and the related prospectus
supplement will be rated in one of the four highest rating categories by one or
more rating agencies.
Fixed income securities generally, but not always, have a principal balance
and a specified interest rate.
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Each series or class of securities offered under this prospectus may have a
different interest rate, which may be a fixed or adjustable interest rate. The
related prospectus supplement will specify the interest rate for each series or
class of securities described in that prospectus supplement, or the initial
interest rate and the method for determining subsequent changes to the interest
rate.
A series may include one or more classes of Strip Securities entitled to:
o principal distributions with disproportionate, nominal or no principal
distributions; or
o interest distributions with disproportionate, nominal or no interest
distributions.
In addition, a series of securities may include two or more classes of
securities:
o that differ as to timing, sequential order, priority of payment, interest
rate or amount of distribution of principal or interest or both; or
o as to which distributions of principal or interest or both on any class
may be made:
o upon the occurrence of specified events;
o in accordance with a schedule or formula; or
o on the basis of collections from designated portions of the related
pool of Receivables.
A series may include one or more classes of Accrual Securities, as to which
certain accrued interest will not be distributed but rather will be added to its
principal balance, or nominal balance, in the case of Accrual Securities which
are also Strip Securities, on each payment date, or in the manner that may be
described in the related prospectus supplement.
If provided in the related prospectus supplement, a series may include one
or more other classes of senior securities that are senior to one or more other
classes of subordinate securities in respect of distributions of principal and
interest and allocations of losses on Receivables.
In addition, certain classes of senior or subordinate securities may be
senior to other classes of senior or subordinate securities in respect of
distributions or losses.
GENERAL PAYMENT TERMS OF SECURITIES
As will be provided in the related Trust Agreement and as will be described
in the related prospectus supplement, securityholders will be entitled to
receive payments on their securities on the specified payment dates. Payment
dates with respect to the securities will occur monthly, quarterly or
semi-annually, as further described in the related prospectus supplement.
The related prospectus supplement will describe the record date preceding
the payment date, as of which the trustee or its paying agent will fix the
identity of the securityholders for the purpose of receiving payments on the
next succeeding payment date.
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Each Trust Agreement will provide for a remittance period preceding each
payment date. As more fully provided in the related prospectus supplement,
collections received on the related Receivables during a remittance period will
be required to be remitted by the related servicer to the related trustee prior
to the related payment date and will be used to fund payments to securityholders
on that payment date. The related prospectus supplement may provide that all or
a portion of the payments collected on the related Receivables may be applied by
the related trustee to the acquisition of subsequent Receivables during a
specified period rather than be used to fund payments of principal to
securityholders during that period. This results in securities with an
interest-only period, also commonly referred to as a revolving period, which
will be followed by an amortization period. These interest-only or revolving
periods may, upon the occurrence of events to be described in the related
prospectus supplement, terminate prior to the end of the specified period and
result in the earlier than expected amortization of the related securities.
In addition, the related prospectus supplement may provide that all or a
portion of the collected payments may be retained by the trustee for a specified
period prior to being used to fund payments of principal to securityholders.
The retention and temporary investment by the trustee of the collected
payments may be required by the related Trust Agreement for the purposes of:
o slowing the amortization rate of the related securities relative to the
payment schedule of the related Receivables; or
o attempting to match the amortization rate of the related securities to an
amortization schedule established at the time the securities are issued.
If applicable to any securities, these features may terminate upon the
occurrence of events to be described in the related prospectus supplement,
resulting in distributions to the specified securityholders and an acceleration
of the amortization of the securities.
Neither the securities nor the underlying Receivables will be guaranteed or
insured by any governmental agency or instrumentality or the depositor, the
related servicer, the related Receivables seller, any trustee or any of their
respective affiliates unless specifically set forth in the related prospectus
supplement.
As may be described in the related prospectus supplement, securities of
each series covered by a particular Trust Agreement will either represent:
o specified beneficial ownership interests in a separate trust fund created
under the Trust Agreement; or
o debt secured by the related trust fund.
If any trust fund includes certificates of interest or participations or
security interests in Receivables, the related prospectus supplement will
describe the material terms and conditions of the certificates or participations
or describe the security interest.
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MASTER TRUSTS
The Trust Agreement may provide that the depositor may direct the related
trustee to issue new series where the depositor may designate, to the extent
applicable:
o its name or designation;
o its initial principal amount, or method for calculating the amount;
o its interest rate, or a formula for determining it;
o the payment dates and the date or dates from which interest will accrue;
o the method for allocating collections to securityholders of the series;
o any bank accounts to be used by the series and the terms governing the
operation of those bank accounts;
o the percentage used to calculate monthly servicing fees;
o the provider and terms of any form of credit enhancement;
o the terms on which the securities of the series may be repurchased or
remarketed to other investors;
o the number of classes of securities of the series, and if the series
consists of more than one class, the rights and priorities of each class;
o the extent to which the securities of the series will be issuable in
book-entry form;
o the priority of the series with respect to any other series; and
o any other relevant terms.
Each new series issued under a master trust will have the effect of
decreasing the equity interest in the related master trust. None of the
depositor, the related servicer, the related trustee or any master trust is
required or intends to obtain the consent of any securityholder of any
outstanding series to issue any additional series.
Each Master Trust Agreement will provide that the depositor may designate
terms so that each new series issued under a master trust has an amortization
period which may have a different length and begin on a different date than the
periods for any series previously issued by the related master trust and then
outstanding. In addition, each new series issued under a master trust may have
the benefits of credit enhancements issued by enhancement providers different
from the providers of the credit enhancement for any series previously issued by
the related master trust and then outstanding. Under each Master Trust
Agreement, the related trustee will hold the credit enhancement only on behalf
of the securityholders to which the credit enhancement relates. The depositor
will have the option under each Master Trust Agreement to vary among series the
terms upon which a series may be repurchased by the issuer or remarketed to
other investors. As will be more fully described in the related prospectus
supplement, there is
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no limit to the number of new series issued under a master trust that the
depositor may cause under a Master Trust Agreement. Each master trust will
terminate only as provided in the related Master Trust Agreement. We cannot
assure you that the terms of any new series issued under a master trust might
not have an impact on the timing and amount of payments received by
securityholders of another series issued by the same master trust.
Under each Master Trust Agreement and under a related supplement, new
series issued under a master trust may only occur upon the satisfaction of
conditions provided in the Master Trust Agreement. The obligation of the related
trustee to authenticate the securities of any new series issued under a master
trust and to execute and deliver the supplement to the related Master Trust
Agreement is subject to the satisfaction of the conditions specified in the
Master Trust Agreement, which may include:
o on or before the business day specified in the related prospectus
supplement immediately preceding the date upon which the new series
issued under a master trust is to occur, the depositor will give the
related trustee, the related servicer, the related rating agencies and
related providers of credit enhancement, written notice of the new series
issued under a master trust and the date upon which the new series issued
under a master trust is to occur;
o the depositor will deliver to the related trustee a supplement to the
related Master Trust Agreement, in form satisfactory to the trustee,
executed by each party to the related Master Trust Agreement other than
the trustee;
o the depositor will deliver to the related trustee any related credit
enhancement agreement;
o the related trustee will receive confirmation from the related rating
agencies that the new series issued under a master trust will not result
in any rating agency reducing or withdrawing its rating for any other
series or class of trust;
o the depositor will deliver to the related trustee, the related rating
agencies and the providers of credit enhancement, an opinion of counsel
acceptable to the related trustee that for federal income tax purposes:
(1) following the new series issued under a master trust the related
master trust will not be deemed to be an association, or publicly
traded partnership, taxable as a corporation;
(2) the new series issued under a master trust will not affect the tax
characterization as debt of securities of any outstanding series or
class issued by the master trust that were characterized as debt at
the time of their issuance; and
(3) the new series issued under a master trust will not cause or
constitute an event in which gain or loss would be recognized by any
securityholders or the related master trust; and
o any other conditions specified in any supplement.
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Upon satisfaction of the conditions set forth in the Master Trust
Agreement, the related trustee will execute the supplement to the related Master
Trust Agreement and issue the securities of the new series.
BOOK-ENTRY REGISTRATION
Securityholders of a given series may hold their securities through DTC in
the United States or Clearstream Banking, societe anonyme or Euroclear in Europe
if they are participants of those systems, or indirectly through organizations
that are participants in those systems.
Cede & Co., as nominee for DTC, will hold the global securities for a given
series. Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries which in turn will hold the positions in
customers' securities accounts in the depositaries' names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC and a "clearing agency"
registered under Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and to facilitate the clearance and settlement
of securities transactions between participants through electronic book-entries,
thereby eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream Participants and Euroclear Participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Clearstream
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary. However, these cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that system in accordance with its rules and
procedures and within its established deadlines which are in European time. The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream
Participants and Euroclear Participants may not deliver instructions directly to
the depositaries.
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, dated the business day
following the DTC settlement date, and the credits or any
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transactions in the securities settled during the processing will be reported to
the relevant Clearstream Participant 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.
The securityholders of a given series that are not participants or indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, securities of a series may do so only through participants
and indirect participants. In addition, securityholders of a given series will
receive all distributions of principal and interest through the participants who
in turn will receive them from DTC. Under a book-entry format, securityholders
of a given series may experience some delay in their receipt of payments, since
the payments will be forwarded by the applicable trustee to Cede & Co., as
nominee for DTC. DTC will forward the payments to its participants, which then
will forward them to indirect participants or the securityholders. It is
anticipated that the only "securityholder" in respect of any series will be Cede
& Co., as nominee of DTC. Securityholders of a given series will not be
recognized as securityholders of that series, and these securityholders will be
permitted to exercise the rights of securityholders of that series only
indirectly through DTC and its participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities of a
given series among participants on whose behalf it acts for the securities and
to receive and transmit distributions of principal of, and interest on, those
securities. Participants and indirect participants with which the
securityholders of a given series have accounts for the securities similarly are
required to make book-entry transfers and receive and transmit the payments on
behalf of their respective securityholders of that series. Accordingly, although
the securityholders will not possess securities, the creating and affecting DTC
provide a mechanism by which participants will receive payments and will be able
to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a
securityholder of a given series to pledge securities of that series to persons
or entities that do not participate in the DTC system, or to otherwise act with
respect to the securities, may be limited due to the lack of a physical
certificate for the securities.
DTC will advise the trustee for each Series that it will take any action
permitted to be taken by a securityholder of the related series only at the
direction of one or more participants to whose accounts with DTC the securities
of that series are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that their actions are taken on behalf
of participants whose holdings include undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a professional
depository. Clearstream facilitates the clearance and settlement of securities
transactions between Clearstream Participants through electronic book-entry
changes in accounts of Clearstream Participants, which eliminates the need for
physical movement of certificates. Transactions may be settled in Clearstream in
any of 28 currencies, including United States dollars. Clearstream provides to
its Clearstream Participants, services for:
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o safekeeping;
o administration;
o clearance and settlement of internationally traded securities; and
o securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depository, Clearstream is subject to regulation by the Luxembourg
Monetary Institute. Clearstream Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. 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 Euroclear Participants
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 28 currencies, including United States dollars. The Euroclear System
includes various other services, including:
o securities lending and borrowing; and
o interfaces with domestic markets in several countries generally similar
to the arrangements for cross-market transfers with DTC described above.
Euroclear is operated by Morgan Guaranty Trust Company of New York,
Brussels, Belgium office, under contract with Euroclear Clearance System, S.C.,
a Belgian cooperative corporation. All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear System on behalf of Euroclear
Participants. Euroclear Participants include banks, including central banks,
securities brokers and dealers and other professional financial intermediaries
and may include the underwriters of any securities. Indirect access to the
Euroclear System is also available to other firms that clear through or maintain
a custodial relationship with a Euroclear participant, either directly or
indirectly.
As a result, the Euroclear Operator is regulated and examined by the Board
of Governors of the Federal Reserve System and the New York State Banking
Department, as well as the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the terms and conditions governing use of Euroclear and the
related operating procedures of the Euroclear System and applicable Belgian law.
The terms and conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear System,
and receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific
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certificates to specific securities clearance accounts. The Euroclear Operator
acts under the terms and conditions only on behalf of Euroclear Participants and
has no record of relationship with persons holding through Euroclear
Participants.
Except as required by law, the trustee in respect of a series will not have
any liability for any aspect of the records relating to or payments made or
account of beneficial ownership interests of the related securities held by Cede
& Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to the beneficial ownership interests.
DEFINITIVE SECURITIES
Definitive Securities will be issued to the securityholders of a given
series or their nominees, rather than to DTC or its nominee, only if:
(1) the trustee for the related series advises in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
depository for the securities and the trustee is unable to locate a
qualified successor;
(2) the servicer, at its option, elects to terminate the book-entry-system
through DTC; or
(3) after the occurrence of an "Event of Default" under the related
indenture or a default by the servicer under the related Trust
Agreement, securityholders representing at least a majority of the
outstanding principal amount of the securities advise the applicable
trustee through DTC in writing that the continuation of a book-entry
system through DTC is no longer in the securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable trustee will be required to notify all the
securityholders through participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive certificates representing
the securities and receipt of instructions for re-registration, the applicable
trustee will reissue the securities as Definitive Securities to the
securityholders.
Distributions of principal of, and interest on, the securities will
thereafter be made by the applicable trustee in accordance with the procedures
set forth in the related indenture or Trust Agreement directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable record date specified for those
securities in the related prospectus supplement. The distributions may be made
by check mailed to the address of the holder as it appears on the register
maintained by the applicable trustee. The final payment on those securities,
however, will generally be made only upon presentation and surrender of the
security at the office or agency specified in the notice of final distribution
to the applicable securityholders.
Definitive Securities in respect of a given series of securities will be
transferable and exchangeable at the offices of the applicable trustee or of a
certificate registrar named in a notice delivered to holders of the Definitive
Securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
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REPORTS TO SECURITYHOLDERS
On or prior to each payment date for a series of securities, the related
servicer or the related trustee will forward or cause to be forwarded to each
holder of record of the class of securities a statement or statements for the
related trust fund setting forth the information which generally may include the
following information, to the extent applicable:
(1) the amount of the distribution for each class of securities;
(2) the amount of the distribution allocable to principal;
(3) the amount of the distribution allocable to interest;
(4) the pool balance, if applicable, as of the close of business on the
last day of the related remittance period;
(5) the aggregate outstanding principal balance and the pool factor for
each class of securities after giving effect to all payments reported
under (2) above on the payment date;
(6) the amount paid to the servicer for the related remittance period;
(7) the amount of the aggregate purchase amounts for Receivables that have
been reacquired for the remittance period; and
(8) the amount of coverage under any letter of credit, financial guaranty
insurance policy, reserve account or other form of credit enhancement
covering default risk as of the close of business on the applicable
payment date and a description of any credit enhancement substituted
for any letter of credit, financial guaranty insurance policy, or
reserve account.
Each amount set forth under subclauses (1), (2), (3) and (4) for the
securities of any series will be expressed as a dollar amount per $1,000 of the
initial principal balance of the securities, as applicable.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year, the applicable trustee will provide to the
securityholders a statement containing the amounts described in (2) and (3)
above for that calendar year and any other information required by applicable
tax laws, for the purpose of the securityholders' preparation of federal income
tax returns.
DESCRIPTION OF THE TRUST AGREEMENTS
The following summary describes certain terms of each Trust Agreement under
which a trust fund will be created and the related securities for the trust fund
will be issued. For purposes of this prospectus, the term "Trust Agreement" as
used regarding a trust means any and all agreements relating to:
o the establishment of the related trust;
o the servicing of the related Receivables; and
o the issuance of the related securities, including the indenture.
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ACQUISITION OF THE RECEIVABLES UNDER A RECEIVABLES ACQUISITION AGREEMENT
On the closing date specified for any series of securities, the depositor
will acquire the related Receivables or a security interest in the Receivables
from the related Receivables seller under a Receivables Acquisition Agreement.
The depositor will either transfer the Receivables to an issuer under a pooling
agreement, or will pledge the depositor's right, title and interests in and to
the Receivables to a trustee on behalf of securityholders under an indenture.
The depositor and/or the related Receivables seller may be obligated to
acquire from the related trust fund its interest in any Receivable transferred
to an issuer or pledged to a trustee on behalf of securityholders. This
obligation may arise if the interest of the securityholders in the Receivables
is materially and adversely affected by a breach of any representation or
warranty made by the depositor or the related Receivables seller for the
Receivable, which breach is not cured following the discovery by or notice to
the depositor or the related Receivables seller of the breach. The obligation of
the depositor to acquire the Receivables for which a Receivables seller has
breached a representation or warranty would be subject to the Receivables
seller's acquisition of the Receivables from the depositor. In addition, if so
specified in the related prospectus supplement, the depositor and/or the
Receivables seller may reacquire Receivables or substitute other Receivables for
the Receivable held by a trust fund subject to specified conditions set forth in
the related Trust Agreement and Receivables Acquisition Agreement.
ACCOUNTS
With respect to each series of securities, the related servicer will
establish and maintain with the applicable trustee one or more accounts, in the
name of the trustee on behalf of the related securityholders, into which all
payments made on the related Receivables will be deposited. The servicer will
also establish and maintain with the trustee separate distribution accounts, in
the name of the trustee on behalf of the securityholders, in which amounts
released from a collection account and any reserve account or other credit
enhancement, if any, for distribution to the securityholders will be deposited
and from which distributions to the securityholders will be made.
Any other accounts to be established with respect to a series of
securities, including any reserve account, will be described in the related
prospectus supplement.
For any series of securities, funds in the accounts established under the
related Trust Agreement will be invested as provided in the related Trust
Agreement in eligible investments. Eligible investments are generally limited to
investments acceptable to the rating agencies as being consistent with the
rating of the securities. If the rating agencies so permit, eligible investments
may include securities issued by the depositor, the related Receivables seller,
the related servicer or their affiliates or other trusts created by the
depositor or its affiliates. Eligible investments are mostly limited to
obligations or securities that mature not later than the business day
immediately preceding the related payment date. However, funds in any reserve
account may be invested in securities that will not mature prior to the date of
the next distribution and will not be sold to meet any shortfalls. Thus, the
amount of cash in any reserve account at any time may be less than the balance
of the reserve account. If the amount required to be withdrawn
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from any reserve account to cover shortfalls in collections on the related
Receivables exceeds the amount of cash in the reserve account a temporary
shortfall in the amounts distributed to the related securityholders could
result. This temporary shortfall could, in turn, increase the average life of
the securities of that series. The related prospectus supplement will specify
whether or not the investment earnings on funds deposited in the accounts, net
of losses and investment expenses, will be available to pay securityholders.
The accounts will be maintained with a federally or state chartered
depository institution and in a manner satisfactory to each rating agency rating
the securities of the related series.
To the extent that a servicer's unsecured debt ratings are acceptable to
the rating agencies, amounts deposited to any account maintained by the servicer
may be commingled with the servicer's general account monies. Any rights to so
commingle monies will be described in the related prospectus supplement.
THE SERVICER
The servicer under each Trust Agreement will be named in the related
prospectus supplement. The entity serving as servicer may be an affiliate of the
Receivables seller or the depositor and may have other business relationships
with the Receivables seller or the depositor or their affiliates. The servicer
for each series will service the Receivables contained in the trust fund for
that series. Any servicer may delegate its servicing responsibilities to one or
more sub-servicers, but will not be relieved of its liabilities by doing so.
Each servicer will make certain representations and warranties regarding
its authority to enter into, and its ability to perform its obligations under,
the related Trust Agreement. An uncured breach of a representation or warranty
that in any respect materially and adversely affects the interests of the
securityholders will constitute a default by the servicer under the related
Trust Agreement.
SERVICING PROCEDURES
Each Trust Agreement will provide that the related servicer will make
reasonable efforts to collect all payments due with respect to the Receivables
held in the related trust fund. The servicer will also continue the collection
procedures that the servicer follows with respect to the particular type of
Receivable in the particular pool it services for itself and others in a manner
consistent with the related Trust Agreement. Consistent with its normal
procedures, and, to the extent described in the related prospectus supplement,
the servicer may, in its discretion and on a case-by-case basis, arrange with
the obligor to extend or modify the payment schedule on a Receivable. Some of
the arrangements, including, any extension of the payment schedule beyond the
final scheduled payment date for the related securities, may result in the
servicer acquiring the Receivable if the Contract becomes a defaulted Contract.
The servicer may sell the Equipment securing the respective defaulted Contract,
if any, at a public or private sale, or take any other action permitted by
applicable law. See "Certain Legal Aspects of the Receivables" in this
prospectus.
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The material aspects of any particular servicer's collections procedures
will be set forth in the related prospectus supplement.
PAYMENTS ON RECEIVABLES
With respect to each series of securities, the related servicer will
deposit all payments on the related Receivables and all proceeds of the
Receivables collected in the related collection facility, such as a lock-box
account or collection account. Monies deposited in a collection facility for a
trust fund may be commingled with funds from other sources. As will be further
specified in the related prospectus supplement, the related servicer will be
required to deposit payments on the related Receivables collected during each
collection period into the related collection account on a specified day each
month. Pending deposit into the related collection account, collections in the
collection facility may be invested by the related servicer at its own risk and
for its own benefit, and will not be segregated from funds of the related
servicer.
SERVICING COMPENSATION
With respect to any series of securities, the related servicer will be
entitled to receive a servicing fee for each collection period. The servicing
fee will be in an amount equal to a specified percentage per annum of the value
of the Receivables held in the related trust fund, generally as of the first day
of the collection period. Each prospectus supplement and servicing agreement
will specify the priority of distributions with respect to the servicing fee,
together with any portion of the servicing fee that remains unpaid from prior
payment dates. The servicing fee may be paid prior to any distribution to the
related securityholders.
Each servicer may also, if specified in the related prospectus supplement,
collect and retain any late fees, the penalty portion of interest paid on past
due amounts and other administrative fees or similar charges allowed by
applicable law with respect to the Receivables. Each servicer will generally be
entitled to reimbursement from the related trust fund for expenses and
liabilities incurred by it in servicing the Receivables. Payments by or on
behalf of obligors will be allocated to scheduled payments and late fees and
other charges in accordance with the servicer's normal practices and procedures.
The servicing fee will:
(1) compensate the related servicer for performing the functions of a
third party servicer of similar types of Receivables as an agent for
their beneficial owner, including:
o collecting and posting all payments;
o responding to inquiries of obligors on the related Receivables;
o investigating delinquencies;
o sending payment coupons to obligors;
o reporting tax information to obligors;
o paying costs of collection and disposition of defaults; and
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o policing the collateral.
(2) compensate the related servicer for administering the related
Receivables, accounting for collections and furnishing statements to
the applicable trustee and the applicable indenture trustee;
(3) reimburse the related servicer for:
o certain taxes;
o accounting fees;
o outside auditor fees; and
o data processing costs and other costs incurred in connection with
administering the Receivables.
DISTRIBUTIONS
With respect to each series of securities, beginning on the payment date
specified in the related prospectus supplement, distributions of principal and
interest, or, where applicable, of principal or interest only, on each class of
the securities entitled to those distribution will be made by the applicable
indenture trustee to the noteholders and by the applicable trustee to the
certificateholders of those series. The timing, calculation, allocation, order,
source, priorities of and requirements for each class of noteholders and all
distributions to each class of certificateholders of each series will be set
forth in the related prospectus supplement.
With respect to each series of securities, on each payment date collections
on the related Receivables will be transferred from the collection account to
the distribution account for distribution to securityholders, to the extent
provided in the related prospectus supplement. Credit enhancement, such as a
reserve account, may be available to cover any shortfalls in the amount
available for distribution on that date, to the extent specified in the related
prospectus supplement. As may be more fully described in the related prospectus
supplement, distributions in respect of principal of a class of securities of a
given series will be subordinate to distributions in respect of interest on that
class, and distributions in respect of the certificates of that series may be
subordinate to payments in respect of the notes of that series.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of credit enhancement arrangements, if any, and the
provider of the credit enhancements, if applicable, for each class of securities
of a given series will be set forth in the related prospectus supplement. If and
to the extent provided in the related prospectus supplement, credit enhancement
may be in the form of:
o a financial guaranty insurance policy;
o subordination of one or more classes of securities;
o reserve accounts;
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o over-collateralization;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support;
o surety bonds;
o guaranteed cash deposits or any other arrangements as may be described in
the related prospectus supplement; or
o any combination of two or more of the above forms of credit enhancement.
If specified in the related prospectus supplement, credit enhancement for a
class of securities may cover one or more other classes of securities of the
same series, and credit enhancement for a series of securities may cover one or
more other series of securities.
The presence of credit enhancement for the benefit of any class or series
of securities is intended to enhance the likelihood of receipt by the
securityholders or the class or series of the full amount of principal and
interest due and to decrease the likelihood that the securityholders will
experience losses. As may be more specifically provided in the related
prospectus supplement, the credit enhancement for a class or series of
securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest on the
principal balance. If losses occur which exceed the amount covered by any credit
enhancement or which are not covered by any credit enhancement, securityholders
of any class or series will bear their allocable share of deficiencies, as may
be described in the related prospectus supplement. In addition, if a form of
credit enhancement covers more than one series of securities, securityholders of
those series will be subject to the risk that the credit enhancement will be
exhausted by the claims of securityholders of other series.
STATEMENTS TO INDENTURE TRUSTEES AND TRUSTEES
Prior to each payment date with respect to each series of securities, the
related servicer will provide to the applicable indenture trustee and/or the
applicable trustee and credit enhancer a statement setting forth substantially
the information described in the related prospectus supplement. This may include
the same information as is required to be provided in the periodic reports
provided to securityholders of that series described under "Description of the
Securities--Reports to Securityholders" in this prospectus. The statement will
be as of the close of business on the last day of the preceding related
remittance period.
EVIDENCE AS TO COMPLIANCE
Each Trust Agreement will generally provide that a firm of independent
public accountants will furnish to the related issuer and/or the applicable
trustee, an annual statement as to compliance by the related servicer during the
preceding twelve months with the standards relating to the servicing of the
Receivables. In the case of the first certificate, the period will cover the
time since the applicable closing date.
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Each Trust Agreement will also generally provide for delivery to the
related issuer and/or the applicable trustee of a certificate signed by an
officer of the related servicer. The certificate will either:
o state that the servicer has fulfilled its obligations under the Trust
Agreement in all material respects throughout the preceding 12 months,
or, in the case of the first certificate, the period from the applicable
closing date; or
o describe the default if there has been a default in the fulfillment of
its obligation in any material respect.
Each servicer may also be required to agree to give the issuer and the
trustee notice of certain servicer defaults under the related Trust Agreement.
CERTAIN MATTERS REGARDING THE SERVICERS
The servicer may not resign from its obligations and duties as servicer,
except upon determination that the performance by the servicer of its duties is
no longer permissible under applicable law and except pursant to the terms
specified in the related prospectus supplement. The resignation will not become
effective until the related trustee or a successor servicer has assumed the
servicer's servicing obligations and duties under the Trust Agreement.
Neither the related servicer nor any of its respective directors, officers,
employees, or agents will be under any liability to the related issuer or the
related securityholders for taking any action or for refraining from taking any
action under the Trust Agreement, or for errors in judgment, other than as may
be described in the related prospectus supplement. However, neither the servicer
nor any similar 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 duties or by reason of reckless disregard of obligations
and duties under the Trust Agreement. In addition, the Trust Agreement may
provide that the related servicer is under no obligation to appear in,
prosecute, or defend any legal action that is not incidental to its servicing
responsibilities under the Trust Agreement and that, in its opinion, may cause
it to incur any expense or liability.
Under the circumstances specified in the Trust Agreement the following
entities may be the successor to the servicer under the Trust Agreement:
o any entity into which the related servicer may be merged or consolidated;
o any entity resulting from any merger or consolidation to which the
servicer is a party;
o any entity succeeding to the business of the servicer; or
o any corporation or other entity that assumes the obligations of the
servicer.
SERVICER DEFAULT
A "servicer default" under a Trust Agreement may include:
(1) any failure by the related servicer to deliver to the applicable
trustee for deposit in any of the applicable accounts any required
payment or to direct the trustee to make any
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required distributions from the applicable accounts, which failure
continues unremedied for greater than the number of business days
specified in the related prospectus supplement after written notice
from the trustee is received by the servicer or after discovery by the
servicer;
(2) any failure by the servicer or the related Receivables seller to
observe or perform in any material respect any other covenant or
agreement in the Trust Agreement, which failure materially and
adversely affects the rights of the related securityholders and which
continues unremedied for a period greater than 120 days after written
notice is given of the failure; and
(3) any Insolvency Event.
RIGHTS UPON SERVICER DEFAULT
As long as a servicer default under a Trust Agreement remains unremedied,
the applicable trustee, credit enhancer or holders of securities of the related
series with not less than 25% of the voting rights of the outstanding securities
may terminate all the rights and obligations of the servicer, if any, under the
Trust Agreement. After the rights and obligations of the servicer are terminated
the trustee or a successor servicer appointed by the trustee will succeed to all
the responsibilities, duties and liabilities of the servicer under the Trust
Agreement and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no servicer default other than the appointment has occurred, the
bankruptcy trustee or official may have the power to prevent the applicable
trustee or the securityholders from effecting a transfer of servicing. In the
event that the trustee is unwilling or unable to so act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
with a net worth of at least $25,000,000 and whose regular business includes the
servicing of a similar type of Receivables. This trustee may make the
arrangements for compensation to be paid, which in no event may be greater than
the servicing compensation payable to the servicer under the related Trust
Agreement.
WAIVER OF PAST DEFAULTS
With respect to each trust fund, subject to the approval of any credit
enhancer, the holders of securities evidencing at least a majority of the voting
rights of the outstanding securities may, on behalf of all securityholders of
the related securities, waive any default by the servicer, or by the related
Receivables seller, in the performance of its obligations under the related
Trust Agreement and its consequences. However, a default in making any required
deposits to or payments from any of the accounts in accordance with the Trust
Agreement may not be waived. No waiver will impair the securityholders' rights
with respect to subsequent defaults.
AMENDMENT
To the extent provided in the related prospectus supplement, each of the
Trust Agreements may be amended by the parties to the Trust Agreement, without
the consent of the related securityholders. The amendment may be for the purpose
of:
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o adding any provisions to or changing in any manner or eliminating any of
the provisions of the Trust Agreements or
o modifying in any manner the rights of the securityholders.
This amendment will be permitted if, in the opinion of counsel satisfactory to
the applicable trustee, the amendment does not materially and adversely affect
the interests of any of the affected securityholders.
The Trust Agreements may also be amended by the depositor, the servicer,
and the applicable trustee with the consent of any credit enhancer and the
holders of securities evidencing at least a majority of the voting rights of the
outstanding securities for the purpose of:
o adding any provisions to or changing in any manner or eliminating any of
the provisions of the Trust Agreements; or
o modifying in any manner the rights of the securityholders:
This amendment will be permitted if the amendment does not:
o increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the related Receivables or
distributions that are required to be made for the benefit of the
securityholders; or
o reduce the percentage of the securities of the series which are
required to consent to the amendment, without the consent of the
securityholders of that series.
TERMINATION
The obligations of the servicer, the Receivables seller(s), the depositor
and the trustee under the related Trust Agreement will terminate upon the
earlier to occur of:
(1) the maturity or other liquidation of the last related Receivable and
the disposition of any amounts received upon liquidation of any
remaining Receivables and
(2) the payment to securityholders of the related series of all amounts
required to be paid to them under the Trust Agreement.
In order to avoid excessive administrative expense, the related servicer,
Receivables seller, depositor or the other party may be permitted to purchase
from a trust fund, all the remaining Receivables at a price set forth in the
related prospectus supplement. This repurchase may occur only if the current
balance of the Receivables is less than a specified percentage set forth in the
related prospectus supplement of the initial pool balance for the trust fund.
The related securities will be redeemed following the purchase.
A trustee may solicit bids for the purchase of the Receivables remaining in
a trust within ten days following a payment date as of which the pool balance is
equal to or less than the percentage of the initial pool balance specified in
the related prospectus supplement. This purchase must be in accordance with the
terms and conditions set forth in the related prospectus
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supplement. If the trustee receives satisfactory bids as described in the
prospectus supplement, then the Receivables remaining in that trust fund will be
sold to the highest bidder.
Any outstanding notes of the related series may be redeemed concurrently
with either of the events specified above. The subsequent distribution to the
related securityholders of all amounts required to be distributed to them under
the applicable Trust Agreement may effect the prepayment of the certificates of
that series.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Contracts that comprise the Receivables will be "chattel paper" as
defined in the Uniform Commercial Code. Pursuant to the UCC, for most purposes a
sale of chattel paper is treated in a manner similar to a transaction creating a
security interest in chattel paper. The depositor, the related servicer and/or
the related Receivables seller(s) will cause the filing of appropriate UCC-1
financing statements to be made with the appropriate governmental authorities.
Under the Trust Agreement, the related servicer will be obligated from time to
time to take such actions as are necessary to protect and perfect the issuer's
or the trustee's interests in the Contracts and their proceeds.
THE EQUIPMENT
The related Receivables seller will convey a security interest in the
related Equipment to the depositor. UCC financing statements will not be filed
to perfect any security interest in the Equipment unless otherwise specified in
the related prospectus supplement. Moreover, in the event of the repossession
and resale of Equipment, it may be subject to a superior lien. If the Equipment
is subject to a superior lien, the senior lienholder may be entitled to be paid
the full amount of the indebtedness owed to it out of the sale proceeds before
such proceeds could be applied to the payment of claims of the related servicer
on behalf of the issuer. In addition, the failure to stamp a lease related to
the Equipment to prevent a third party in possession from having a lien superior
to the lien of the servicer on behalf of the issuer, would jeopardized the
related security interest in the Equipment.
In the event of a default by the lessee, the related servicer on behalf of
the related trustee may take action to enforce the defaulted Contract by
repossession and resale of the leased Equipment. Under the UCC in most states, a
creditor can, without prior notice to the debtor, repossess assets securing a
defaulted Contract by:
o the lessee's voluntary surrender of those assets; or
o "self-help" repossession that does not involve a breach of the peace and
by judicial process.
In the event of a default by the lessee, some jurisdictions require that
the lessee be notified of the default and be given a time period within which it
may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
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The UCC and other state laws place restrictions on repossession sales,
including requirements that the secured party provide the lessee 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 and that the sale be
conducted in a commercially reasonable manner. Each Trust Agreement may require
the related servicer to:
o sell promptly any repossessed item of Equipment;
o reacquire the repossessed Equipment from the trust fund;
o re-lease the repossessed Equipment for the benefit of the
securityholders; or
o take any other action as specified in the related prospectus supplement.
Under most state laws, a lessee has the right to redeem collateral for its
obligations prior to actual sale by paying the secured party the unpaid balance
of the obligation plus:
o reasonable expenses for repossession, holding and preparing the
collateral for disposition and arranging for its sale; and
o reasonable attorneys' fees, to the extent provided for in the written
agreement of the parties.
In addition, because the market value of the Equipment of the type financed
under the Receivables Acquisition Agreement generally declines with age and
because of obsolescence, the net disposition proceeds of leased Equipment at any
time during the term of the lease may be less than the outstanding balance on
the Contract principal balance which it secures. Because of this, and because
other creditors may have rights in the related leased Equipment superior to
those of the related trust fund and the risk of an avoidance sought by a
bankruptcy trustee in the case of unperfected interests in the Equipment, the
related servicer may not be able to recover the entire amount due on a defaulted
Contract in the event that the servicer elects to repossess and sell the leased
Equipment at any time.
Under the UCC and laws applicable in most states, a creditor is entitled to
obtain a deficiency judgment from a lessee for any deficiency on repossession
and resale of the asset securing the unpaid balance of that lessee's Contract.
However, some states impose prohibitions or limitations on deficiency judgments.
In most jurisdictions the courts, in interpreting the UCC, would impose upon a
creditor an obligation to:
o repossess the Equipment in a commercially reasonable manner; and
o "mitigate damages" in the event of a lessee's failure to cure a default.
The creditor would be required to exercise reasonable judgment and follow
acceptable commercial practice in seizing and disposing of the Equipment and to
offset the net proceeds of the disposition against its claim. In addition, a
lessee may successfully invoke an election of remedies defense to a deficiency
claim in the event that the related servicer's repossession and sale of the
leased Equipment is found to be a retention discharging the lessee from all
further obligations under UCC Section 9-505(2). If a deficiency judgment were
granted, the judgment
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would be a personal judgment against the lessee for the shortfall, but a
defaulting lessee may 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.
Certain statutory provisions, including federal and state bankruptcy and
insolvency laws, may also limit the ability of the related servicer to repossess
and resell collateral or obtain a deficiency judgment. In the event of the
bankruptcy or reorganization of a lessee, various provisions of the Bankruptcy
Code of 1978 and related laws may interfere with or eliminate the ability of the
servicer or the trustee to enforce its rights under the Receivables. If
bankruptcy proceedings were instituted in respect of a lessee, the trustee could
be prevented from continuing to collect payments due from or on behalf of the
lessee or exercising any remedies assigned to the trustee without the approval
of the bankruptcy court, and the bankruptcy court could permit the lessee to use
or dispose of the leased Equipment and provide the trustee with a lien on
substitute collateral, so long as such substitute collateral constituted
"adequate protection" as defined under the Bankruptcy Code.
In addition, certain of the Receivables may be leased by the Receivables
seller to governmental entities. Payment by governmental authorities of amounts
due under the Contracts may be contingent upon legislative approval.
Accordingly, payment delays and collection difficulties as described in the
related prospectus supplement may limit collections with respect to certain
governmental Contracts.
These UCC and bankruptcy provisions, in addition to the possible decrease
in value of a repossessed item of Equipment may limit the amount realized on the
sale of the collateral to less than the amount due on the related Receivable.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
considerations of the purchase, ownership and disposition of the securities. The
summary does not purport to deal with federal income tax considerations
applicable to all categories of holders, some of which may be subject to special
rules. For example, it does not discuss the tax treatment of securityholders
that are insurance companies, regulated investment companies or dealers in
securities. You are urged to consult your own tax advisors in determining the
federal, state, local, foreign and any other tax consequences to you of the
purchase, ownership and disposition of the securities.
The following summary is based upon current provisions of the Code, the
Treasury regulations issued under the Code and judicial or ruling authority, all
of which are subject to change, which change may be retroactive. The depositor
will be provided with an opinion of Cadwalader, Wickersham & Taft regarding
certain federal income tax matters discussed below. Those opinions, however, are
not binding on the IRS or the courts. No ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the issuer, the notes, the certificates and related terms, parties
and documents will be deemed to refer, unless otherwise specified in this
prospectus, to each issuer, the notes and the certificates and the related
terms, parties and documents applicable to that issuer.
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The federal income tax consequences to certificateholders will vary
depending on:
o whether the issuer is treated as a partnership under the Code and
applicable Treasury regulations or
o whether the issuer will be treated as a grantor trust.
The prospectus supplement for each series of certificates will specify
whether the issuer will be treated as a partnership or as a grantor trust.
FASITS
Sections 860H through 860L of the Code provide for the creation of an
entity for federal income tax purposes, referred to as a FASIT. These provisions
were effective as of September 1, 1997, but many technical issues concerning
FASITs have not yet been addressed by final Treasury regulations. To qualify as
a FASIT, an entity must meet certain requirements under Section 860L of the Code
and must elect that treatment. The applicable Trust Agreement, if applicable,
may be amended to provide that the depositor and trustee will cause a FASIT
election to be made for the issuer if the depositor delivers an opinion of
Cadwalader, Wickersham & Taft to the effect that, for federal income tax
purposes,
(1) the deemed issuance of FASIT regular interests, occurring in connection
with the election, will not adversely affect the federal income tax treatment of
the securities,
(2) following the election the issuer will not be deemed to be an
association, or publicly traded partnership, taxable as a corporation, and
(3) the election will not cause or constitute an event in which gain or
loss would be recognized by any securityholder or the issuer.
ISSUERS TREATED AS PARTNERSHIPS
Tax Characterization of the Issuer as a Partnership
An issuer which is not treated as a grantor trust and which does not
affirmatively elect to be treated as a corporation will be treated as a
partnership under applicable Treasury regulations as long as there are two or
more beneficial owners. The issuer will be ignored as a separate entity where
there is a single beneficial owner of all equity classes of the related series,
including any class of notes treated as equity for federal income tax purposes.
Cadwalader, Wickersham & Taft will deliver their opinion that an issuer will not
be an association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the trust and servicing agreement or pooling and servicing
agreement and indenture and related documents will be complied with, including
the making of no affirmative election to be treated as a corporation.
Cadwalader, Wickersham & Taft's opinion will also conclude that either
(1) the nature of the income of the issuer will exempt it from the rule
that certain publicly traded partnerships are taxable as corporations, or
(2) that the restrictions on transfer of certain classes of the securities
will prevent the issuer from being classified as a publicly traded partnership.
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If an issuer were taxable as a corporation for federal income tax purposes,
it would be subject to corporate income tax on its taxable income. The issuer's
taxable income would include all of its income on the related Receivables, less
servicing fees and other deductible expenses, which may include its interest
expense on the notes. Any corporate income tax could materially reduce cash
available to make distributions on the securities, and beneficial owners of
securities could be liable for the part of the tax that is unpaid by the issuer.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The depositor will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Cadwalader, Wickersham & Taft will, except as
otherwise provided in the related prospectus supplement, advise the depositor
that the notes will be classified as debt for federal income tax purposes. The
discussion below assumes this characterization of the notes is correct.
OID. The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the interest formula for the notes meets
the requirements for "qualified stated interest" under Treasury regulations
relating to original issue discount, and that any OID on the notes (i.e., any
excess of the principal amount of the notes over their issue price) does not
exceed a de minimis amount (i.e., 0.25% of their principal amount multiplied by
the number of full years included in their term), all within the meaning of the
OID Regulations. If these conditions are not satisfied with respect to any given
series of notes, additional tax considerations with respect to the notes will be
disclosed in the applicable prospectus supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with OID. The stated interest on the notes will be taxable to a noteholder as
ordinary interest income when received or accrued in accordance with the
noteholder's method of tax accounting. Under the OID Regulations, a holder of a
note issued with more than a de minimis amount of OID must include the OID in
income, on a pro rata basis as principal payments are made on the note. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one year
from the issue date of the short-term note may be subject to special rules. An
accrual basis holder of a short-term note, and certain cash method holders,
including regulated investment companies, as set forth in Section 1281 of the
Code, generally would be required to report interest income as interest accrues
on a straight-line basis over the term of each interest period. Other cash basis
holders of a short-term note would, in general, be required to report interest
income as interest is paid, or, if earlier, upon the taxable disposition of the
short-term note. However, a cash basis holder of a short-term note reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
short-term note until the taxable disposition of the short-term note. A cash
basis taxpayer may elect under Section 1281 of the Code to accrue interest
income on all nongovernment debt obligations with a term of one year or less, in
which case the taxpayer would include interest on the short-term note in income
as it accrues, but would not be subject to the interest expense deferral rule
referred to in the preceding sentence. Certain special rules apply if a
short-term note is purchased for more or less than its principal amount.
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Sale or Other Disposition. If a noteholder sells a note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the holder's
cost for the note, increased by any market discount, acquisition discount, OID
and gain previously included by the noteholder in income with respect to the
note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by the noteholder
with respect to the note. The gain or loss will be capital gain or loss if the
note was held as a capital asset, except for gain representing accrued interest
and accrued market discount not previously included in income. Capital losses
generally may be used only to offset capital gains.
Non-U.S. Holders. Interest payments made, or accrued, to a noteholder who
is a nonresident alien, foreign corporation or other holder who is a Non-U.S.
Person generally will be considered "portfolio interest" and generally will not
be subject to United States federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the Non-U.S. Person and the Non-U.S. Person:
(1) is not actually or constructively a "10 percent shareholder" of the
issuer or the depositor or an affiliate (including a holder of 10% of
the outstanding certificates) or a "controlled foreign corporation"
with respect to which the issuer or the depositor or an affiliate is a
"related person" within the meaning of the Code and
(2) provides the trustee or other person who is otherwise required to
withhold U.S. tax with respect to the notes with an appropriate
statement (on Form W-8 or a similar form), signed under penalties of
perjury, certifying that the beneficial owner of the note is a
Non-U.S. Person and providing the Non-U.S. Person's name and address.
If a note is held through a securities clearing organization or certain
other financial institutions, the organization or institution may provide the
relevant signed statement to the withholding agent. In that case, however, the
signed statement must be accompanied by a Form W-8 or substitute form provided
by the Non-U.S. Person that owns the note. If this interest is not portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30 percent, unless reduced or eliminated pursuant
to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Non-U.S. Person will be exempt from United
States federal income and withholding tax, provided that:
(1) the gain is not effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Person and
(2) in the case of an individual Non-U.S. Person, the individual is not
present in the United States for 183 days or more in the taxable year.
Final regulations dealing with withholding tax on income paid to Non-U.S.
Persons and related matters were issued by the Treasury Department on October 6,
1997. These new withholding regulations will generally be effective for payments
made after December 31, 2000, subject to certain transition rules. Current
withholding certificates will remain valid until the earlier of December 31,
2000 or the due date of expiration of the certificate under the rules as
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currently in effect. The new withholding regulations would require, in the case
of notes held by a foreign partnership, that:
(1) the certification described above be provided by the partners rather
than by the foreign partnership and
(2) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships.
Prospective investors who are Non-U.S. Persons are strongly urged to consult
their own tax advisors with respect to the new withholding regulations.
Backup Withholding. Each noteholder (other than an exempt holder such as a
corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt noteholder fail to
provide the required certification, the issuer will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion
of Cadwalader, Wickersham & Taft, the IRS successfully asserted that one or more
classes of notes in a series did not represent debt for federal income tax
purposes, the notes might be treated as equity interests in the issuer. If so
treated, unless otherwise indicated in the applicable prospectus supplement, the
issuer should be treated as a publicly traded partnership that would not be
taxable as a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of the notes as equity interests in this kind of publicly
traded partnership could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income", income to Non-U.S. Persons generally
would be subject to U.S. tax and U.S. withholding tax requirements, and
individual holders might be subject to certain limitations on their ability to
deduct their share of issuer expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Issuer as a Partnership. The depositor will agree, and the
related certificateholders will agree by their purchase of certificates, to
treat the issuer 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 issuer, the partners of
the partnership being the certificateholders (including the holder of any
certificates representing the retained interest in the issuer) and the notes
being debt of the partnership. However, the proper characterization of the
arrangement involving the issuer, the certificates, the notes and the depositor
is not clear because there is no authority on transactions closely comparable to
that contemplated in this prospectus.
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 issuer.
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This type of characterization would not result in materially adverse tax
consequences to certificateholders as compared to the consequences from
treatment of the certificates as equity in a partnership, described below. The
following discussion assumes that the certificates represent equity interests in
a partnership.
Partnership Taxation. As a partnership, the issuer 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 issuer. The issuer's income will consist
primarily of interest and finance charges earned on the related Receivables
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of the Receivables. The issuer's
deductions will consist primarily of interest accruing with respect to the
notes, servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (i.e., the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
issuer for each month equal to the sum of:
(1) the interest that accrues on the certificates in accordance with their
terms for that month, including interest accruing at the related
pass-through rate for that month and interest, if any, on amounts
previously due on the certificates but not yet distributed;
(2) any issuer income attributable to discount on the related Receivables
that corresponds to any excess of the principal amount of the
certificates over their initial issue price;
(3) any other amounts of income payable to the certificateholders for that
month; and
(4) in the case of an individual, estate or trust, the certificateholder's
share of income corresponding to the miscellaneous itemized deductions
described in the next paragraph.
This allocation of interest will be reduced by any amortization by the
issuer of premium on Receivables that corresponds to any excess of the issue
price of certificates over their principal amount. Unless otherwise provided in
the related prospectus supplement, all remaining taxable income of the issuer
will be allocated to the owner of the retained interest of the issuer. Losses of
the issuer will be allocated to the retained interest and to the certificates in
the order in which such losses are borne, and additional income will be
allocated to a class that receives a recovery of a previously allocated loss.
In the event the issuer issues certificates which are Strip Securities, the
amount allocated to the certificateholders will equal the excess of
(1) the pass-through rate applicable to the Strip Securities times the
notional principal amount for the Strip Securities for the month over
(2) the portion of the amount distributed with respect to the Strip
Securities for the month that would constitute a return of basis if
the Strip Securities constituted an instrument described in Section
860G(a)(1)(B)(ii) of the Code, applying the
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principles of Section 1272(a)(6) of the Code and employing the
constant yield method of accrual (utilizing the appropriate prepayment
assumption).
However, no negative accruals will be permitted, and other deductions of
the issuer will be allocated to the Strip Securities up to their remaining
capital account balances immediately before the final redemption.
The portion of expenses of the issuer (including fees to the servicer, but
not interest expense) allocated to taxpayers that are individuals, estates or
trusts would be miscellaneous itemized deductions to those taxpayers. The
deductions might be disallowed to the taxpayers in whole or in part and might
result in those taxpayers being taxed on an amount of income that exceeds the
amount of cash actually distributed to those taxpayers over the life of the
issuer. Any net loss of the issuer will be allocated first to the retained
interest holder to the extent of its adjusted capital account, then to the other
certificateholders in the priorities set forth in the Trust Agreement to the
extent of their respective adjusted capital accounts, and thereafter to the
retained interest holder.
The issuer intends to make all calculations relating to market discount
income and amortization of premium with respect to both simple interest
Receivables and precomputed Receivables on an aggregate basis rather than a
Receivable-by-Receivable basis. If the IRS were to require that the calculations
be made separately for each Receivable, the issuer might be required to incur
additional expense, but it is believed that there would not be a material
adverse effect on certificateholders.
Discount and Premium. Except as otherwise provided in the related
prospectus supplement, it is believed that the Receivables were not issued with
OID, and, therefore, the issuer should not have OID income. However, the
purchase price paid by the issuer for the related Receivables may be greater or
less than the remaining principal balance of the Receivables at the time of
purchase. If so, the Receivables will have been acquired at a premium or
discount, as the case may be. (As indicated above, the issuer will make this
calculation on an aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the issuer acquires the related Receivables at a market discount or
premium, it will elect to include that discount in income currently as it
accrues over the life of the Receivables or to offset the premium against
interest income on those Receivables. As indicated above, a portion of the
market discount income or premium deduction may be allocated to
certificateholders.
Section 708 Termination. Under Section 708 of the Code, the issuer will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the issuer are sold or exchanged within a
12-month period. Under applicable Treasury regulations, this kind of 50% or
greater transfer would cause a deemed contribution of the assets of the issuer
to a new partnership in exchange for interests in the issuer. These interests in
a new partnership would be deemed distributed to the partners of the issuer in
liquidation thereof, which would not constitute a sale or exchange. The issuer
will not comply with certain technical requirements that might apply when this
kind of constructive termination occurs. As a result, the issuer may be subject
to certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the issuer might not be able to
comply due to lack of data.
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Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates sold.
With respect to noncorporate certificateholders, this capital gain or loss will
be short-term or long-term, depending on whether the certificate has been held
for
(1) 12 months or less, or
(2) more than 12 months, respectively.
Long-term capital gain tax rates are lower for noncorporate
certificateholders as compared with short-term capital gains, which are taxed at
ordinary income tax rates. A certificateholder's tax basis in a certificate will
generally equal the holder's cost increased by the holder's share of issuer
income (includible in income) and decreased by any distributions received with
respect to the certificate. In addition, both the tax basis in the certificates
and the amount realized on a sale of a certificate would include the holder's
share of the liabilities of the issuer. A holder acquiring certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in the certificates and, upon sale or other disposition of some of the
certificates, to 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 related Receivables would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The issuer does not expect to have any other assets that
would give rise to these special reporting requirements. Thus, to avoid these
special reporting requirements, the issuer will elect to include market discount
in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the certificates that exceeds the aggregate
cash distributions with respect thereto, this excess will generally give rise to
a capital loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the issuer's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates (or notional principal
amount, in the case of any Strip Securities) owned by them as of the close of
the last day of that 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 this type of 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 issuer might be reallocated among the certificateholders. The retained
interest holder, acting as tax matters partner for the issuer, will be
authorized to revise the issuer's method of allocation between transferors and
transferees to conform to a method permitted by future regulations.
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Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have a
higher (lower) basis in the certificates than the selling certificateholder had.
The tax basis of the issuer's assets will not be adjusted to reflect that higher
(or lower) basis unless the issuer 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 issuer will not make that election. As a
result, certificateholders might be allocated a greater or lesser amount of
issuer 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 issuer. These books will be maintained for
financial reporting and tax purposes on an accrual basis, and the fiscal year of
the issuer is expected to be the calendar year. The trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the issuer and will report each certificateholder's allocable share of
items of issuer income and expense to holders and the IRS on Schedule K-I. The
issuer will provide the Schedule K-l information to nominees that fail to
provide the issuer with the information statement described below and these
nominees will be required to forward that information to the beneficial owners
of the certificates. Generally, holders must file tax returns that are
consistent with the information return filed by the issuer or be subject to
penalties unless the holder notifies the IRS of all the 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 issuer
with a statement containing certain information on the nominee, the beneficial
owners and the certificates so held. The 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 that person,
(b) whether that person is a U.S. Person, a tax-exempt entity or a
foreign government, an international organization, or any wholly
owned agency or instrumentality of either of the foregoing, and
(c) certain information on certificates that were held, bought or
sold on behalf of that person throughout the year.
In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the issuer information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Securities Exchange Act of 1934 is not required to
furnish the information statement to the issuer. The information referred to
above for any calendar year must be furnished to the issuer on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the issuer with the information described above may be subject to
penalties.
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The retained interest holder will be designated as the tax matters partner
for each issuer in the related Trust Agreement and, as such, will be responsible
for representing the certificateholder in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the issuer 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 issuer. 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 issuer.
Tax Consequences to Non-U.S. Certificateholders. Pursuant to a change in
the safe harbor provisions of Section 864(b)(2)(A) of the Code (applicable to
tax years beginning after December 31, 1997), certificateholders who are
Non-U.S. Persons will not be considered to be engaged in a trade or business in
the United States for purposes of federal withholding taxes with respect to
Non-U.S. Persons solely as a result of owning or trading certificates. As a
result, the issuer is not obligated to withhold on the portion of its taxable
income that is allocable to Non-U.S. Persons at regular graduated rates (35% for
Non-U.S. Persons that are taxable as corporations and 39.6% for all other
Non-U.S. Persons), unless those Non-U.S. Persons hold certificates in connection
with the conduct of a U.S. trade or business.
Interest allocable to a Non-U.S. Person that does not hold certificates in
connection with the conduct of a U.S. trade or business will not qualify for the
exemption for portfolio interest under Section 871(h) of the Code, because
underlying Receivables owned by the issuer are not in "registered form" as that
term is defined in applicable Treasury regulations. As a result, this Non-U.S.
Person who holds certificates will be subject to United States withholding tax
on interest or OID attributable to the underlying Receivables (whether or not
that amount is distributed) at a rate of 30 percent, unless reduced or
eliminated pursuant to an applicable treaty. Potential investors who are
Non-U.S. Persons should consult their own tax advisors regarding the specific
tax consequences of owning a certificate.
Backup Withholding. Distributions made on the certificates and proceeds
from the sale of the certificates will be subject to a "backup" withholding tax
of 3l% if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
ISSUERS TREATED AS GRANTOR TRUSTS
Tax Characterization of Grantor Trusts
The prospectus supplement may provide an opinion by Cadwalader, Wickersham
& Taft that the issuer will not be classified as an association taxable as a
corporation and that the issuer will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code (a "grantor trust fund"). In this
case, beneficial owners of grantor trust certificates will be treated for
federal income tax purposes as owners of a portion of the issuer's assets as
described below. The certificates issued by an issuer that is treated as a
grantor trust are referred to as grantor trust
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certificates. Grantor trust certificates may either be "standard certificates"
or "strip certificates" as described below.
Standard Certificates. The holder of certificates representing the same
percentage of interest and principal payments in the Receivables with respect to
a series, referred to in this prospectus as "standard certificates," will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the issuer represented by the standard certificates and
will be considered the equitable owner of a pro rata undivided interest in each
of the Receivables in the issuer. Any amounts received by a standard
certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each standard certificateholder will be required to report on its federal
income tax return in accordance with that standard certificateholder's method of
accounting its pro rata share of the entire income from the Receivables in the
issuer represented by the standard certificates, including interest, OID, if
any, prepayment fees, assumption fees, any gain recognized upon an assumption
and late payment charges received by the servicer. Under Code Sections 162 or
212, each standard certificateholder will be entitled to deduct its pro rata
share of servicing fees, prepayment fees, assumption fees and late payment
charges retained by the servicer, provided that the amounts are reasonable
compensation for services rendered to the issuer. Standard certificateholders
that are individuals, estates or trusts will be entitled to deduct their share
of expenses only to the extent those expenses plus all other miscellaneous
itemized deductions exceed two percent of their respective adjusted gross
incomes. Such expenses are not deductible at all for purposes of computing the
alternative minimum tax, which may expose such holders to significant additional
tax liability. A standard 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 standard certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the servicer, whichever is
earlier. If the servicing fees paid to the servicer are deemed to exceed
reasonable servicing compensation, the amount of the excess could be considered
as an ownership interest retained by the servicer (or any person to whom the
servicer assigned for value all or a portion of the servicing fees) in a portion
of the interest payments on the Receivables. The Receivables would then be
subject to the "coupon stripping" rules of the Code discussed below.
Original Issue Discount. Except as discussed below with respect to strip
certificates or as otherwise discussed in the applicable prospectus supplement,
it is not anticipated that the receivables or the standard certificates will be
issued with original issue discount ("OID") for federal income tax purposes.
Market Discount. A standard certificateholder that acquires an undivided
interest in Receivables may be subject to the market discount rules of Sections
1276 through 1278 to the extent an undivided interest in a Receivable is
considered to have been purchased at a "market discount." Generally, the amount
of market discount is equal to the excess of the portion of the principal amount
of the Receivable allocable to the holder's undivided interest over the holder's
tax basis in that interest. Market discount with respect to a standard
certificate will be considered to be zero if the amount allocable to the
standard certificate is less than 0.25% of the standard certificate's stated
redemption price at maturity multiplied by the weighted average
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maturity remaining after the date of purchase. Treasury regulations implementing
the market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under Code Section 1276 and
1278. The IRS may require you to compute market discount on a
Receivable-by-Receivable basis, based on the allocation of your purchase price
among the Receivables based on their fair market values. However, we will not
furnish information to you on a Receivable-by-Receivable basis. Accordingly, if
you compute premium amortization on an aggregate basis, you may be required by
the IRS to recompute the premium on a Receivable-by-Receivable basis.
The Code provides that any principal payment (whether a scheduled payment
or a prepayment) or any gain or disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of the payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or in an amount, for each accrual period, equal to the
product of
(1) the total remaining market discount and
(2) a fraction, the numerator of which is the amount of stated interest
paid during the accrual period and the denominator of which is the
total amount of stated interest remaining to be paid at the beginning
of the accrual period.
For purposes of calculating market discount under any of the above methods
in the case of instruments (such as the standard certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing those instruments, a prepayment assumption will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a standard
certificate purchased at a discount or premium in the secondary market.
A holder who acquired a standard certificate at a market discount also may
be required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry the
standard certificate purchased with market discount. For these purposes, the de
minimis rule referred to above applies. This 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. If the holder elects to include market
discount in income currently as it accrues on all market discount instruments
acquired by that holder in that taxable year or thereafter, the interest
deferral rule described above will not apply.
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Premium. The price paid for a standard certificate by a holder will be
allocated to that holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that the holder's undivided interest
in each Receivable will have its own tax basis. A standard certificateholder
that acquires an interest in Receivables at a premium may elect to amortize the
premium under a constant interest method. Amortizable bond premium will be
treated as an offset to interest income on the standard certificate. The basis
for the standard certificate will be reduced to the extent that amortizable
premium is applied to offset interest payments. We cannot tell you whether a
reasonable prepayment assumption should be used in computing amortization of
premium allowable under Section 171 of the Code. A standard certificateholder
that makes this election for a standard 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
standard certificateholder acquires during the year of the election or
thereafter. We will not furnish information to you on a Receivable-by-Receivable
basis. Accordingly, if you compute premium amortization on an aggregate basis,
the IRS may require you to recompute the premium.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a standard certificate acquired at a premium should
recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of the Receivable that is
allocable to the standard certificate and the portion of the adjusted basis of
the standard certificate that is allocable to that Receivable. If a reasonable
prepayment assumption is used to amortize the premium, it appears that that type
of loss would be available, if at all, only if prepayments have occurred at a
rate faster than the reasonable assumed prepayment rate. It is not clear whether
any other adjustments would be required to reflect differences between an
assumed prepayment rate and the actual rate of prepayments.
Election to Treat All Interest as OID. The OID regulations permit a
standard certificateholder to elect to accrue all interest, discount (including
de minimis market discount or OID) and premium in income as interest, based on a
constant yield method. If that kind of election were to be made with respect to
a standard certificate with market discount, the standard 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 standard certificateholder acquires during the year of the election or
thereafter. Similarly, a standard certificateholder that makes this election for
a standard 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 standard certificateholder owns or acquires.
See "--Premium" above. The election to accrue interest, discount and premium on
a constant yield method with respect to a standard certificate is irrevocable.
Sale or Exchange of a Standard Certificate. Sale or exchange of a standard
certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the owner's adjusted basis
in the standard certificate. This adjusted basis generally will equal the
seller's purchase price for the standard certificate, increased by the OID and
any market discount included in the seller's gross income with respect to the
standard certificate, and reduced by any market premium amortized by the seller
and by principal payments on the standard certificate previously received by the
seller. This gain or loss will be capital gain or loss to an owner for which a
standard certificate is a "capital asset" within the meaning of
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Section 1221 of the Code (except in the case of gain attributable to accrued
market discount, as noted above under "--Market Discount") and, with respect to
noncorporate owners, will be short-term or long-term, depending on whether the
standard certificate has been held for 12 months or less, or more than 12
months, respectively. (Long-term capital gain tax rates are less than short-term
capital gains rates for individuals, which are taxed at ordinary income tax
rates.)
Standard certificates will be "evidences of indebtedness" within the
meaning of Section 582(c)(1) of the Code, so that gain or loss recognized from
the sale of a standard certificate by a bank or a thrift institution to which
that section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Interest or OID paid to Non-U.S. Persons who own standard
certificates will be treated as "portfolio interest" for purposes of United
States withholding tax. That interest (including OID, if any) attributable to
the underlying Receivables will not be subject to the normal 30% (or any lower
rate provided for by an applicable tax treaty) withholding tax imposed on those
amounts provided that
(1) the Non-U.S. Person is not a "10% shareholder" (within the definition
of Section 871(h)(3)) of any obligor on the Receivables; and is not a
controlled foreign corporation (within the definition of Section 957)
related to any obligor on the Receivables and
(2) that certificateholder fulfills certain certification requirements.
Under these requirements, the certificateholder must certify, under penalty
of perjury, that it is not a U.S. Person and must provide its name and address.
If, however, the interest or gain is effectively connected to the conduct of a
trade or business within the U.S. by that certificateholder, that owner will be
subject to U.S. federal income tax thereon at graduated rates. Potential
investors who are not U.S. Persons should consult their own tax advisors
regarding the specific tax consequences of owning a certificate.
Information Reporting and Backup Withholding. The servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a standard certificateholder at any time during that year,
any information that servicer deems necessary or desirable to assist standard
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 standard certificates as nominees on behalf of
beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that the person has not reported all interest and dividend income
required to be shown on its federal income tax return, 31% backup withholding
may be required with respect to any payments. Any amounts deducted and withheld
from a distribution to a recipient would be allowed as a credit against the
recipient's federal income tax liability.
Strip Certificates
General. Strip Certificates are subject to the rules of Code Section 1286,
under which the separation of ownership of the right to receive some or all of
the principal payments on an obligation from ownership of the right to receive
some or all of the interest payments results in the creation of "stripped bonds"
with respect to principal payments and "stripped coupons" with respect to
interest payments. The securities will be subject to those rules if:
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(1) the depositor or any of its affiliates is treated as having an
ownership interest in the Receivables to the extent it is paid or retains
servicing compensation in an amount greater than reasonable consideration for
servicing the Contracts, or
(2) securities are issued in two or more classes or subclasses representing
the right to non-pro-rata percentages of the interest and principal payments on
the Receivables.
In general, a holder of a Strip Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of the
principal payments on each Receivable and/or "stripped coupons" with respect to
its pro rata share of all or a portion of the interest payments on each
Receivable, including the Strip Certificate's allocable share of the servicing
fees paid to a servicer, to the extent that those fees represent reasonable
compensation for services rendered. Although not free from doubt, for purposes
of reporting to holders of Strip Certificates, the servicing fees will be
allocated to the classes of Strip Certificates in proportion to the
distributions to the classes for the related period or periods. The holder of a
Strip Certificate generally will be entitled to a deduction each year in respect
of the servicing fees, as described above under "--Standard
Securities--General," subject to the limitation described in that section.
Code Section 1286 treats a stripped bond or a stripped coupon generally as
an obligation issued on the date that the stripped interest is purchased.
Although the treatment of Strip Certificates for federal income tax purposes is
not clear in certain respects, particularly where Strip Certificates are issued
with respect to a pool of Receivables containing variable-rate Receivables, the
depositor has been advised by Cadwalader, Wickersham & Taft that:
(1) The issuer will be treated as a grantor trust under subpart E, Part I
of subchapter J of the Code and not as an association or publicly traded
partnership taxable as a corporation and
(2) each Strip Certificate should be treated as a single installment
obligation for purposes of calculating OID and gain or loss on disposition.
This treatment is based on the interrelationship of Code Section 1286, Code
Sections 1272 through 1275, and the OID regulations. Although it is possible
that computations with respect to Strip Certificates could be made in one of the
ways described below under "--Possible Alternative Characterization," the OID
regulations state, in general, that two or more debt instruments issued by a
single issuer to a single investor in a single transaction should be treated as
a single debt instrument. Accordingly, for OID purposes, all payments on any
Strip Certificates should be aggregated and treated as though they were made on
a single debt instrument. The applicable agreement will require that the trustee
make and report all computations described below using this aggregate approach,
unless substantial legal authority requires otherwise.
Furthermore, Treasury regulations provide for treatment of a Strip
Certificate as a single debt instrument issued on the date it is purchased for
purposes of calculating any OID. In addition, under those regulations, a Strip
Certificate that represents a right to payments of both interest and principal
may be viewed either as issued with OID or market discount, as described below,
at a de minimis, or, presumably, at a premium. This treatment indicates that the
interest component of a Strip Certificate of this type would be treated as
qualified stated interest under the OID
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Regulations (reportable as interest under the cash or accrual method, as the
case may be), assuming it is not an interest-only Strip Certificate. Further,
these regulations provide that the purchaser of a Strip Certificate will be
required to account for any discount as market discount rather than OID if
either:
(1) the initial discount with respect to the Stripped Certificate was
treated as zero under the de minimis rule, or
(2) no more than 100 basis points in excess of reasonable servicing is
stripped off the related Receivables. Any market discount would be reportable as
described above under "Standard Certificates--Market Discount," without regard
to the de minimis rule described in this prospectus, assuming that a prepayment
assumption is employed in that computation
Taxation of Strip Certificates. Except as described above under
"--General," each Strip Certificate will be considered to have been issued with
OID for federal income tax purposes. OID with respect to a Strip Certificate
must be included in ordinary income as it accrues, in accordance with a constant
yield method that takes into account the compounding of interest, which may be
prior to the receipt of the cash attributable to that income. For Receivables
that are prepayable, such accrual will likely employ a prepayment assumption.
With the apparent exception of a Strip Certificate qualifying as a market
discount obligation as described above under "--General," the issue price of a
Strip Certificate will be the purchase price paid by each holder of the Strip
Certificate. The stated redemption price at maturity will include the aggregate
amount of the payments to be made on the Strip Certificate to the holder of
securities, presumably under the prepayment assumption, other than qualified
stated interest.
If the Receivables prepay at a rate either faster or slower than under the
applicable prepayment assumption, a holder's recognition of OID will be either
accelerated or decelerated and the amount of the OID will be either increased or
decreased depending on the relative interests in principal and interest on each
Receivable represented by the holder's Strip Certificate. While the matter is
not free from doubt, the holder of a Strip Certificate should be entitled in the
year that it becomes certain, assuming no further prepayments, that the holder
will not recover a portion of its adjusted basis in that Strip Certificate to
recognize a loss, which may be a capital loss, equal to that portion of
unrecoverable basis.
As an alternative to the method described above, the fact that some or all
of the interest payments with respect to the Strip Certificates will not be made
if the Receivables are prepaid could lead to the interpretation that those
interest payments are "contingent" within the meaning of the OID regulations.
The OID regulations, as they relate to the treatment of contingent interest, are
by their terms not applicable to repayable securities. However, if final
regulations dealing with contingent interest with respect to the Strip
Certificates apply the same principles as the OID regulations, those regulations
may lead to different timing of income inclusion than would be the case under
the OID regulations. Furthermore, application of those principles could lead to
the characterization of gain on the sale of contingent interest Strip
Certificates as ordinary income. Investors should consult their tax advisors
regarding the appropriate tax treatment of Strip Certificates.
Sale or Exchange of Strip Certificates. Sale or exchange of a Strip
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received
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and the holder's adjusted basis in that Strip Certificate, as described above
under "Standard Certificates--Sale or Exchange of a Standard Certificate." To
the extent that a subsequent purchaser's purchase price is exceeded by the
remaining payments on the Strip Certificates, the subsequent purchaser will be
required for federal income tax purposes to accrue and report the excess as if
it were OID in the manner described above. It is not clear for this purpose
whether the assumed prepayment rate that is to be used in the case of a holder
of securities other than an original holder of securities should be the original
prepayment assumption or a new rate based on the circumstances at the date of
subsequent purchase.
Purchase of More Than One Class of Strip Certificates. When an investor
purchases more than one class of Strip Certificates, it is currently unclear
whether for federal income tax purposes the classes of Strip Certificates should
be treated separately or aggregated for purposes of the rules described above.
Possible Alternative Characterization. The characterizations of the Strip
Certificates discussed above are not the only possible interpretations of the
applicable Code provisions. For example, the holder of securities may be treated
as the owner of:
(1) one installment obligation consisting of the Strip Certificate's pro
rata share of the payments attributable to principal on each Receivable and a
second installment obligation consisting of the respective Strip Certificate's
pro rata share of the payments attributable to interest on each Receivable,
(2) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each Receivable, or
(3) a separate installment obligation for each Receivable, representing the
Strip Certificate's pro rata share of payments of principal and/or interest to
be made with respect to that Strip Certificate.
Alternatively, the holder of one or more classes of Strip Certificates may
be treated as the owner of a pro rata fractional undivided interest in each
Receivable to the extent that the related Strip Certificate, or classes of Strip
Certificates in the aggregate, represent the same pro rata portion of principal
and interest on each Receivable, and a stripped bond or stripped coupon, as the
case may be, treated as an installment obligation or contingent payment
obligation, as to the remainder. Treasury regulations regarding OID on stripped
obligations make the foregoing interpretations less likely to be applicable. The
preamble to these regulations states that they are premised on the assumption
that an aggregation approach is appropriate for determining whether OID on a
stripped bond or stripped coupon is de minimis, and solicits comments on
appropriate rules for aggregating stripped bonds and stripped coupons under Code
Section 1286.
Because of these possible varying characterizations of Strip Certificates
and the resultant differing treatment of income recognition, holders of
securities are urged to consult their own tax advisors regarding the proper
treatment of Strip Certificates for federal income tax purposes.
Information Reporting and Backup Withholding. The trustee will furnish,
within a reasonable time after the end of each calendar year, to each holder of
Strip Certificates at any time during that calendar year, information, prepared
on the basis described above, as is necessary to enable the holder of those
Strip Certificates to prepare its federal income tax returns.
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The information will include the amount of OID accrued on Strip Certificates
held by persons other than holders exempted from the reporting requirements.
However, the amount required to be reported by the trustee may not be equal to
the proper amount of OID required to be reported as taxable income by a holder
of Strip Certificates other than an original holder that purchased at the issue
price. In particular, in the case of Strip Certificates, the reporting will be
based on a representative initial offering price of each class of Strip
Certificates or a price as set forth in the related prospectus supplement. The
trustee will also file OID information with the IRS. If a holder of securities
fails to supply an accurate taxpayer identification number or if the Secretary
of the Treasury determines that a holder of securities has not reported all
interest and dividend income required to be shown on his federal income tax
return, 31% backup withholding may be required in respect of any reportable
payments, as described above under "Standard Certificates--Information Reporting
and Backup Withholding."
Non-U.S. Persons. To the extent that a Strip Certificate evidences
ownership in Receivables that are issued on or before July 18, 1984, interest or
OID paid by the person required to withhold tax under Code Section 1441 or 1442
to nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or any lower rate as may
be provided for interest by an applicable tax treaty. Accrued OID recognized by
the holder of Strip Certificates on a sale or exchange also will be subject to
federal income tax at the same rate.
Treasury regulations provide that interest or OID paid by the trustee or
other withholding agent to a Non-U.S. Person evidencing ownership interest in
mortgage loans issued after July 18, 1984 will be "portfolio interest" and will
be treated in the manner, and these persons will be subject to the same
certification requirements, described above under "Standard
Certificates--Non-U.S. Persons."
* * *
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation. You
should consult your own tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of securities, including the tax
consequences under state, local and foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
ERISA CONSIDERATIONS
GENERAL
ERISA and Section 4975 of the Code impose certain requirements on those
employee benefit plans and arrangements to which they apply and on those persons
who are fiduciaries with respect to the employee benefit plans and arrangements.
The following is a general discussion of the requirements, and certain
applicable exceptions to and administrative exemptions from the requirements.
For purposes of this discussion, an IRA is an ERISA Plan if the IRA is endorsed
by or contributed to by the IRA participant's employer or employee organization.
Other IRAs and Non-ERISA Plans are not considered ERISA Plans, but the Non-ERISA
Plans are subject to ERISA-like requirements as well as the prohibited
transaction
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provisions of the Code. Exempt Plans are exempt from the provisions of Title I
of ERISA and the prohibited transaction provisions of the Code. Accordingly,
Exempt Plans also are not considered ERISA Plans, but the Exempt Plans may be
subject to the provisions and special requirements of other applicable federal,
state and local law.
Before purchasing any certificates, an ERISA Plan fiduciary should consult
with its counsel and determine whether there exists any prohibition to the
purchase under the requirements of ERISA or the Code, whether prohibited
transaction exemptions such as PTE 83-1 or any individual administrative
exemption applies, including whether the appropriate conditions set forth there
would be met, or whether any statutory prohibited transaction exemption is
applicable, and further should consult the applicable prospectus supplement
relating to the series of certificates.
CERTAIN REQUIREMENTS UNDER ERISA AND THE CODE
General
In accordance with ERISA's general fiduciary standards, before investing in
a certificate, an ERISA Plan fiduciary should determine whether to do so is
permitted under the governing ERISA Plan instruments and is appropriate for the
ERISA Plan in view of its overall investment policy and the composition and
diversification of its portfolio. An ERISA Plan fiduciary should especially
consider the ERISA requirement of investment prudence and the sensitivity of the
return on the certificates to the rate of principal repayments, including
prepayments on a Contract, as discussed in "The Receivables--Maturity and
Prepayment Considerations" in this prospectus.
Parties in Interest/Disqualified Persons
Other provisions of ERISA, and corresponding provisions of the Code,
prohibit certain transactions involving the assets of an ERISA Plan and persons
who have certain specified relationships to the ERISA Plan, so-called "parties
in interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code. The depositor, the master servicer or the trustee or
certain affiliates of these parties might be considered or might become "parties
in interest" or "disqualified persons" with respect to an ERISA Plan. If so, the
acquisition or holding of certificates by or on behalf of ERISA Plan could be
considered to give rise to a "prohibited transaction" within the meaning of
ERISA and the Code unless an administrative exemption described below or some
other exemption is available.
Special caution should be exercised before the assets of an ERISA Plan,
including assets that may be held in an insurance company's separate or general
accounts where assets in the accounts may be deemed plan assets for purposes of
ERISA, are used to purchase a certificate if, with respect these assets, the
depositor, the master servicer or the trustee or an affiliate of these parties
either:
o has investment discretion with respect to the investment of the assets of
the ERISA Plan; or
o has authority or responsibility to give, or regularly gives, investment
advice with respect to the assets for a fee and under an agreement or
understanding that the advice
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will serve as a primary basis for investment decisions with respect to
the assets and that the advice will be based on the particular investment
needs of the ERISA Plan.
Delegation of Fiduciary Duty
Further, if the assets included in a trust fund were deemed to constitute
assets of an ERISA Plan, it is possible that an ERISA Plan's investment in the
certificates might be deemed to constitute a delegation, under ERISA, of the
duty to manage plan assets by the fiduciary deciding to invest in the
certificates, and certain transactions involved in the operation of the trust
estate might be deemed to constitute prohibited transactions under ERISA and the
Code. Neither ERISA nor the Code define the term "plan assets."
The U.S. Department of Labor has issued regulations concerning whether or
not an ERISA Plan's assets would be deemed to include an interest in the
underlying assets of an entity, such as a trust estate, for purposes of the
reporting and disclosure and general fiduciary responsibility provisions of
ERISA, as well as for the prohibited transaction provisions of ERISA and the
Code, if the ERISA Plan acquires an "equity interest", such as a Certificate, in
this type entity.
Certain exceptions are provided in the Department of Labor regulations
whereby an investing ERISA Plan's assets would be deemed merely to include its
interest in the certificates instead of being deemed to include an interest in
the assets of a trust fund. However, it cannot be predicted in advance nor can
there be any continuing assurance whether the exceptions may be met, because of
the factual nature of certain of the rules set forth in the regulations. For
example, one of the exceptions in the regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of the
value of all classes of equity interests are held by "benefit plan investors,"
which term is defined to include ERISA Plans, Non-ERISA Plans and Exempt Plans
and any entity whose assets include "plan assets" by reason of benefit plan
investments in the entity, but this exception is tested immediately after each
acquisition of an equity interest in the entity whether upon initial issuance or
in the secondary market.
Applicability to Non-ERISA Plans
Since Non-ERISA Plans are subject to the prohibited transaction provisions
of the Code, the discussion above with respect to "disqualified persons,"
prohibited transactions, delegation of fiduciary duty and plan assets applies to
Non-ERISA Plans as well as ERISA Plans. However, the administrative exemptions
discussed below are not applicable to Non-ERISA Plans.
NON-ERISA PLANS AND EXEMPT PLANS
Although Non-ERISA Plans and Exempt Plans are not considered ERISA Plans
for purposes of the above discussion, Non-ERISA Plans are subject to the
prohibited transaction provisions of the Code, and both Non-ERISA Plans and
Exempt Plans may be subject to certain other ERISA-like requirements of
applicable law. Therefore, before purchasing any certificates by or on behalf of
a Non-ERISA Plan or any Exempt Plan, the prospective purchaser should exercise
special caution and should consult with its legal counsel concerning the
propriety and implications of the investment under the Code or other applicable
law.
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UNRELATED BUSINESS TAXABLE INCOME--RESIDUAL CERTIFICATES
The purchase of a residual certificate by an IRA or any employee benefit
plan qualified under Code Section 401(a) and exempt from taxation under Code
Section 501(a), including most varieties of Benefit Plans, may give rise to
"unrelated business taxable income" as described in Code Sections 511 through
515 and 860E. Further, prior to the purchase of residual certificates, a
prospective transferee may be required to provide an affidavit to a transferor
that it is not, nor is it purchasing a residual certificate on behalf of, a
Disqualified Organization. In addition, prior to the transfer of a residual
certificate, the trustee or the depositor may require an opinion of counsel to
the effect that the transferee is not a Disqualified Organization and that the
transfer will not subject the trustee, the depositor, the master servicer or any
servicer to additional obligations imposed by ERISA or the Code.
DUE TO THE COMPLEXITY OF THESE RULES AND THE PENALTIES IMPOSED UPON PERSONS
INVOLVED IN PROHIBITED TRANSACTIONS, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL
INVESTORS WHO ARE ACTING ON BEHALF OF A BENEFIT PLAN OR ANY OTHER EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT CONSULT WITH THEIR COUNSEL REGARDING THE
CONSEQUENCES UNDER ERISA, THE CODE OR OTHER APPLICABLE LAW OF THEIR ACQUISITION
AND OWNERSHIP OF CERTIFICATES.
THE SALE OF CERTIFICATES TO A BENEFIT PLAN OR ANY OTHER EMPLOYEE BENEFIT
PLAN OR ARRANGEMENT IS IN NO RESPECT A REPRESENTATION BY THE DEPOSITOR OR THE
APPLICABLE UNDERWRITER THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY EMPLOYEE BENEFIT PLANS GENERALLY OR
ANY PARTICULAR PLAN OR ARRANGEMENT, OR THAT THIS INVESTMENT IS APPROPRIATE FOR
EMPLOYEE BENEFIT PLANS GENERALLY OR ANY PARTICULAR PLAN OR ARRANGEMENT.
METHODS OF DISTRIBUTION
The securities offered by this prospectus and by the supplements to this
prospectus will be offered in series. The distribution of the securities may be
effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment for a sale. The
related prospectus supplement will specify whether the securities will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by PaineWebber Incorporated acting as
underwriter with other underwriters, if any, named in the related underwriting
agreement. If it is a firm commitment underwriting, the related prospectus
supplement may also specify that the underwriters will not be obligated to pay
for any securities agreed to be purchased by purchasers pursuant to purchase
agreements acceptable to the depositor. In connection with the sale of the
securities, underwriters may receive compensation from the depositor or from
purchasers of the securities in the form of discounts, concessions or
commissions. The related prospectus supplement will describe any compensation
paid by the depositor to the underwriters.
Alternatively, the related prospectus supplement may specify that the
securities will be distributed by PaineWebber Incorporated acting as agent or in
some cases as principal with respect to securities which it has previously
purchased or agreed to purchase. If PaineWebber Incorporated acts as agent in
the sale of securities, PaineWebber Incorporated will receive a selling
commission with respect to each series of securities, depending on market
conditions,
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expressed as a percentage of the aggregate principal balance of the related
residential loans as of the cut-off date. The exact percentage for each series
of securities will be disclosed in the related prospectus supplement. To the
extent that PaineWebber Incorporated elects to purchase securities as principal,
PaineWebber Incorporated may realize losses or profits based on the difference
between its purchase price and the sales price. The prospectus supplement with
respect to any series offered other than through underwriters will contain
information regarding the nature of the offering and any agreements to be
entered into between the depositor and purchasers of securities of the related
series.
The depositor will indemnify PaineWebber Incorporated and any underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or will contribute to payments PaineWebber Incorporated and any
underwriters may be required to make in respect of any liability.
The related prospectus supplement relating to securities of a particular
series offered by this prospectus will specify whether the depositor or any
other person or persons specified in the prospectus supplement may purchase some
or all of the securities from the underwriter or underwriters or other person or
persons specified in the related prospectus supplement. A purchaser may
thereafter from time to time offer and sell, pursuant to this prospectus and the
related prospectus supplement, some or all of the securities so purchased,
directly, through one or more underwriters to be designated at the time of the
offering of these securities, through dealers acting as agent and/or principal
or in any other manner as may be specified in the related prospectus supplement.
The related offering may be restricted in the manner specified in the related
prospectus supplement. The related transactions may be effected at market prices
prevailing at the time of sale, at negotiated prices or at fixed prices. Any
underwriters and dealers participating in the purchaser's offering of the
related securities may receive compensation in the form of underwriting
discounts or commissions from a purchaser and dealers may receive commissions
from the investors purchasing the related securities for whom they may act as
agent. The discounts or commissions will not exceed those customary in those
types of transactions involved. Any dealer that participates in the distribution
of the related securities may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933. Any commissions and discounts received by
a dealer and any profit on the resale or the securities by that dealer might be
deemed to be underwriting discounts and commissions under the Securities Act of
1933.
In the ordinary course of business, PaineWebber Incorporated and the
depositor, or their affiliates, may engage in various securities and financing
transactions. These financing transactions include repurchase agreements to
provide interim financing of the depositor's residential loans pending the sale
of residential loans or interests in residential loans, including the
securities.
The depositor anticipates that the securities will be sold primarily to
institutional investors. Purchasers of securities, including dealers, may,
depending on the facts and circumstances of the related purchases, be deemed to
be "underwriters" within the meaning of the Securities Act of 1933 in connection
with reoffers and sales by them of securities. Holders of securities should
consult with their legal advisors in this regard prior to any reoffer or sale.
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As to each series of securities, only those classes rated in one of the
four highest rating categories by any rating agency will be offered by this
prospectus. Any unrated class may be initially retained by the depositor, and
may be sold by the depositor at any time to one or more institutional investors.
If required by applicable law or regulation, this prospectus will be used
by PaineWebber Incorporated, our affiliate, in connection with offers and sales
related to market-making transactions in the securities previously offered by
this prospectus in transactions in which PaineWebber Incorporated acts as
principal. PaineWebber Incorporated may also act as agent in those transactions.
Sales may be made at negotiated prices determined at the time of sale.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
With respect to each series of securities offered by this prospectus, there
are incorporated in this prospectus and in the related prospectus supplement by
reference all documents and reports filed by the depositor as required by
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 that
specifically concern the related series of securities. We will provide or cause
to be provided a copy of any or all reports incorporated in this prospectus by
reference without charge to each person to whom this prospectus and a related
prospectus supplement is delivered in connection with the offering of one or
more classes of series of securities, if they request it orally or in writing.
We will provide these reports only to the extent the reports relate to one or
more of classes of the related series of securities, and without the exhibits to
these documents, unless the exhibits are specifically incorporated by reference
in these documents. Requests should be directed in writing to PaineWebber Asset
Acceptance Corporation, 1285 Avenue of the Americas, New York, New York 10019,
Attention: General Counsel, or by telephone at (212) 713-2000.
We filed a registration statement relating to the securities with the SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
Copies of the registration statement may be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, if payment of the
prescribed charges is made, or may be examined free of charge at the SEC's
offices, 450 Fifth Street N.W., Washington, D.C. 20549 or at the regional
offices of the Commission located at Suite 1300, 7 World Trade Center, New York,
New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. The SEC also maintains a site on the World Wide
Web at "http://www.sec.gov" at which you can view and download copies of
reports, proxy and information statements and other information filed
electronically through the Electronic Data Gathering, Analysis and Retrieval --
EDGAR -- system. The depositor filed the registration statement, including all
exhibits to the registration statement, through the EDGAR system and therefore
these materials should be available by logging on to the SEC's Web site. The SEC
maintains computer terminals providing access to the EDGAR system at each of the
offices referred to above.
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LEGAL MATTERS
The validity of the securities and certain federal income tax matters in
connection with the securities will be passed on for the depositor by
Cadwalader, Wickersham & Taft, New York, New York.
FINANCIAL INFORMATION
A trust fund will be formed with respect to each series of securities and
no trust fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of securities, except
for serial issuances by a master trust. The depositor's activities will be
limited solely to the activities of trust funds to be formed with respect to
each series of securities. Accordingly, no financial statements with respect to
any trust fund will be included in this prospectus or in the related prospectus
supplement.
A prospectus supplement may contain the financial statements of the related
credit enhancer, if any.
ADDITIONAL INFORMATION
This prospectus, together with the prospectus supplement for each series of
securities, contains a summary of the material terms of the applicable exhibits
to the registration statement and the documents referred to in this prospectus
and in the registration statement. Copies of the exhibits are on file at the
offices of the Securities and Exchange Commission in Washington, D.C., and may
be obtained at rates prescribed by the Commission upon request to the Commission
and may be inspected, without charge, at the Commission's offices.
RATING
It will be a condition to the issuance of the securities of each series
offered by this prospectus and by the related prospectus supplement that they
shall have been rated in one of the four highest rating categories by the
nationally recognized statistical rating agency or agencies specified in the
related prospectus supplement.
Any rating would be based on, among other things, the adequacy of the value
of the assets of the trust fund and any credit enhancement with respect to the
related class. A rating will reflect the specified Rating Agency's assessment
solely of the likelihood that holders of a class of securities of the related
class will receive payments to which holders of securities are entitled by their
terms. The rating will not constitute
(1) an assessment of the likelihood that principal prepayments on the
related residential loans will be made,
(2) the degree to which the rate of prepayments might differ from that
originally anticipated or
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(3) the likelihood of early optional termination of the series of
securities. The rating should not be deemed a recommendation to purchase, hold
or sell securities, inasmuch as it does not address market price or suitability
for a particular investor.
The rating will not address the possibility that prepayment at higher or
lower rates than anticipated by an investor may cause the investor to experience
a lower than anticipated yield. The rating will not address that an investor
purchasing a security at a significant premium might fail to recoup its initial
investment under certain prepayment scenarios.
We cannot assure you that any rating will remain in effect for any given
period of time or that it may not be lowered or withdrawn entirely by the rating
agency in the future if in its judgment circumstances in the future so warrant.
A rating may be lowered or withdrawn due to any erosion in the adequacy of the
value of the assets of the trust fund or any credit enhancement with respect to
a series. The rating might also be lowered or withdrawn among other reasons,
because of an adverse change in the financial or other condition of a credit
enhancement provider or a change in the rating of the credit enhancement
provider's long term debt.
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GLOSSARY OF TERMS
"ACCRUAL SECURITIES" are one or more classes of fixed income securities as
to which a portion of the accrued interest will not be distributed but rather
will be added to the principal balance, or nominal balance in the case of
Accrual Securities which are also Strip Securities, of those classes of fixed
income securities on each payment date.
"BENEFIT PLANS" are Exempt Plans, ERISA Plans and Non-ERISA Plans referred
to collectively.
"CHATTEL PAPER" has the meaning in the Uniform Commercial Code which
generally means a record that evidences both a monetary obligation and a
security interest in specific goods, a security interest in specific goods and
software used in the goods, or a lease of specific goods. The term does not
include charters or other contracts involving the use or hire of a vessel. If a
transaction is evidenced both by a security agreement or lease and by an
instrument or series of instruments, the group of records taken together
constitutes chattel paper.
"CLEARSTREAM" Clearstream Banking, societe anonyme.
"CLEARSTREAM PARTICIPANTS" are participating organizations for which
Clearstream holds securities.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACTS" with respect to each trust fund are any combination of finance
leases or installment sale or loan contracts or participation interests in the
leases or contracts, together with all related monies.
"COOPERATIVE" is the Euroclear Clearance System, S.C., a Belgian
cooperative corporation.
"DEFINITIVE SECURITY" is a physical certificate representing a security
issued in the name of the beneficial owner of the security rather than DTC.
"DISQUALIFIED ORGANIZATION" means the United States, any state or political
subdivision of the United States, any foreign government, any international
organization, any agency or instrumentality of any of those bodies, provided
that the term does not include an instrumentality if all of its activities are
subject to tax and a majority of its board of directors is not selected by these
governmental entities, any cooperative organization furnishing electric energy
or providing telephone service to persons in rural areas as described in Code
Section 1381(a)(2)(C), and any organization, other than a farmers' cooperative
described in Code Section 521, that is exempt from taxation under the Code
unless that organization is subject to the tax on unrelated business income
imposed by Code Section 511.
"EQUIPMENT" is the equipment and related property that is being financed or
leased under a Contract, together with the related proceeds.
"ERISA PLANS" are retirement plans and other employee benefit plans and
arrangements, including individual retirement accounts and annuities and Keogh
plans, which are subject to
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ERISA, and bank collective investment funds and insurance company general and
separate accounts in which the plans, accounts or arrangements are invested.
"EUROCLEAR" the Euroclear System.
"EUROCLEAR OPERATOR" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System.
"EUROCLEAR PARTICIPANTS" are participating organizations for which
Euroclear holds securities.
"EXEMPT PLANS" are employee benefit plans that are governmental plans, (as
defined in Section 3(32) of ERISA) and certain church plans (as defined in
Section 3(33) of ERISA).
"FASIT" is a financial asset securitization investment trust.
"INSOLVENCY EVENT" is financial insolvency, bankruptcy, readjustment of
debt, marshaling of assets and liabilities, or similar proceedings with respect
to the servicer or the related Receivables seller and actions by the servicer or
the related Receivables seller indicating its insolvency, reorganization under
bankruptcy proceedings, or inability to pay its obligations.
"MASTER TRUST AGREEMENT" is a Trust Agreement which authorizes the trustee
to issue certificates evidencing the equity interest in a master trust.
"NON-ERISA PLANS" include IRAs that are not endorsed by or contributed to
by the IRA participant's employer or employee organization and certain employee
benefit plans covering only self-employed individuals.
"NON-U.S. PERSON" is a person who is not a U.S. Person.
"OID" is original issue discount.
"OID REGULATIONS" are Treasury regulations relating to OID.
"PARTICIPANTS" are participating organizations through which a
securityholder can hold its book-entry security.
"RECEIVABLES" are the Equipment and Contracts included in each trust fund.
"RECEIVABLES ACQUISITION AGREEMENT" the agreement between the Receivables
seller and the depositor under which the Receivables will be acquired by the
depositor from the related Receivables seller.
"STRIP CERTIFICATES" means securities subject to Code Section 1286, under
which the separation of ownership of the right to receive some or all of the
principal payments on an obligation from ownership of the right to receive some
or all of the interest payments results in the creation of "stripped bonds" with
respect to principal payments and "stripped coupons" with respect to interest
payments.
"STRIP SECURITIES" are one or more classes of fixed income securities
entitled to:
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(1) principal distributions, with disproportionate, nominal or no interest
distributions; or
(2) interest distributions, with disproportionate, nominal or no principal
distributions.
"TRUST AGREEMENT" as used with respect to a trust means any and all
agreements relating to the establishment of the related trust, the servicing of
the related Receivables and the issuance of the related securities, including an
indenture and a pooling and servicing agreement.
"UCC" means the Uniform Commercial Code.
"U.S. PERSON" means a citizen or resident of the United States, a
corporation, partnership (except as provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States,
any state or the District of Columbia, including an entity treated as a
corporation or partnership for U.S. federal income tax purposes, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more of those U.S.
Persons have the authority to control all substantial decisions of the trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996, which are eligible to elect to be treated as
U.S. Persons).
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until we deliver a final prospectus and prospectus
supplement. This prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS
______________, 2000
PAINEWEBBER ASSET ACCEPTANCE CORPORATION,
Depositor
ASSET-BACKED SECURITIES
(Issuable in Series)
PaineWebber Asset Acceptance Corporation from time to time will offer
asset-backed certificates or asset-backed notes. We will offer the certificates
or notes through this prospectus and a separate prospectus supplement for each
series.
For each series we will establish a trust fund consisting primarily of any
combination of the following receivables:
o retail installment sale and installment loan contracts secured by new or
used automobiles, light duty trucks, motorcycles, recreational vehicles,
recreational sport and power boats, boat motors, boat trailers, power and
sailing yachts and claims on related insurance policies,
o closed-end or open-end lease contracts on new and used automobiles and
light duty trucks and claims on related insurance policies,
o lottery proceeds and litigation settlement proceeds and other structured
cash settlements.
Each trust fund may also include a security interest in the assets underlying
the receivables and any related property and proceeds.
The certificates of a series will represent beneficial ownership interests in
the trust fund. The notes of a series will represent indebtedness of the trust
fund. The certificates or notes of a series may be divided into two or more
classes which may have different interest rates and which may receive principal
payments in differing proportions and at different times. In addition, the
rights of certain holders of classes may be subordinate to the rights of holders
of other classes to receive principal and interest.
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YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 13 IN THIS
PROSPECTUS AND IN THE RELATED PROSPECTUS SUPPLEMENT.
The securities will not represent obligations of PaineWebber Asset Acceptance
Corporation or any of its affiliates. No governmental agency will insure the
securities or the receivables backing the securities.
You should consult with your own advisors to determine if the offered
securities are appropriate investments for you and to determine the applicable
legal, tax, regulatory and accounting treatment of the offered securities.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THE OFFERED CERTIFICATES OR NOTES OR DETERMINED
IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
No secondary market will exist for a series of certificates or notes prior to
its offering. We cannot assure you that a secondary market will develop for the
certificates or notes of any series, or, if it does develop, that it will
continue.
-------------------
PAINEWEBBER INCORPORATED
<PAGE>
We may offer the certificates or notes, as applicable, through one or more
different methods, including offerings through underwriters, as more fully
described under "Methods of Distribution" in this prospectus and as may be
described in the related prospectus supplement. Our affiliates may from time to
time act as agents or underwriters in connection with the sale of the offered
certificates or notes, as applicable. We may retain or hold for sale, from time
to time, one or more classes of a series of certificates, or notes, as
applicable. We may offer some classes of the certificates or notes, if so
specified in the related prospectus supplement, in one or more transactions
exempt from the registration requirements of the Securities Act of 1933. These
offerings will not be made under this prospectus or the related registration
statement.
-------------------
We will acquire the receivables in the trust fund for a series from one or
more affiliated or unaffiliated receivables sellers. Each receivables seller
will be an entity, including vendors, generally in the business of originating
or acquiring their particular type of receivables. We will acquire the
receivables from the related receivables seller(s) on or prior to the date of
issuance of the related securities, as described in this prospectus and in the
related prospectus supplement. The receivables included in a trust fund will be
serviced by a servicer described in the related prospectus supplement.
-------------------
This prospectus may not be used to consummate sales of the offered
certificates or notes, as applicable, unless accompanied by a prospectus
supplement.
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TABLE OF CONTENTS
PAGE
SUMMARY OF TERMS...............................................................1
RISK FACTORS..................................................................13
Limited Liquidity of Securities May Adversely Affect the
Market Value of Your Securities.........................................13
Competing Claims to Ownership of Receivables May Result in
Reduced Payments on Your Securities.....................................13
Security Interests of Other Persons May be Superior to the
Trustee's Interests Which May Result in Reduced Payments
on Your Securities......................................................14
Issuer May Not Fully Rely Upon Repossession and Disposition................15
Insolvency and Bankruptcy Proceedings Could Adversely
Affect Payments on the Securities.......................................15
Lack of Title to Leased Vehicles Could Cause Losses........................16
Vicarious Tort Liability Relating to Leased Vehicles Could
Cause Losses............................................................17
Insurance on Vehicles May Be Inadequate to Cover Losses....................17
Levels of Delinquencies May Increase.......................................18
Some Classes of Securities May Be Subordinated in Priority
of Payment..............................................................18
Securityholders Must Rely on Limited Receivables for Repayment.............18
The Issuance of Another Series by a Master Trust May Adversely
Affect Payments on the Securities.......................................19
Book-Entry Registration May Decrease Liquidity and Delay Payment...........19
A Reduction in the Rating of a Credit Enhancer Could Result
in a Reduced Rating for the Securities..................................20
Yield is Sensitive to Rate of Principal Prepayments on Receivables.........20
DEFINED TERMS.................................................................21
THE TRUST FUNDS...............................................................21
THE ISSUERS...................................................................23
THE RECEIVABLES...............................................................24
Receivables Pools..........................................................24
The Loan Contracts Relating to Financed Vehicles and Boats.................24
Lease Contracts Relating to Vehicles.......................................26
Recoveries On Vehicles.....................................................28
Residual Value Insurance For Leased Vehicles...............................28
Contingent And Excess Liability Insurance Policies For Leased
Vehicles................................................................29
Delinquencies, Repossessions, and Net Losses...............................30
Maturity and Prepayment Considerations.....................................30
Acquisition of Receivables From Receivables Sellers........................30
USE OF PROCEEDS...............................................................31
THE DEPOSITOR.................................................................31
THE TRUSTEE...................................................................32
DESCRIPTION OF THE SECURITIES.................................................32
General....................................................................32
General Payment Terms of Securities........................................33
Master Trusts..............................................................34
Book-Entry Registration....................................................36
Definitive Securities......................................................39
Reports to Securityholders.................................................40
DESCRIPTION OF THE TRUST AGREEMENTS...........................................41
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Acquisition of the Receivables Under a Receivables
Acquisition Agreement...................................................41
Accounts...................................................................42
The Servicer...............................................................43
Servicing Procedures.......................................................43
Payments on Receivables....................................................43
Servicing Compensation.....................................................44
Payments...................................................................45
Credit and Cash Flow Enhancements..........................................45
Statements to Indenture Trustees and Trustees..............................46
Evidence as to Compliance..................................................46
Certain Matters Regarding the Servicers....................................47
Servicer Default...........................................................47
Rights Upon Servicer Default...............................................48
Waiver of Past Defaults....................................................48
Amendment..................................................................48
Termination................................................................49
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES......................................49
Financed Vehicles--General.................................................49
Security Interests in the Financed Vehicles................................50
The Trustee's Interests in the Loan Contracts...........................50
Perfection..............................................................50
Continuity of Perfection................................................52
Priority of Certain Liens Arising by Operation of Law...................53
The Trustee's Interests In Leased Vehicles.................................53
Security Interests In Boats................................................54
Repossession...............................................................58
Notice of Sale; Redemption Rights..........................................58
Deficiency Judgments and Excess Proceeds...................................59
Soldiers' and Sailors' Civil Relief Act of 1940............................59
Consumer Protection Laws...................................................60
Loan Contracts..........................................................60
Lease Contracts.........................................................61
Other Limitations..........................................................62
Vicarious Tort Liability With Respect To The Leased Vehicles...............62
FEDERAL INCOME TAX CONSIDERATIONS.............................................63
FASITs.....................................................................64
Issuers Treated as Partnerships............................................64
Tax Characterization of the Issuer as a Partnership.....................64
Tax Consequences to Holders of the Notes................................65
Tax Consequences to Holders of the Certificates.........................67
Issuers Treated as Grantor Trusts..........................................72
Tax Characterization of Grantor Trusts..................................72
Strip Certificates......................................................77
ERISA CONSIDERATIONS..........................................................81
General....................................................................81
Certain Requirements Under ERISA and the Code..............................81
General.................................................................81
Parties in Interest/Disqualified Persons................................81
Delegation of Fiduciary Duty............................................82
Non-ERISA Plans and Exempt Plans...........................................82
Unrelated Business Taxable Income--Residual Certificates...................83
METHODS OF DISTRIBUTION.......................................................83
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............................85
LEGAL MATTERS.................................................................86
FINANCIAL INFORMATION.........................................................86
ADDITIONAL INFORMATION........................................................86
RATING........................................................................86
GLOSSARY OF TERMS.............................................................88
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IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Two separate documents contain information about the offered certificates or
notes, as applicable. These documents progressively provide more detail:
(1) this prospectus, which provides general information, some of which
may not apply to the offered securities; and
(2) the accompanying prospectus supplement for each series, which
describes the specific terms of the offered securities.
The description of terms in the accompanying prospectus supplement will include:
o details regarding the class or classes of the securities;
o the rate of interest, other applicable rate or the manner of
determining the rate and authorized denominations of each class of the
securities;
o information concerning the receivables and insurance policies, cash
accounts, letters of credit, financial guaranty insurance policies,
third party guarantees or other forms of credit enhancement relating
to one or more pools of receivables or the related securities;
o the specified interest of each class of securities in the payments
from the trust fund and the manner and priority of the payments from
the trust fund;
o information as to the nature and extent of subordination of a series
of securities;
o the date of payment to securityholders;
o information regarding the servicer(s) for the related receivables;
o information regarding the receivables seller(s) for the related
receivables and the underwriting guidelines used by the receivables
seller(s) for the receivables;
o the circumstances under which each trust fund may be subject to early
termination;
o information regarding tax considerations; and
o additional information with respect to the method of payment of the
securities.
IF THE TERMS OF THE OFFERED SECURITIES VARY BETWEEN THIS PROSPECTUS AND THE
ACCOMPANYING PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THE
PROSPECTUS SUPPLEMENT.
You should rely only on the information contained in this prospectus and the
accompanying prospectus supplement. We have not authorized anyone to provide you
with information that is different from that contained in this prospectus and
the related prospectus supplement. The information in this prospectus is
accurate only as of the date of this prospectus.
---------------------
If you require additional information, the mailing address of our principal
executive offices is PaineWebber Asset Acceptance Corporation, 1285 Avenue of
the Americas, New York, NY 10019 and the telephone number is (212) 713-2000. For
other means of acquiring additional information about us or a series of
securities, see "Incorporation of Certain Information by Reference" in this
prospectus.
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SUMMARY OF TERMS
THIS SUMMARY HIGHLIGHTS IMPORTANT INFORMATION FROM THIS DOCUMENT. IT DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN INVESTMENT
DECISION. PLEASE READ THIS ENTIRE PROSPECTUS AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT CAREFULLY TO UNDERSTAND ALL OF THE TERMS OF A SERIES OF SECURITIES.
RELEVANT PARTIES
Issuer.................... With respect to each series of securities the
issuer will be:
o the depositor;
o a special-purpose company organized and
established by the depositor; or
o a trust to be formed by the depositor.
See "The Issuers" in this prospectus.
Depositor................. PaineWebber Asset Acceptance Corporation, the
depositor, is a corporation organized under the
laws of the state of Delaware. The depositor's
principal executive offices are located at 1285
Avenue of the Americas, New York, New York 10019,
and its telephone number is (212) 713-2000. See
"The Depositor" in this prospectus.
Servicer.................. The servicer for each trust fund will be specified
in the related prospectus supplement. The servicer
will service the receivables comprising each trust
fund and administer each trust fund according to
the related servicing agreement. The servicer may
subcontract all or any portion of its obligations
as servicer under each servicing agreement to
qualified subservicers but the servicer will
remain liable with respect to its obligations. See
"The Servicing" in this prospectus.
Receivables Seller(s)..... The depositor will acquire the receivables from
one or more affiliated or unaffiliated receivables
sellers.
Trustee................... The trustee for each series of securities will be
specified in the related prospectus supplement. In
addition, the issuer may separately enter into an
indenture and may issue notes under the indenture.
If the issuer is a trust and separately enters
into an indenture and then issues notes under the
indenture, the issuer and the indenture will be
administered by separate, independent trustees as
required by the rules and regulations under the
Trust Indenture Act of 1939 and the Investment
Company Act of 1940.
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SECURITIES
Description of
Securities............. Each class of securities of any series will
either be:
o certificates which evidence beneficial
ownership in a segregated pool of
receivables; or
o notes which represent indebtedness secured by
the trust fund, as described in this
prospectus and in the related prospectus
supplement.
For each series we will establish a trust fund
consisting primarily of any combination of the
following receivables together with all related
monies that are received:
o retail installment sale and installment loan
contracts secured by new or used automobiles,
light duty trucks, motorcycles, recreational
vehicles, recreational sport and power boats,
boat motors, boat trailers, power and sailing
yachts and claims on related insurance
policies;
o closed-end or open-end lease contracts on new
and used automobiles and light duty trucks
and claims on related insurance policies; or
o lottery proceeds and litigation settlement
proceeds and other structured cash
settlements.
Each trust fund also may include a security
interest in the assets underlying the receivables
and any related property and proceeds.
No trust fund will include receivables for which
the underlying assets relate to:
o office equipment;
o aircraft;
o firearms or other weapons;
o railroad rolling stock; or
o facilities such as factories, warehouses or
plants subject to state laws governing the
manner in which title or security interest in
real property is determined or perfected.
With respect to securities that represent
beneficial ownership interests in a trust, each
trust will be established under a pooling
agreement between the depositor and the trustee
named in the pooling agreement. Each pooling
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agreement will describe the related pool of
receivables held by the trust.
With respect to securities that represent debt
issued by the issuer, the issuer will enter into
an indenture between the issuer and the trustee
named in the indenture. Each indenture will
describe the related pool of receivables
comprising the trust fund and securing the debt
issued by the related issuer.
The receivables comprising each trust fund will be
serviced by the servicer under a servicing
agreement between the servicer and the related
issuer.
Any individual trust fund may contain in a single
agreement, or in several agreements:
o the contractual arrangements relating to the
establishment of a trust, if any;
o the servicing of the related receivables;
o and the issuance of the related securities.
These agreements may combine certain aspects of
the pooling agreement, the servicing agreement and
the indenture. For example, the agreement may be
in the form of a pooling and servicing agreement,
or a servicing and collateral management
agreement.
The trustee is any and all persons acting as
trustee under a trust agreement. For purposes of
this prospectus, the term "trust agreement" as
used with respect to a trust fund means:
o any and all agreements relating to the
establishment of a trust, if any;
o the servicing of the related receivables; and
o the issuance of the related securities.
Securities Will Be
Non-Recourse.............. Except for certain non-recourse debt described
under "Federal Income Tax Considerations," the
securities will not be obligations of the
depositor. The related servicer, the related
receivables seller(s) or any person other than the
related issuer in the case of securities issued as
debt. The notes of a given series will represent
obligations of the issuer. The certificates of a
given series represent beneficial interests in the
related issuer only. In each case, the sole source
of payment for the securities will be the
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receivables of the issuer. As may be described
further in the related prospectus supplement,
certain types of credit enhancement, including the
following, may constitute a full recourse
obligation of the issuer for that credit
enhancement:
o a letter of credit;
o a financial guaranty insurance policy; or
o a reserve fund.
General Nature of the
Securities as
Investments............... All of the securities offered under this
prospectus and the related prospectus supplement
will be rated in one of the four highest rating
categories by one or more rating agencies.
Additionally, all of the securities offered under
this prospectus and the related prospectus
supplement will be of the fixed-income type. Fixed
income securities generally, but not always, have
a principal balance and a specified interest rate.
Each series or class of fixed income securities
offered under this prospectus and the related
prospectus supplement may have a different
interest rate, which may be a fixed or adjustable
rate. The related prospectus supplement will
specify the interest rate for each series or class
of fixed income securities or the initial interest
rate and the method for determining subsequent
changes to the interest rate.
A series may include one or more classes of fixed
income securities, known as strip securities.
These strip securities will be entitled to:
o principal payments, with disproportionate,
nominal or no interest payments; or
o interest payments, with disproportionate,
nominal or no principal payments.
In addition, a series of securities may include
two or more classes of fixed income securities:
o that differ as to timing, sequential order,
priority of payment, interest rate, amount of
payments of principal or interest or both; or
o as to which 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
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designated portions of the related pool of
receivables.
These series may include one or more classes of
fixed income securities known as accrual
securities. Accrual securities will not have a
portion of their accrued interest distributed.
Rather, the accrued interest will be added to the
principal balance, or nominal balance, in the case
of accrual securities which are also strip
securities, of those classes of fixed income
securities on each payment date, or in the manner
described in the related prospectus supplement.
A series may include one or more other classes of
fixed income securities that are senior to one or
more other classes of fixed income securities in
respect of a portion of the payments of principal
and interest and allocations of losses on
receivables, if provided for in the related
prospectus supplement. In addition, certain
classes of senior fixed income securities, or
subordinate fixed income securities may be senior
to other classes of senior or subordinate fixed
income securities in respect of these payments or
losses.
General Payment
Terms of Securities....... The holders of the securities will be entitled to
receive payments on their securities on specified
payment dates. Payment dates with respect to fixed
income securities will generally occur monthly,
quarterly or semi-annually, as described in the
related prospectus supplement.
The related prospectus supplement will describe a
record date preceding the payment date, as of
which the trustee or its paying agent will fix the
identity of the securityholders for the purpose of
receiving payments on the next succeeding payment
date. The payment date will be a specified day of
each month described in the related prospectus
supplement.
Each trust agreement will provide for, and the
related prospectus supplement will describe, a
remittance period preceding each payment date. For
example, in the case of monthly-pay securities,
the remittance period may be the calendar month
preceding the month in which a payment date
occurs. Collections received on or with respect to
the related receivables constituting a trust fund
during a remittance period will be required to be
remitted by the servicer to the related trustee
prior to the related payment
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date and will be used to fund payments to
securityholders on the payment date.
The related trust agreement may provide that all
or a portion of the payments collected on the
related receivables may be applied by the related
trustee to the acquisition of additional
receivables during a specified period rather than
be used to fund payments of principal to
securityholders during that period. The result of
this application of funds is that the related
securities will possess an interest-only period,
also commonly referred to as a revolving period,
which will be followed by an amortization period.
Any interest only or revolving period may, upon
the occurrence of specified events that may be
described in the related prospectus supplement,
terminate prior to the end of the specified period
and result in the earlier than expected
amortization of the related securities. In
addition, the related trust agreement may provide
that all or a portion of the collected payments
may be retained by the trustee, and held in
certain temporary investments for a specified
period prior to being used to fund payments of
principal to securityholders.
The retention and temporary investment by the
trustee of the collected payments may be required
by the related trust agreement for the purpose of:
o slowing the amortization rate of the related
securities relative to the rent payment
schedule of the related receivables; or
o attempting to match the amortization rate of
the related securities to an amortization
schedule established at the time the
securities are issued.
This retention and temporary investment feature
may terminate upon the occurrence of events to be
described in the related prospectus supplement,
resulting in payments to the specified
securityholders and an acceleration of the
amortization of those securities.
Neither the securities nor the underlying
receivables will be guaranteed or insured by any
governmental agency or instrumentality or the
depositor, the related servicer, the related
receivables seller, any trustee, or any of their
affiliates.
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MASTER TRUSTS; ISSUANCE OF
ADDITIONAL SERIES............ A trust agreement may authorize the trustee to
issue equity certificates which evidence the
equity interest in a master trust. The trust
agreement may provide that the depositor may cause
the related trustee to issue one or more new
series of securities which would cause a reduction
in the related equity interest in the master trust
represented by the related equity certificate.
Under this type of trust agreement, the depositor
may determine the terms of any new series. See
"Description of the Securities--Master Trusts" in
this prospectus.
The depositor may cause the related trustee to
offer any new series to the public or other
investors, in transactions:
o either registered or exempt from registration
under the Securities Act of 1933; and
o directly or through one or more underwriters
or placement agents, in fixed-price offerings
or in negotiated transactions or otherwise.
A new series to be issued by a master trust which
has a series outstanding may, as may be described
in the related prospectus supplement, only be
issued upon satisfaction of the conditions
described under "Description of the
Securities--Master Trusts" in this prospectus.
These conditions will include the condition that
the subsequent issuance will not effect the rating
given to any existing series issued by the master
trust. Securities secured by receivables held by a
master trust will be entitled to monies received
relating to those receivables on a pari passu
basis with the other securities issued under the
other trust agreements by that master trust.
CROSS-COLLATERALIZATION...... The source of payment for securities of each
series will be the receivables of the related
trust fund only. However, a series or class of
securities may include the right to receive monies
from a common pool of credit enhancement which may
be available for more than one series of
securities.
Common pools of credit enhancement include:
o a master reserve account;
o a master insurance policy; or
o a master collateral pool consisting of
similar receivables.
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No payment received on any receivable held by any
issuer may be applied to the payment of securities
issued by any other issuer. However, collections
in excess of the amounts needed to pay the related
securities may be deposited in:
o a common master reserve account; or
o an over-collateralization account that
provides credit enhancement for more than one
series of securities issued under the related
trust agreement.
TRUST FUNDS.................. The related prospectus supplement will specify
the receivables to be included in each trust fund
and may specify that a security interest in the
underlying property will also be included in the
trust fund. To the extent specified in the related
prospectus supplement, credit enhancement with
respect to a trust fund or any class of securities
may include any one or more of the following:
o a policy issued by an insurer specified in
the related prospectus supplement;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o repurchase obligations;
o third party payments or other support; or
o cash deposits or other arrangements.
Credit enhancement may be provided by means of
subordination, cross-support among the receivables
or over-collateralization. See "Description of the
Trust Agreements--Credit and Cash Flow
Enhancements" in this prospectus. The retail
installment sale or installment loan contract are
obligations for the purchase of the property, or
evidence borrowings used to acquire the property
or refinancings of those borrowings. The
receivables contracts may consist of any
combination of:
o contracts that provide for fixed level
monthly payments which will amortize the full
amount of the contract over its term;
o contracts that provide for monthly payments
with a final fixed value payment which is
greater than the scheduled monthly payments;
or
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o contracts that provide for the amortization
of the amount financed under the receivable
over a series of fixed level monthly
payments.
The receivables will either be:
o transferred to an issuer under a pooling
agreement; or
o pledged to a trustee on behalf of
securityholders under an indenture.
The rights and benefits of the depositor or
transferor under a receivables acquisition
agreement will be assigned to the trustee on
behalf of the related securityholders.
PRE-FUNDING ACCOUNT.......... In addition, if specified in the
related prospectus supplement, the trust fund will
include monies on deposit in a pre-funding account
to be established with the trustee. The
pre-funding account will be used to acquire
subsequent receivables from time to time during
the pre-funding period specified in the related
prospectus supplement. The amount in the
pre-funding account, if any, will be reduced
during the related pre-funding period by the
amount used to purchase subsequent receivables.
Any amount remaining in the pre-funding account at
the end of the related pre-funding period will be
paid to the related securityholders in the manner
described in the related prospectus supplement.
The depositor may be obligated to acquire from the
related receivables seller(s) and to either
transfer to an issuer or pledge to a trustee on
behalf of securityholders, subsequent receivables
from time to time during any pre-funding period
specified in the related prospectus supplement.
REGISTRATION OF SECURITIES... Securities may be represented by global securities
registered in the name of Cede & Co., as nominee
of DTC, or another nominee. In this case,
securityholders will not be entitled to receive
definitive securities representing the
securityholders' interests, except in certain
circumstances that may be described in the related
prospectus supplement. See "Description of the
Securities--Book-Entry Registration" in this
prospectus.
CREDIT AND CASH FLOW
ENHANCEMENT.................. Credit enhancement with respect to a trust fund
or any class of securities may include any one or
more of the following:
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o a policy issued by an insurer specified in
the related prospectus supplement;
o a reserve account;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support; and
o cash deposits or other arrangements.
Any form of credit enhancement will have certain
limitations and exclusions from coverage which
will be described in the related prospectus
supplement.
See "Description of the Trust Agreements--Credit
and Cash Flow Enhancements" in this prospectus.
RECEIVABLES ACQUISITION
AGREEMENT.................... The depositor or the related receivables seller
will be obligated to acquire from the related
trust fund any receivable transferred under a
pooling agreement or pledged under an indenture if
the interest of the securityholders in that
receivable is materially and adversely affected by
a breach of any representation or warranty made by
the depositor or the related receivables seller
with respect to that receivable, if the breach has
not been cured. To the extent that the depositor
acquires any receivables, the related receivables
seller will be obligated to acquire those
receivables from the depositor under the related
receivables acquisition agreement at the same time
as the depositor's acquisition of the receivables
from the applicable trust fund. The obligation of
the depositor to acquire any receivables for which
the related receivables seller has breached a
representation or warranty is subject to the
related receivables seller's acquisition of those
receivables from the depositor. In addition, if so
specified in the related prospectus supplement,
the depositor may reacquire certain receivables or
substitute other receivables for those receivables
held by a trust fund, subject to specified
conditions set forth in the related trust
agreement and receivables acquisition agreement.
SERVICER'S COMPENSATION...... The servicer will be entitled to receive a fee for
servicing the receivables of each trust fund equal
to a specified percentage of the value or
principal balance of the receivables held in the
related trust fund, as set forth in the related
prospectus supplement. See "Description of the
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Trust Agreements--Servicing Compensation" in this
prospectus and as may be described in the related
prospectus supplement.
OPTIONAL TERMINATION......... The related servicer, the related receivables
seller, the depositor, or other entities may cause
early retirement of a series of securities under
the circumstances and in the manner set forth in
this prospectus under "Description of the Trust
Agreements--Termination" and as may be described
in the related prospectus supplement.
MANDATORY TERMINATION........ The trustee, the related servicer or other
entities that may be specified in the related
prospectus supplement may be required to cause the
early retirement of all or any portion of a series
of securities. The applicable party would cause
the early retirement by soliciting competitive
bids for the purchase of the related trust fund or
otherwise, in the manner specified under
"Description of the Trust Agreements--Termination"
in this prospectus and as may be described in the
related prospectus supplement.
TAX CONSIDERATIONS........... Securities of each series offered by this
prospectus will, for federal income tax purposes,
constitute either:
o interests in an issuer treated as a grantor
trust under applicable provisions of the
Code;
o debt issued by an issuer or by the depositor;
or
o interests in an issuer which is treated as a
partnership.
The prospectus supplement for each series of
securities will summarize federal income tax
considerations relevant to the purchase, ownership
and disposition of the securities. Investors are
advised to consult their tax advisors and to
review "Federal Income Tax Considerations" in this
prospectus and in the related prospectus
supplement.
ERISA CONSIDERATIONS......... The prospectus supplement for each series of
securities will summarize considerations under
ERISA, relevant to the purchase of those
securities by employee benefit plans and
individual retirement accounts. See "ERISA
Considerations" in this prospectus and in the
related prospectus supplement.
RATINGS...................... Each class of securities offered under this
prospectus and the related prospectus supplement
will be rated in one of the four highest rating
categories by one or more rating agencies. The
ratings will address, in the opinion of the rating
agencies, the likelihood that the issuer will be
able to
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make timely payment of all amounts due on
the related securities in accordance with the
terms of the securities. The ratings will neither
address any prepayment or yield considerations
applicable to any securities nor constitute a
recommendation to buy, sell or hold any
securities.
The ratings expected to be received with respect
to any securities will be set forth in the related
prospectus supplement.
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RISK FACTORS
Before making an investment decision, you should carefully consider the
following risks and the risks described under "Risk Factors" in the prospectus
supplement for the applicable series of securities. We believe these sections
describe the principal factors that make an investment in the securities
speculative or risky. In particular, payments on your securities will depend on
payments received on and other recoveries with respect to the loans. Therefore,
you should carefully consider the risk factors relating to the loans and the
properties.
LIMITED LIQUIDITY OF SECURITIES MAY ADVERSELY AFFECT THE MARKET VALUE OF YOUR
SECURITIES
We cannot assure you that a secondary market for the securities of any series
will develop or, if it does develop, that it will provide you with liquidity of
investment or will continue for the life of your securities. The market value of
your securities will fluctuate with changes in prevailing rates of interest.
Consequently, if you sell your security in any secondary market that develops,
you may sell it for less than par value or for less than your purchase price.
You will have optional redemption rights only to the extent the related
prospectus supplement so specifies. The prospectus supplement for any series may
indicate that an underwriter intends to establish a secondary market in the
securities, but no underwriter must do so.
COMPETING CLAIMS TO OWNERSHIP OF RECEIVABLES MAY RESULT IN REDUCED PAYMENTS ON
YOUR SECURITIES
In connection with the issuance of any series of securities, the related
receivables seller(s) will transfer retail installment sale or installment loan
contracts to the depositor. The receivables may consist of a security interest
in the retail installment contracts or notes and security agreements evidencing
the obligor's obligation to pay.
The related prospectus supplement will further describe the provisions in the
related trust agreement that either:
o the trustee will be required to maintain possession of the original copies
of all retail installment sale or installment loan contracts that
constitute chattel paper; or
o that the depositor, the related receivables seller(s) or the related
servicer will retain possession of the retail installment sale or
installment loan contract.
If the depositor or a receivables seller retains possession of the related
retail installment sale or installment loan contract, the servicer may take
possession of the original copies as necessary for its enforcement. If any
retail installment sale or installment loan contract remains in the possession
of the depositor or a receivables seller, the related prospectus supplement may
describe specific trigger events that will require delivery to the trustee. If
the depositor, servicer, trustee, receivables seller or other third party, sells
or pledges and delivers the receivable to another party, in violation of the
receivables acquisition agreement or the trust agreement, there is a risk that
the other party could acquire an interest in them that has a priority over the
issuer's interest.
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Furthermore, if the depositor, the servicer, a receivables seller or a third
party is rendered insolvent, the event of insolvency may result in competing
claims to ownership or security interests in the retail installment sale or
installment loan contract. The claim, even if unsuccessful, could result in
delays in payments on the securities. If successful, the claim could result in
losses to the securityholders or an acceleration of the repayment of the
securities. The related receivables seller will be obligated to acquire any
receivable from the related trust fund if there is a breach of the
representations and warranties that materially adversely affect the interests of
the depositor or the issuer in them and the breach has not been cured or as
otherwise provided in the related prospectus supplement.
SECURITY INTERESTS OF OTHER PERSONS MAY BE SUPERIOR TO THE TRUSTEE'S INTERESTS
WHICH MAY RESULT IN REDUCED PAYMENTS ON YOUR SECURITIES
Federal and state laws, including the UCC as in effect in various states,
controls:
o the transfer of the receivables by the related receivables sellers to the
depositor under each receivables acquisition agreement and then by the
depositor to the trustee under the related trust agreement;
o the perfection of the security interests in the receivables; and
o the enforcement of rights to realize on the property as collateral for the
receivables.
The related prospectus supplement will describe the actions that the related
servicer will be required to take to perfect the rights of the trustee in the
receivables. If, through inadvertence or otherwise, a third party were to
purchase a receivable for new value in the ordinary course of its business,
without actual knowledge of the issuer's interest, and take possession of a
receivable, the purchaser would acquire an interest in the receivable superior
to the interest of the issuer. The related prospectus supplement may provide
that no action will be taken to perfect the rights of the trustee in proceeds of
a policy of vendor's single interest physical damage insurance or of any other
insurance policies covering individual property or obligors.
In addition, in the case receivables relating to financed boats which have
liens perfected pursuant to federal law, other liens may, as a matter of law,
have priority over the perfected first priority liens. These other liens may
arise from:
o damages arising out of a maritime tort;
o wages of a stevedore when employed directly by the owner operator, master,
ship's husband, or agent of the vessel;
o wages of the crew of a vessel;
o general average; or
o salvage.
This risk exists for crew wages in the case of the financed boats because of
the possibility that recreational boat owners will utilize crew members and
because liens for wages owed to the
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crew members could have priority over the issuer's lien in the asset. None of
the receivables seller, the servicer, the trustee or the depositor will have any
obligation to purchase a receivable as to which these liens result in the
trustee's or issuer's losing the priority of its security interest or its
security interest in the financed property after the date the security interest
was conveyed to the trustee or issuer.
Therefore, the rights of a third party with an interest in the proceeds could
prevail against the rights of the issuer prior to the time the proceeds are
deposited by the related servicer into a account. See "Certain Legal Aspects of
the Receivables" in this prospectus.
ISSUER MAY NOT FULLY RECOVER UPON REPOSSESSION AND DISPOSITION
In the case of receivables relating to financed vehicles or leased vehicles,
if the trustee must rely on repossession and disposition of vehicles to recover
scheduled payments due on defaulted receivables, the issuer may not receive the
full amount due on the receivables or may not receive the full amount on a
timely basis. Other factors that may affect the ability of the issuer to receive
the full amount due on the receivables include:
o whether the certificates of title relating to the vehicles are in the name
of the related titling trust or indicate the existence of a security
interest;
o depreciation;
o obsolescence;
o damage or loss of any vehicles; and
o the application of federal and state bankruptcy and insolvency laws.
As a result, you may be subject to delays in receiving payments and suffer
loss of your investment in the securities.
INSOLVENCY AND BANKRUPTCY PROCEEDINGS COULD ADVERSELY AFFECT PAYMENTS ON THE
SECURITIES
The depositor will take steps in structuring the transactions contemplated by
this prospectus that are intended to ensure that the voluntary or involuntary
application for relief by the related receivables seller or the depositor under
insolvency laws like the United States Bankruptcy Code or similar applicable
state laws will not result in the receivables of the related trust fund becoming
property of the estate of the receivables seller or the depositor within the
meaning of those insolvency laws. These steps may involve the creation by the
related receivables seller or the depositor of a separate, limited-purpose
company or trust whose organizational documents contain certain limitations,
including:
o restrictions on the nature of its business; and
o restrictions on its ability to commence a voluntary case or proceeding
under any insolvency law without the prior unanimous affirmative vote of
all its directors.
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However, there can be no assurance that the activities of any limited-purpose
company or trust would not result in a court concluding that the receivables and
liabilities of the limited-purpose company or trust should be consolidated with
those of the related receivables seller or depositor in a proceeding under any
insolvency law.
The related prospectus supplement may provide that the equity interest in a
trust fund, if any, may be transferred to the related limited-purpose
subsidiary.
If a receivables seller is the servicer, cash collections held by the
receivables seller may be commingled and used for the benefit of that
receivables seller prior to each payment date. In the event of the bankruptcy of
that receivables seller, the trustee may not have a perfected interest in those
collections.
In the event of an insolvency of the transferor of receivables, a court,
among other remedies, could attempt to recharacterize the transfer of the
receivables as a borrowing by the transferor of receivables or the related
securityholders, secured by a pledge of the receivables.
The attempt to recharacterize, even if unsuccessful, could result in delays
in payments on the securities. If the attempt to recharacterize were successful,
a court could elect to accelerate payment of the securities and liquidate the
receivables. The securityholders would then be entitled to the then outstanding
principal and interest on the receivables at the applicable interest rate to the
date of payment. Thus, the securityholders could lose the right to future
payments of interest and might incur reinvestment losses. The related prospectus
supplement may provide that, in the event the related issuer is rendered
insolvent, the related trustee will promptly sell, dispose of, or otherwise
liquidate the related receivables.
The proceeds from this sale, disposition or liquidation of the receivables
will be treated as collections on the receivables. If the proceeds from the
liquidation of the receivables and any amount available from any credit
enhancement are not sufficient to pay securities of the related series in full,
the amount of principal returned to the securityholders will be reduced and you
will incur a loss.
Obligors under the receivables may be entitled to assert against the related
receivables seller, the depositor, or the issuer, if any, claims and defenses
which they have against the receivables seller with respect to the receivables.
LACK OF TITLE TO LEASED VEHICLES COULD CAUSE LOSSES
In the case of receivables relating to leased vehicles, the vehicles subject
to lease contracts will typically be titled in the name of either a finance
subsidiary, which may be a receivables seller, or in the name of the applicable
issuer. In the event that the leased vehicles are not titled in the name of the
related issuer, a notation of lien in favor of the related trustee on the
related certificates of title will be filed except to the extent described in
the related prospectus supplement or that the laws of any particular state do
not require this lien notation to be made to perfect the trustee's security
interest. The lack of title or notation of lien could result in the applicable
issuer losing the priority of its security interest in the vehicles. See
"Certain Legal Aspects of the Receivables" in this prospectus.
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VICARIOUS TORT LIABILITY RELATING TO LEASED VEHICLES COULD CAUSE LOSSES
In the case of receivables relating to leased vehicles, the applicable issuer
will own the vehicles subject to lease contracts. However, the vehicles will be
operated by issuer lessees and their respective invitees. State laws differ as
to whether anyone suffering injury to person or property involving a leased
vehicle may bring an action against the owner of the vehicle merely by virtue of
that ownership.
Some state statutes provide that a victim of an accident has no cause of
action against the owner of the leased vehicle arising from the negligent
operation of the leased vehicle unless the owner has negligently entrusted or
continues to negligently entrust the vehicle to an inappropriate lessee.
Other state statutes provide that the owner of a motor vehicle that is
subject to a lease having an initial term of at least one year is exempt from
liability for tort claims arising out of the negligent operation of the leased
vehicle or negligent acts of the operator in the event of an accident in which
the leased vehicle is involved if the lessee is required under the lease to
maintain certain specified levels of insurance, and the insurance is in effect.
Generally, the lease contracts contain provisions requiring the lessees to
maintain levels of insurance satisfying applicable state law, and the related
trust agreement will require the servicer to monitor compliance by the lessees
with the insurance.
Actions by third parties might arise against the owner of a vehicle subject
to lease contracts based on legal theories other than negligence. These theories
include product defect or improper vehicle preparation prior to the origination
of the related lease contract. Even if the applicable issuer were to be the
subject of an action for damages as a result of its ownership of a vehicle
subject to lease contracts, those damages may be covered by insurance. In the
event that any available insurance coverage were to be exhausted and damages
were assessed against the issuer, claims could be imposed against the assets of
the applicable issuer. However, the claims would not take priority over any
items comprising the trust fund to the extent that the trustee has a perfected
security interest in the trust fund. If any such claims were imposed against the
assets of the trust, you could incur a loss on your investment. See "Certain
Legal Aspects of the Receivables--Vicarious Tort Liability Could Cause Losses"
in this prospectus.
INSURANCE ON VEHICLES MAY BE INADEQUATE TO COVER LOSSES
In the case of receivables relating to leased or financed vehicles, each
contract generally requires the related obligor to maintain insurance covering
physical damage to the vehicle in an amount not less than the unpaid principal
balance of the contract under which the receivables seller is named as a loss
payee. Since the obligors select their own insurers to provide the required
coverage, the specific terms and conditions of their policies may vary.
In addition to physical damage insurance which may be required to be
maintained by the obligors, each vehicle may be insured against physical damage
risks by a policy of vendor's single interest physical damage insurance which
provides limited coverage for:
o physical loss or damage from any external cause to the vehicle; and
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o inability to locate the vehicle or the related obligor.
Any recovery under a policy of vendor's single interest physical damage
insurance may be less than the outstanding principal and interest due on the
related receivable. If these shortfalls occur, you could suffer a loss on your
investment.
LEVELS OF DELINQUENCIES MAY INCREASE
We cannot assure you that:
o the historical levels of delinquencies and losses experienced by any
receivables seller on its portfolio of retail installment sale or
installment loan contracts will be the same as the performance of the
contracts included in any trust fund; or
o that those levels will continue in the future.
Delinquencies and losses could increase significantly for various reasons,
including changes in the federal income tax laws, changes in the local, regional
or national economies.
SOME CLASSES OF SECURITIES MAY BE SUBORDINATED IN PRIORITY OF PAYMENT
Payments of interest and principal on one class of securities of a series may
be subordinated in priority of payment to interest and principal due on other
classes of securities of a related series. Moreover, each trust fund will not
have, nor is it permitted or expected to have, any significant assets or sources
of funds other than:
o the related receivables;
o a pre-funding account;
o any related reserve accounts; and
o any other credit enhancement.
SECURITYHOLDERS MUST RELY ON LIMITED RECEIVABLES FOR REPAYMENT
The securities solely represent interests in the related trust or debt
secured by the related trust fund, and will not represent a recourse obligation
to other assets of the related receivables seller(s) or of the depositor. No
securities of any series will be insured or guaranteed by any receivables
seller, the depositor, the servicer, or the applicable trustee. Consequently,
holders of the securities of any series must rely for repayment primarily upon
payments on:
o the related receivables;
o any amounts on deposit in the pre-funding account;
o any reserve account; and
o any other credit enhancement as may be specified in the related prospectus
supplement.
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THE ISSUANCE OF ANOTHER SERIES BY A MASTER TRUST MAY ADVERSELY AFFECT PAYMENTS
ON THE SECURITIES
A master trust may issue more than one series. While the terms of any
additional series will be specified in a supplement to the related master trust
agreement, the provisions of the supplement and the terms of any additional
series, will not be subject to prior review by, or consent of, holders of the
securities of any series previously issued by the master trust. The terms may
include:
o methods for determining applicable investor percentages and allocating
collections;
o provisions creating different or additional security or credit
enhancements;
and
o any other provisions which are made applicable only to that series.
The obligation of the related trustee to issue any new series is subject to
the condition, among others, that the issuance will not result in any rating
agency reducing or withdrawing its rating of the securities of any outstanding
series. We cannot assure you, however, that the terms of any series might not
have an impact on the timing or amount of payments received by a securityholder
of another series issued by the same master trust. See "Description of the
Securities--Master Trusts" in this prospectus.
BOOK-ENTRY REGISTRATION MAY DECREASE LIQUIDITY AND DELAY PAYMENT
Issuance of the securities in book-entry form may reduce the liquidity of the
securities in the secondary trading market since investors may be unwilling to
purchase securities for which they cannot obtain definitive physical securities
representing the securityholders' interests, except in the circumstances that
may be described in the related prospectus supplement.
Transactions in securities usually will be effected only through:
o DTC,
o direct or indirect participants in DTC's book-entry system, or
o certain banks.
As a result, the ability of a securityholder to pledge a security to persons
or entities that do not participate in the DTC system, or otherwise to take
actions in respect to the securities, may be limited due to lack of a physical
security representing the securities.
Securityholders may experience some delay in their receipt of payments of
interest on and principal of the securities since payments may be required to be
forwarded by the trustee to DTC. In this event, DTC will credit the payments to
the accounts of its participants which then will credit them to the accounts of
the applicable class of securityholders either directly or indirectly through
indirect participants. See "Description of the Securities--Book-Entry
Registration" in this prospectus.
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A REDUCTION IN THE RATING OF A CREDIT ENHANCER COULD RESULT IN A REDUCED RATING
FOR THE SECURITIES
The rating of securities credit enhanced by the following will depend
primarily on the creditworthiness of the credit enhancer that is the issuer of
the external credit enhancement device:
o a letter of credit,
o a financial guaranty insurance policy,
o a reserve fund,
o a credit or liquidity facilities
o cash deposits, or
o other forms of credit enhancement,
Any reduction in the rating assigned to the claims-paying ability of the
related credit enhancer to honor its obligations under any credit enhancement
below the rating initially given to the securities would likely result in a
reduction in the rating of the securities.
YIELD IS SENSITIVE TO RATE OF PRINCIPAL PREPAYMENTS ON RECEIVABLES
Because the rate of payment of principal on the securities will depend on the
rate of payment on the related receivables, the rate of payment of principal on
the securities cannot be predicted. Payments on the receivables will include:
o scheduled payments as well as partial and full prepayments, to the extent
not replaced with substitute receivables;
o payments upon the liquidation of defaulted receivables;
o payments upon acquisitions by the related receivables seller, the related
servicer or the depositor of receivables from the related trust fund on
account of a breach of representations and warranties in the related trust
agreement;
o payments upon an optional acquisition by the related receivables seller,
the related servicer or the depositor of receivables from the related
trust fund; and
o residual payments.
The rate of early terminations of receivables due to prepayments and defaults
may be influenced by a variety of economic and other factors, including:
o obsolescence;
o current economic conditions; and
o tax considerations.
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The risk of reinvesting payments of the principal of the securities will be
borne by the securityholders. The yield to maturity on strip securities or
securities purchased at premiums or discounts to par will be extremely sensitive
to the rate of prepayments on the related receivables. In addition, the yield to
maturity on other types of securities may be relatively more sensitive to the
rate of prepayment of the related retail installment sale or installment loan
contracts than other classes of securities. The other types of securities
include:
o strip securities;
o accrual securities; or
o other classes in a series including more than one class of securities,
The rate of prepayments of receivables cannot be predicted and is influenced
by a wide variety of economic, social, and other factors, including:
o prevailing interest rates;
o the availability of alternate financing; and
o local and regional economic conditions.
Therefore, we cannot assure you as to the level of prepayments that a trust
fund will experience.
You should consider the risk that a slower than anticipated rate of
prepayments on the receivables could result in an actual yield that is less than
the anticipated yield, in the case of securities purchased at a discount.
You should also consider the risk that a faster than anticipated rate of
prepayments on the receivables could result in an actual yield that is less than
the anticipated yield, in the case of any securities purchased at a premium.
DEFINED TERMS
We define and use capitalized terms in this prospectus to assist you in
understanding the terms of the securities and this offering. We define the
capitalized terms used in this prospectus under the caption "Glossary of Terms"
in this prospectus on page 88.
THE TRUST FUNDS
The property of each trust fund, as specified in the related prospectus
supplement, will include
o a pool of Receivables, including any Receivables conveyed to the issuer
after the related closing date;
o all monies, including accrued interest, due under the Receivables on or
after the applicable cut-off date;
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o the amounts as from time to time may be held in one or more accounts
established and maintained by the servicer under the related Trust
Agreement, as may be further described in the related prospectus
supplement;
o the security interests, if any, in the assets underlying the related pool
of Receivables;
o in the case of Receivables consisting of Loan Contracts or Lease
Contracts, the right to proceeds from claims on physical damage policies,
if any, covering the related Boats, Recreational Vehicles and Vehicles or
the related obligors, as the case may be;
o in the case of Receivables consisting of Loan Contracts or Lease
Contracts, the proceeds of any repossessed Boats, Recreational Vehicles
and Vehicles related to the pool of Receivables;
o the rights of the depositor under the related Receivables Acquisition
Agreement; and
o interest earned on certain short-term investments held by the trust fund,
unless the related prospectus supplement specifies that the earnings may
be paid to the related servicer or Receivables seller(s).
The trust fund may also include, if so specified in the related prospectus
supplement, monies on deposit in a pre-funding account. The pre-funding account
will be used by the trustee to acquire or receive a security interest in
subsequent Receivables during the pre-funding period specified in the related
prospectus supplement. In addition, some combination of credit enhancements may
be issued to or held by the trustee on behalf of the related trust fund for the
benefit of the holders of one or more classes of securities. The Receivables
comprising a trust fund, as specifically described in the related prospectus
supplement, will be either:
o originated by the related Receivables seller;
o originated by various manufacturers and acquired by the related
Receivables seller;
o originated by various dealers and acquired by the related Receivables
seller; or
o acquired by the related Receivables seller from originators or owners of
Receivables.
In the case of Receivables consisting of Loan Contracts or Lease Contracts,
the related Boat, Recreational Vehicle or Vehicle will be subject to federal or
state registration or titling requirements. No trust fund will include
Receivables with respect to which the underlying assets relate to:
o office equipment;
o aircraft;
o firearms or other weapons;
o railroad rolling stock; or
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o facilities such as factories, warehouses or plants subject to state laws
governing the manner in which title or security interest in real property
is determined or perfected.
The Receivables will be acquired by the depositor from the related
Receivables seller under a Receivables Acquisition Agreement or under provisions
of the Trust Agreements between the Receivables seller and the depositor. The
Receivables included in each trust fund will be selected from those Receivables
held by Receivables sellers based on the criteria specified in the applicable
Trust Agreement and described in this prospectus or in the related prospectus
supplement.
With respect to each series of securities, on or prior to the closing date on
which the securities are delivered to securityholders, the depositor will form a
trust fund by either:
o transferring the related Receivables to a trust under a Trust Agreement;
or
o entering into an indenture, or causing a special-purpose company or trust
to enter into an indenture, with an indenture trustee, relating to the
issuance of the securities, secured by the related Receivables.
The Receivables comprising each trust fund will generally have been
originated by the related Receivables seller or acquired by the Receivables
seller from vendors or from other lessors in accordance with the Receivables
seller's specified underwriting criteria. The underwriting criteria applicable
to the Receivables included in any trust fund will be described in all material
respects in the related prospectus supplement.
THE ISSUERS
With respect to each series of securities, the issuer will be:
o the depositor;
o a special-purpose company organized and established by the depositor; or
o a trust to be formed by the depositor.
For purposes of this prospectus and the related prospectus supplement, the
depositor, if the depositor issues the related securities, the related
special-purpose company, if a special-purpose company issues the related
securities, or the related trust, if a trust issues the related securities, will
be referred to as the "issuer" with respect to those securities.
Upon the issuance of the securities of a given series, the proceeds from the
issuance will be used by the depositor to acquire the related Receivables from
the related Receivables seller. The related servicer will service the related
Receivables under the applicable servicing agreement, and will be compensated
for acting as the servicer. To facilitate servicing and to minimize
administrative burden and expense, the servicers may be appointed custodians for
the related Receivables by each trustee and the depositor, as may be set forth
in the related prospectus supplement.
The following protection may be provided to the securityholders of a given
class:
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o the subordination of another class of securities of that series;
o the availability of the funds in the reserve account; or
o any other credit enhancement for that series as may be specified in the
related prospectus supplement.
If this protection is insufficient, the issuer must rely solely on the payments
from the obligors on the Receivables and the proceeds from the sale of the
assets which secure or are leased under the defaulted Receivables. It may be
difficult for the issuer to realize on the collateral securing those
Receivables, and thus the proceeds to be paid to the securityholders of that
series may be reduced.
THE RECEIVABLES
RECEIVABLES POOLS
Information with respect to the Receivables in each trust fund will be set
forth in the related prospectus supplement, including:
o the identity of the related Receivables seller(s);
o the related underwriting criteria and collection policies; o the
composition of the Receivables and the distribution of the Receivables by
geographic location;
o the annual percentage rate; and
o remaining principal balance as of the applicable cut-off date.
THE LOAN CONTRACTS RELATING TO FINANCED VEHICLES AND BOATS
The Loan Contracts may consist of any combination of:
o Rule of 78s Contracts;
o Fixed Value Contracts; or
o Simple Interest Contracts.
Each Rule of 78s Contract provides for the payment by the obligor of a
specified total amount of payments, payable in monthly installments on the
related due date. The total amount of payments represents:
o the principal amount financed and
o finance charges in an amount calculated on the basis of a stated annual
percentage rate for the term of the Loan Contract.
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The rate at which the amount of finance charges is earned and,
correspondingly, the amount of each fixed monthly payment allocated to reduction
of the outstanding principal balance of the related Loan Contract 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 of a
Loan Contract and lower during later months than that under a constant yield
method for allocating payments between interest and principal. However, the
related prospectus supplement may provide that all payments received by the
related servicer on the Rule of 78s Contracts may be allocated on an actuarial
basis.
A Fixed Value Contract provides for amortization of the loan over a series of
fixed level payment monthly installments, but also requires a final fixed value
payment due after payment of the monthly installments which may be satisfied by:
o payment in full in cash of the amount;
o transfer of the vehicle to the related Receivables seller provided certain
conditions are satisfied; or
o refinancing the fixed value payment in accordance with certain conditions.
For Simple Interest Contracts, each monthly payment consists of:
o an installment of interest which is calculated on the basis of the
outstanding principal balance of the Receivable:
o multiplied by the stated annual percentage rate; and
o further multiplied by the period elapsed, as a fraction of a calendar
year, since the preceding payment of interest was made.
This is unlike the monthly payment under Rule of 78s Contracts. As payments
are received under a Simple Interest Contract, the amount received is applied
first to interest accrued to the date of payment and the balance is applied to
reduce the unpaid principal balance.
If an obligor pays a fixed monthly installment before its scheduled due date:
o the portion of the payment allocable to interest for the period since the
preceding payment was made will be less than it would have been had the
payment been made as scheduled; and
o the portion of the payment applied to reduce the unpaid principal balance
will be correspondingly greater;
If an obligor pays a fixed monthly installment after its scheduled due date:
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o the portion of the payment allocable to interest for the period since the
preceding payment was made will be greater than it would have been had the
payment been made as scheduled; and
o the portion of the payment applied to reduce the unpaid principal balance
will be correspondingly less.
In either case, the obligor pays a fixed monthly installment until the final
scheduled payment date, at which time the amount of the final installment is
increased or decreased as necessary to repay the then outstanding principal
balance.
If an obligor elects to prepay a Rule of 78s Contract in full, it is entitled
to a rebate of the portion of the outstanding balance then due and payable
attributable to unearned finance charges. If a Simple Interest Contract is
prepaid, rather than receive a rebate, the obligor is required to pay interest
only to the date of prepayment. The amount of a rebate under a Rule of 78s
Contract calculated in accordance with the Rule of 78s will always be less than
had the rebate been calculated on an actuarial basis and generally will be less
than the remaining scheduled payments of interest that would be due under a
Simple Interest Contract for which all payments were made on schedule. Payments
to security holders may not be affected by Rule of 78s rebates under the Rule of
78s Contract because under the related prospectus supplement the payments may be
determined using the actuarial method.
LEASE CONTRACTS RELATING TO VEHICLES
The Lease Contracts are generally written for an original term of not more
than 60 months, for a "capitalized cost", which occasionally may be in excess of
the manufacturer's suggested price, plus an implicit finance or lease charge.
The Lease Contracts are generally written on a constant yield basis and provide
for equal monthly payments, so that at the end of the lease term the capitalized
cost has been amortized to an amount equal to the residual value of the related
Vehicle.
With respect to each Lease Contract that is a closed-end lease, at the end of
its term, if the lessee does not elect to purchase the related Vehicle upon
exercise of the purchase option contained in the Lease Contract, the lessee is
required to return the Vehicle. The lessee will then owe only the incidental
charges for excess mileage, excessive wear and use and other items as may be due
under the Lease Contract. In contrast, under each Lease Contract that is an
open-end lease, the lessee is also obligated to pay at the end of the lease term
any deficit between the fair market value of the leased Vehicle at that time and
the residual value established at the time of origination of the lease.
Generally, each lessee is permitted to purchase the related Vehicle at the
end of the term of the related Lease Contract. The purchase price is generally a
fixed dollar amount equal to the residual value plus any applicable taxes and
all other incidental charges which may be due under the Lease Contract. In
addition, each Lease Contract generally allows the related lessee voluntarily to
terminate the Lease Contract by paying certain miscellaneous charges and a
termination amount more fully described in this section below or as may be
described in the related prospectus supplement.
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In other instances, the Lease Contracts are not expected to run to their full
terms. For example, from time to time there are incentive programs for dealers
to trade customers under existing leases with remaining terms of less than one
year into new Lease Contracts. In so doing, the dealer is able to keep the
customer, sell a new car under a new Lease Contract and obtain a used car for
resale.
Each Lease Contract generally provides that the lessor may terminate the
Lease Contract and repossess the leased Vehicle in the event of a default by the
lessee. Events of default under a Lease Contract may include, but are not
limited to:
o failure to make payment when due;
o certain events of bankruptcy or insolvency;
o failure to maintain the insurance required by the Lease Contract;
o failure to maintain or repair the leased Vehicle as required or to comply
with any other term or condition of the Lease Contract; and
o the making of a material misrepresentation by the lessee in the lease
application.
Upon early termination or default, the amount owed by the lessee under a
Lease Contract is generally equal to:
o the amount of delinquent and future scheduled monthly payments and any
incidental charges owing under the Lease Contract, less unearned finance
charges;
o plus, the residual value of the leased Vehicle; and
o minus any security deposit and any net liquidation proceeds realized from
the sale of the related leased Vehicle.
In the event of an early termination of, or default under, a Lease Contract,
the Lease Contract may provide that if the lessee disagrees with the wholesale
price for the leased Vehicle, the lessee has the right to obtain from an
independent third party a professional appraisal of the wholesale value of the
leased Vehicle that could be realized at sale. This appraised value would then
be used as the revised estimated fair market value for purposes of calculating
sums due from the lessee in those circumstances.
In the event of early termination of, or a default under, a Lease Contract,
any shortfall between the amounts collected with respect to the Lease Contract,
after deducting the costs and other sums retained by the servicer in connection
with the Lease Contract, and the Discounted Contract Balance, together with the
residual value of the Vehicle, will reduce the value of the collateral
constituting a part of the trust fund. To the extent that the shortfall is not
covered through payments on or in respect of the other Lease Contracts and
leased Vehicles, from monies on deposit in the Accounts, from claims under the
residual value insurance, if any, or from other insurance proceeds or
liquidation proceeds, the related securityholders could suffer a loss on their
investment.
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RECOVERIES ON VEHICLES
The trust fund will not include underlying Vehicles, although the right to
receive recoveries with respect to the Vehicles in the event that the related
Contract becomes defaulted may be included in the trust fund. The related
prospectus supplement may specify that the depositor will execute the requisite
documents in order to convey title to the Vehicle to a finance subsidiary, or
the trustee.
Since the trust fund will not contain leased Vehicles, no securities will be
issued in respect of leased Vehicles or any residual values associated with
leased Vehicles.
In the event that any Contract becomes a defaulted Contract, the servicer
will be required to attempt to maximize the recoveries on the Contract, which
may include commencing a legal action against the related obligor for the
balance of the scheduled monthly payments remaining on the Contract,
repossessing and selling the related Vehicle or both.
Repossessions involve the seizure of the related Vehicle, followed by either
the sale of the Vehicle or, in the case of leased Vehicles, the releasing of the
Vehicle to a new obligor. In the event that the Vehicle is repossessed and
offered for sale, the sale will be conducted either at a public auction, or the
Vehicle will be consigned to a dealership and offered for sale on the lot. The
sale method that is selected by the servicer will depend on the servicer's
determination of which method will likely maximize the recovery proceeds, and
will also depend upon the availability of public auctions versus dealerships in
the locale in which the repossession is effected.
The servicer may, in realizing on defaulted Contracts, utilize the original
lessor, as servicer.
If a Lease Contract becomes a "fully-performed Contract", i.e., the related
obligor has made all scheduled payments on the Lease Contract, the obligor will
generally have the option to purchase the Vehicle, or to return the Vehicle to
the servicer for sale or re-leasing. Any recoveries on a fully-performed
Contract will be released to the depositor, subject to any conditions precedent
to the release set forth in the related Trust Agreement.
RESIDUAL VALUE INSURANCE FOR LEASED VEHICLES
The Receivables seller may obtain an insurance policy in respect of the
residual values of the leased Vehicles relating to matured Lease Contracts. The
trustee may be named as an additional insured under any primary residual value
insurance policy. A primary residual value insurance policy generally provides
coverage for 100% of the amount by which the "residual value" of any leased
Vehicle exceeds the "market value" for the leased Vehicle. For these purposes,
"residual value" is generally determined by reference to the Automotive Lease
Guide, Percentage Edition, and will be calculated by multiplying the
manufacturer's suggested price for the leased Vehicle, as adjusted to reflect
any optional equipment, by a percentage that varies depending upon the original
term of the related Lease Contract. Additional adjustments are generally then
made for any excess mileage and excess damage. "Market value" is generally the
greater of:
o the price actually received by or on behalf of the insured in a
commercially reasonable sale held in accordance with procedures approved
by the insurer, or
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o the "average wholesale value" established by the Black Book Used Car
Market Guide, monthly edition.
An insurer may unilaterally change the reference publications used for these
definitions upon providing advance notice. The primary residual value insurance
policy generally does not have any deductibles or provide for co-insurance, but
does provide for a maximum amount payable in respect of a leased Vehicle and an
aggregate cap for all payments made in respect of the leased Vehicles.
The Receivables seller may obtain an additional insurance policy providing
coverage in respect of the "insured value" of a Lease Contract covered by that
policy in excess of a deductible of a specified percentage of the insured value,
depending upon the original term of the related Lease Contract. For purposes of
any excess residual value insurance policy, the "insured value" is generally
equal to the lesser of:
o the residual value set forth in the Receivables seller's Residual Lease
Guide in effect as of the date of origination of the related Lease
Contract, or
o the residual value set forth in the Automotive Lease Guide, Percentage
Edition in effect for the original term of the Lease Contract.
An excess residual value insurance policy would be an excess policy, and a
claim under that policy would be made only after deducting any other recovery by
the servicer in respect of the related residual value of a leased Vehicle, and
the "fair market value" of the leased Vehicle. The "fair market value" of a
leased Vehicle is generally defined in the Excess Residual Value Insurance
Policy as an amount equal to the greater of:
o the best sales price offered in respect of the leased Vehicle in
commercially reasonable sales transactions; or
o the "clean wholesale" value established in the Black Book Used Car Market
Guide Monthly.
Claims made under the excess residual value insurance policy are generally
based upon a comparison of the net recoveries for all covered Vehicles disposed
of during the related quarter to the aggregate insured values for those
Vehicles. As a result, the amount payable under the excess residual value
insurance policy in respect of the residual value of a leased Vehicle could be
less than the insured value of the leased Vehicle.
CONTINGENT AND EXCESS LIABILITY INSURANCE POLICIES FOR LEASED VEHICLES
In addition to the personal property and liability insurance coverage which
is generally required to be obtained and maintained by the lessees pursuant to
the Lease Contracts, and as additional protection in the event that any lessee
fails to maintain all the required insurance under the Lease Contract, the
Receivables seller may maintain contingent liability insurance which provides
coverage for property damage or personal liability suffered by third persons
caused by any Vehicle owned by any insured. The issuer may be an additional
insured under this policy with respect to the leased Vehicles. As may be
provided in the related prospectus supplement, the servicer may also maintain
substantial amounts of excess insurance coverage for which the
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issuer may be named as an additional named insured. With respect to damage to
the leased Vehicles themselves, each lessee is generally obligated by the
related Lease Contract to maintain collision insurance. In the event that the
issuer was not named as an additional insured under the contingent and excess
liability insurance policies or all of the foregoing insurance coverage were
exhausted and damages were assessed against the issuer, claims could be imposed
against the assets of the issuer. If that occurs, the related securityholders
could incur a loss on their investment. See "Risk Factors--Vicarious Tort
Liability Could Cause Losses" and "Certain Legal Aspects of the
Receivables--Vicarious Tort Liability With Respect to the Leased Vehicles" in
this prospectus.
DELINQUENCIES, REPOSSESSIONS, AND NET LOSSES
Certain information relating to the related Receivables seller's or the
servicer's delinquency, repossession and net loss experience with respect to the
Receivables it has originated or acquired or serviced will be set forth in each
prospectus supplement. This information may include, among other things, the
experience with respect to all the Receivables in the Receivables seller's or
servicer's portfolio during certain specified periods, including receivables
which may not meet the criteria for selection as a Receivable for any particular
trust fund. There can be no assurance that the delinquency, repossession and net
loss experience on any trust fund will be comparable to the related Receivables
seller's or servicer's prior experience.
MATURITY AND PREPAYMENT CONSIDERATIONS
If a Receivable permits a prepayment, the prepayment, together with
accelerated payments resulting from defaults, will shorten the weighted average
life of the related pool of Receivables and the weighted average life of the
related securities. The rate of prepayments on the Receivables may be influenced
by a variety of economic, financial and other factors. In addition, under
certain circumstances, the depositor or the related Receivables seller will be
obligated to acquire Receivables from the related trust fund under the
applicable Trust Agreement or Receivables Acquisition Agreement as a result of
breaches of representations and warranties. Any reinvestment risks resulting
from a faster or slower amortization of the related securities which results
from prepayments will be borne entirely by the related securityholders.
The related prospectus supplement will set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of Receivables and the related series of
securities, together with a description of any applicable prepayment penalties.
ACQUISITION OF RECEIVABLES FROM RECEIVABLES SELLERS
The Receivables underlying a series of securities may be acquired by the
depositor, either directly or through affiliates from the related Receivables
seller under a Receivables Acquisition Agreement between the depositor or its
affiliate and each related Receivables seller.
Each Receivable acquired by the depositor may be one originated by the
Receivables seller in accordance with the underwriting criteria specified in the
prospectus supplement or purchased by the Receivables seller. The related
prospectus supplement may provide that:
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o each Receivables seller which is an originator will be an institution
experienced in originating and servicing retail installment sale and
installment loan contracts in accordance with accepted industry practices
and prudent guidelines;
o each Receivables seller under the related Receivables Acquisition
Agreement will make certain representations and warranties to the
depositor or the related trustee in respect of the related Receivables;
and
o in the event the representations and warranties are not made to the
related trustee, the depositor will assign its rights relating to those
representations and warranties, except certain rights of indemnification,
and interest in the related Receivables Acquisition Agreement to the
related trustee for the benefit of the securityholders of that series, and
the Receivables seller will then be liable to the trustee for defective or
missing documents or an uncured breach of the Receivables seller's
representations or warranties.
USE OF PROCEEDS
The proceeds from the sale of the securities of a given series will be
applied by the depositor to the acquisition of the related Receivables from the
related Receivables seller. The depositor will apply all or substantially all of
the net proceeds from the sale of each series of securities for one or more of
the following purposes:
o to purchase the related assets of the trust fund;
o to repay indebtedness which was incurred to obtain funds to acquire the
assets of the trust fund;
o to establish any reserve funds or other funds described in the related
prospectus supplement; and
o to pay costs of structuring, guaranteeing and issuing the securities,
including the costs of obtaining credit support, if any.
The purchase of the assets of the trust fund for a series may be effected by an
exchange of securities with the seller of the assets of the trust fund.
THE DEPOSITOR
PaineWebber Asset Acceptance Corporation, the depositor, was incorporated in
the State of Delaware on April 19, 2000 as a wholly-owned, limited purpose
finance subsidiary of PaineWebber Group Inc. The depositor's principal executive
offices are located at 1285 Avenue of the Americas, New York, New York 10019.
Its telephone number is (212) 713-2000.
As described in this prospectus under "The Trust Funds," the only
obligations, if any, of the depositor with respect to a series of securities may
be limited representations and warranties and limited undertakings to repurchase
or substitute Receivables under limited circumstances. We do not expect that the
depositor will have any servicing obligations or responsibilities with
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respect to any trust fund. The depositor does not have, nor is it expected in
the future to have, any significant assets.
The servicer with respect to any series of securities may be an affiliate of
the depositor. As described in this prospectus under "The Trust Funds," the
depositor may acquire Receivables through or from an affiliate.
Neither the depositor nor PaineWebber Group Inc., nor any of their respective
affiliates, will insure or guarantee the securities of any series.
THE TRUSTEE
The trustee for each series of securities will be specified in the related
prospectus supplement. The trustee's liability in connection with the issuance
and sale of the related securities is limited solely to the express obligations
of the trustee set forth in the related Trust Agreement.
With respect to each series of securities, no resignation or removal of the
trustee and no appointment of a successor trustee will become effective until
the acceptance of appointment by the successor trustee. The related prospectus
supplement will describe the manner in which the trustee may resign. If no
successor trustee is appointed by the depositor or the securityholders, or if no
successor trustee accepts appointment within a specified period following any
resignation or removal, the trustee or any securityholder may petition any court
of competent jurisdiction for the appointment of a successor trustee.
DESCRIPTION OF THE SECURITIES
GENERAL
The securities will be issued in series. Each series of securities, or,
multiple series of securities, will be issued under a Trust Agreement. All of
the securities offered under this prospectus and the related prospectus
supplement will be rated in one of the four highest rating categories by one or
more rating agencies.
Fixed income securities generally, but not always, have a principal balance
and a specified interest rate.
Each series or class of securities offered under this prospectus may have a
different interest rate, which may be a fixed or adjustable interest rate. The
related prospectus supplement will specify the interest rate for each series or
class of securities described in that prospectus supplement, or the initial
interest rate and the method for determining subsequent changes to the interest
rate.
A series may include one or more classes of Strip Securities entitled to:
o principal payments, with disproportionate, nominal or no principal
payments; or
o interest payments, with disproportionate, nominal or no interest payments.
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In addition, a series of securities may include two or more classes of
securities:
o that differ as to timing, sequential order, priority of payment, interest
rate or amount of payment of principal or interest or both; or
o as to which payments of principal or interest or both on any class may be
made:
o upon the occurrence of specified events;
o in accordance with a schedule or formula; or
o on the basis of collections from designated portions of the related
pool of Receivables.
A series may include one or more classes of Accrual Securities, as to which
certain accrued interest will not be paid but rather will be added to its
principal balance, or nominal balance, on each payment date, or in the manner
that may be described in the related prospectus supplement.
If provided in the related prospectus supplement, a series may include one or
more other classes of senior securities that are senior to one or more other
classes of subordinate securities in respect of payments of principal and
interest and allocations of losses on Receivables.
In addition, certain classes of senior or subordinate securities may be
senior to other classes of senior or subordinate securities in respect of
payments or losses.
GENERAL PAYMENT TERMS OF SECURITIES
As will be provided in the related Trust Agreement and as described in the
related prospectus supplement, securityholders will be entitled to receive
payments on their securities on the specified payment dates. Payment dates with
respect to the securities will occur monthly, quarterly or semi-annually, as
will be described in the related prospectus supplement.
The related prospectus supplement will describe the record date preceding the
payment date, as of which the trustee or its paying agent will fix the identity
of the securityholders for the purpose of receiving payments on the next
succeeding payment date.
Each Trust Agreement will describe a remittance period preceding each payment
date. As may be more fully provided in the related prospectus supplement,
collections received on the related Receivables during a remittance period will
be required to be remitted by the related servicer to the related trustee prior
to the related payment date and will be used to fund payments to securityholders
on that payment date. The related prospectus supplement may provide that all or
a portion of the payments collected on the related Receivables may be applied by
the related trustee to the acquisition of subsequent Receivables during a
specified period rather than be used to fund payments of principal to
securityholders during that period. This results in securities with an
interest-only period, also commonly referred to as a revolving period, which
will be followed by an amortization period. These interest-only or revolving
periods may, upon the occurrence of events to be described in the related
prospectus supplement, terminate prior to the end of the specified period and
result in the earlier than expected amortization of the related securities.
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In addition, the related prospectus supplement may provide that all or a
portion of the collected payments may be retained by the trustee for a specified
period prior to being used to fund payments of principal to securityholders.
These collected payments may be held in certain temporary investments, including
Receivables.
The retention and temporary investment by the trustee of the collected
payments may be required by the related Trust Agreement for the purposes of:
o slowing the amortization rate of the related securities relative to the
payment schedule of the related Receivables; or
o attempting to match the amortization rate of the related securities to an
amortization schedule established at the time the securities are issued.
If applicable to any securities, these features may terminate upon the
occurrence of events to be described in the related prospectus supplement,
resulting in payments to the specified securityholders and an acceleration of
the amortization of the securities.
Neither the securities nor the underlying Receivables will be guaranteed or
insured by any governmental agency or instrumentality or the depositor, the
related servicer, the related Receivable seller, any trustee or any of their
respective affiliates unless specifically set forth in the related prospectus
supplement.
As may be described in the related prospectus supplement, securities of each
series will either represent:
o specified beneficial ownership interests in a separate trust fund created
under the Trust Agreement; or
o debt secured by the related trust fund.
If any trust fund includes certificates of interest or participations or
security interests in Receivables, the related prospectus supplement will
describe the material terms and conditions of the certificates or participations
or describe the security interest.
MASTER TRUSTS
The Trust Agreement may provide that the depositor may direct the related
trustee to issue new series where the depositor may designate, to the extent
applicable:
o its name or designation;
o its initial principal amount, or method for calculating the amount;
o its interest rate, or a formula for determining it
o the payment dates and the date or dates from which interest will accrue;
o the method for allocating collections to securityholders of the series;
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o any bank accounts to be used by the series and the terms governing the
operation of those bank accounts;
o the percentage used to calculate monthly servicing fees;
o the provider and terms of any form of credit enhancement;
o the terms on which the securities of the series may be repurchased or
remarketed to other investors;
o the number of classes of securities of the series, and if the series
consists of more than one class, the rights and priorities of each class;
o the extent to which the securities of the series will be issuable in
book-entry form;
o the priority of the series with respect to any other series; and
o any other relevant terms.
Each new series issued under a master trust will have the effect of
decreasing the equity interest in the related master trust. None of the
depositor, the related servicer, the related trustee or any master trust is
required or intends to obtain the consent of any securityholder of any
outstanding series to issue any additional series.
Each Master Trust Agreement will provide that the depositor may designate
terms so that each new series issued under a master trust has an amortization
period which may have a different length and begin on a different date than the
periods for any series previously issued by the related master trust and then
outstanding. In addition, each new series issued under a master trust may have
the benefits of credit enhancements issued by enhancement providers different
from the providers of the credit enhancement for any series previously issued by
the related master trust and then outstanding. Under each Master Trust
Agreement, the related trustee will hold the credit enhancement only on behalf
of the securityholders to which the credit enhancement relates. The depositor
will have the option under each Master Trust Agreement to vary among series the
terms upon which a series may be repurchased by the issuer or remarketed to
other investors. As may be more fully described in the related prospectus
supplement, there is no limit to the number of new series issued under a master
trust that the depositor may cause under a Master Trust Agreement. Each master
trust will terminate only as provided in the related Master Trust Agreement. We
cannot assure you that the terms of any new series issued under a master trust
might not have an impact on the timing and amount of payments received by
securityholders of another series issued by the same master trust.
Under each Master Trust Agreement and under a related supplement, new series
issued under a master trust may only occur upon the satisfaction of conditions
provided in the Master Trust Agreement. The obligation of the related trustee to
authenticate the securities of any new series issued under a master trust and to
execute and deliver the supplement to the related Master Trust Agreement is
subject to the satisfaction of the conditions specified in the Master Trust
Agreement. These conditions may include:
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o on or before the fifth business day immediately preceding the date upon
which the new series issued under a master trust is to occur, the
depositor will give the related trustee, the related servicer, the related
rating agencies and related providers of credit enhancement, written
notice of the new series issued under a master trust and the date upon
which the new series issued under a master trust is to occur;
o the depositor will deliver to the related trustee a supplement to the
related Master Trust Agreement, in form satisfactory to the trustee,
executed by each party to the related Master Trust Agreement other than
the trustee;
o the depositor will deliver to the related trustee any related credit
enhancement agreement;
o the related trustee will receive confirmation from the related rating
agencies that the new series issued under a master trust will not result
in any rating agency reducing or withdrawing its rating for any other
series or class of trust;
o the depositor will deliver to the related trustee, the related rating
agencies and the providers of credit enhancement, an opinion of counsel
acceptable to the related trustee that for federal income tax purposes:
(1) following the new series issued under a master trust the related
master trust will not be deemed to be an association, or publicly
traded partnership, taxable as a corporation;
(2) the new series issued under a master trust will not affect the tax
characterization as debt of securities of any outstanding series or
class issued by the master trust that were characterized as debt at
the time of their issuance; and
(3) the new series issued under a master trust will not cause or
constitute an event in which gain or loss would be recognized by any
securityholders or the related master trust; and
o any other conditions specified in any supplement.
Upon satisfaction of the conditions set forth in the Master Trust Agreement,
the related trustee will execute the supplement to the related Master Trust
Agreement and issue the securities of the new series.
BOOK-ENTRY REGISTRATION
Securityholders of a given series may hold their securities through DTC in
the United States or Clearstream or Euroclear in Europe if they are participants
of those systems, or indirectly through organizations that are participants in
those systems.
Cede & Co., as nominee for DTC, will hold the global securities for a given
series. Clearstream and Euroclear will hold omnibus positions on behalf of the
Clearstream Participants and the Euroclear Participants, respectively, through
customers' securities accounts in Clearstream's and Euroclear's names on the
books of their respective depositaries which in turn
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will hold the positions in customers' securities accounts in the depositaries'
names on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York UCC and a "clearing agency" registered under
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and to facilitate the clearance and settlement of securities
transactions between participants through electronic book-entries, thereby
eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
Transfers between DTC participants will occur in accordance with DTC rules.
Transfers between Clearstream Participants and Euroclear Participants will occur
in the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly through
DTC, on the one hand, and directly or indirectly through Clearstream
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its depositary. However, these cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in that system in accordance with its rules and
procedures and within its established deadlines which are in European time. The
relevant European international clearing system will, if the transaction meets
its settlement requirements, deliver instructions to its depositary to take
action to effect final settlement on its behalf by delivering or receiving
securities in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Clearstream
Participants and Euroclear Participants may not deliver instructions directly to
the depositaries.
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, dated the business day
following the DTC settlement date, and the credits or any transactions in the
securities settled during the processing will be reported to the relevant
Clearstream Participant 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.
The securityholders of a given series that are not participants or indirect
participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, securities of a series may do so only through participants
and indirect participants. In addition, securityholders of a given series will
receive all payments of principal and interest through the participants who in
turn will receive them from DTC. Under a book-entry format, securityholders of a
given series may experience some delay in their receipt of payments, since the
payments will be forwarded by the applicable trustee to Cede & Co., as nominee
for DTC. DTC will forward the
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payments to its participants, which then will forward them to indirect
participants or the securityholders. It is anticipated that the only
"securityholder" in respect of any series will be Cede & Co., as nominee of DTC.
Securityholders of a given series will not be recognized as securityholders of
that series, and these securityholders will be permitted to exercise the rights
of securityholders of that series only indirectly through DTC and its
participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of securities of a
given series among participants on whose behalf it acts for the securities and
to receive and transmit payments of principal of, and interest on, those
securities. Participants and indirect participants with which the
securityholders of a given series have accounts for the securities similarly are
required to make book-entry transfers and receive and transmit the payments on
behalf of their respective securityholders of that series. Accordingly, although
the securityholders will not possess securities, the creating and affecting DTC
provide a mechanism by which participants will receive payments and will be able
to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on behalf
of indirect participants and certain banks, the ability of a securityholder of a
given series to pledge securities of that series to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to the
securities, may be limited due to the lack of a physical certificate for the
securities.
DTC will advise the trustee for each series that it will take any action
permitted to be taken by a securityholder of the related series only at the
direction of one or more participants to whose accounts with DTC the securities
of that series are credited. DTC may take conflicting actions with respect to
other undivided interests to the extent that their actions are taken on behalf
of participants whose holdings include undivided interests.
Clearstream is incorporated under the laws of Luxembourg as a professional
depository. Clearstream facilitates the clearance and settlement of securities
transactions between Clearstream Participants through electronic book-entry
changes in accounts of Clearstream Participants, which eliminates the need for
physical movement of certificates. Transactions may be settled in Clearstream in
any of 28 currencies, including United States dollars. Clearstream provides to
its Clearstream Participants, services for:
o safekeeping;
o administration;
o clearance and settlement of internationally traded securities; and
o securities lending and borrowing.
Clearstream interfaces with domestic markets in several countries. As a
professional depository, Clearstream is subject to regulation by the Luxembourg
Monetary Institute. Clearstream Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Clearstream is also available to others, such
as
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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 Euroclear Participants
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 28 currencies, including United States dollars. The Euroclear System
includes various other services, including:
o securities lending and borrowing; and
o interfaces with domestic markets in several countries generally similar to
the arrangements for cross-market transfers with DTC described above.
Euroclear is operated by Morgan Guaranty Trust Company of New York, Brussels,
Belgium office, under contract with Euroclear Clearance System, S.C., a Belgian
cooperative corporation. All operations are conducted by the Euroclear Operator,
and all Euroclear securities clearance accounts and Euroclear cash accounts are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative
establishes policy for the Euroclear System on behalf of Euroclear Participants.
Euroclear Participants include banks, including central banks, securities
brokers and dealers and other professional financial intermediaries and may
include the underwriters of any securities. Indirect access to the Euroclear
System is also available to other firms that clear through or maintain a
custodial relationship with a Euroclear participant, either directly or
indirectly.
The Euroclear Operator is regulated and examined by the Board of Governors of
the Federal Reserve System and the New York State Banking Department, as well as
the Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the terms and conditions governing use of Euroclear and the
related operating procedures of the Euroclear System and applicable Belgian law.
The terms and conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear System,
and receipts of payments with respect to securities in the Euroclear System. All
securities in the Euroclear System are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the terms and conditions only on behalf of
Euroclear Participants and has no record of relationship with persons holding
through Euroclear Participants.
Except as required by law, the trustee in respect of a series will not have
any liability for any aspect of the records relating to or payments made or
account of beneficial ownership interests of the related securities held by Cede
& Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to the beneficial ownership interests.
DEFINITIVE SECURITIES
Definitive Securities will generally be issued to the securityholders of a
given series or their nominees, rather than to DTC or its nominee, only if:
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(1) the trustee for the related series advises in writing that DTC is no
longer willing or able to discharge properly its responsibilities as
depository for the securities and the trustee is unable to locate a
qualified successor;
(2) the servicer, at its option, elects to terminate the book-entry-system
through DTC; or
(3) after the occurrence of an "Event of Default" under the related indenture
or a default by the servicer under the related Trust Agreements,
securityholders representing at least a majority of the outstanding
principal amount of the securities advise the applicable trustee through
DTC in writing that the continuation of a book-entry system through DTC
is no longer in the securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable trustee will be required to notify all the
securityholders through participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive certificates representing
the securities and receipt of instructions for re-registration, the applicable
trustee will reissue the securities as Definitive Securities to the
securityholders.
Payments of principal of, and interest on, the securities will then be made
by the applicable trustee in accordance with the procedures set forth in the
related Trust Agreement directly to holders of Definitive Securities in whose
names the Definitive Securities were registered at the close of business on the
applicable record date specified for those securities in the related prospectus
supplement. The distributions may be made with a check mailed to the address of
the holder as it appears on the register maintained by the applicable trustee or
otherwise permitted in the related Trust Agreement. The final payment on those
securities, however, will generally be made only upon presentation and surrender
of the security at the office or agency specified in the notice of final payment
to the applicable securityholders.
Definitive Securities in respect of a given series of securities will be
transferable and exchangeable at the offices of the applicable trustee or of a
certificate registrar named in a notice delivered to holders of the Definitive
Securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
On or prior to each payment date for a series of securities, the related
servicer or the related trustee will forward or cause to be forwarded to each
holder of record of the class of securities a statement or statements for the
related trust fund setting forth the information which may generally include the
following information, to the extent applicable:
(1) the amount of the payment for each class of securities;
(2) the amount of the payment allocable to principal;
(3) the amount of the payment allocable to interest;
(4) the pool balance, if applicable, as of the close of business on the last
day of the related remittance period;
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(5) the aggregate outstanding principal balance and the pool factor for each
class of securities after giving effect to all payments reported under
(2) above on the payment date;
(6) the amount paid to the servicer for the related remittance period;
(7) the amount of the aggregate purchase amounts for Receivables that have
been reacquired for the remittance period; and
(8) the amount of coverage under any letter of credit, financial guaranty
insurance policy, reserve account or other form of credit enhancement
covering default risk as of the close of business on the applicable
payment date and a description of any credit enhancement substituted for
any letter of credit, financial guaranty insurance policy, or reserve
account.
Each amount set forth under subclauses (1), (2), (3) and (4) for the
securities of any series will be expressed as a dollar amount per $1,000 of the
initial principal balance of the securities, as applicable.
Within the prescribed period of time for tax reporting purposes after the end
of each calendar year, the applicable trustee will provide to the
securityholders a statement containing the amounts described in (2) and (3)
above for that calendar year and any other information required by applicable
tax laws, for the purpose of the securityholders' preparation of federal income
tax returns.
DESCRIPTION OF THE TRUST AGREEMENTS
The following summary describes certain terms which may be included in each
Trust Agreement under which a trust fund will be created and the related
securities for the trust fund will be issued. For purposes of this prospectus,
the term "Trust Agreement" as used regarding a trust means any and all
agreements relating to:
o the establishment of the related trust;
o the servicing of the related Receivables; and
o the issuance of the related securities, including the indenture.
ACQUISITION OF THE RECEIVABLES UNDER A RECEIVABLES ACQUISITION AGREEMENT
On the closing date specified for any series of securities, the depositor
will acquire the related Receivables or a security interest in the Receivables
from the related Receivables seller under a Receivables Acquisition Agreement.
The depositor will either transfer the Receivables to an issuer under a pooling
agreement, or will pledge the depositor's right, title and interests in and to
the Receivables to a trustee on behalf of securityholders under an indenture.
The depositor and/or the related Receivables seller may be obligated to
acquire from the related trust fund its interest in any Receivable transferred
to an issuer or pledged to a trustee on behalf of securityholders. This
obligation may arise if the interest of the securityholders in the Receivables
is materially and adversely affected by a breach of any representation or
warranty
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made by the depositor or the related Receivables seller for the Receivable,
which breach is not cured following the discovery by or notice to the depositor
or the related Receivables seller of the breach. The obligation of the depositor
to acquire the Receivables for which a Receivables seller has breached a
representation or warranty would be subject to the Receivables seller's
acquisition of the Receivables from the depositor. In addition, if so specified
in the related prospectus supplement, the depositor and/or the Receivables
seller may reacquire Receivables or substitute other Receivables for the
Receivable held by a trust fund subject to specified conditions set forth in the
related Trust Agreement and Receivables Acquisition Agreement.
ACCOUNTS
With respect to each series of securities, the related servicer will
establish and maintain with the applicable trustee one or more accounts, in the
name of the trustee on behalf of the related securityholders, into which all
payments made on the related Receivables will be deposited. The servicer will
also establish and maintain with the trustee separate payment accounts, in the
name of the trustee on behalf of the securityholders, in which amounts released
from a collection account and any reserve account or other credit enhancement,
if any, for payment to the securityholders will be deposited and from which
payments to the securityholders will be made.
Any other accounts to be established with respect to an issuer, including any
reserve account, will be described in the related prospectus supplement.
For any series of securities, funds in the accounts established under the
related Trust Agreement will be invested as provided in the related Trust
Agreement in eligible investments. Eligible investments are generally limited to
investments acceptable to the rating agencies as being consistent with the
rating of the securities. If the rating agencies so permit, eligible investments
may include securities issued by the depositor, the related Receivables seller,
the related servicer or their affiliates or other trusts created by the
depositor or its affiliates. Eligible investments are mostly limited to
obligations or securities that mature not later than the business day
immediately preceding the related payment date. However, funds in any reserve
account may be invested in securities that will not mature prior to the date of
the next payment and will not be sold to meet any shortfalls. Thus, the amount
of cash in any reserve account at any time may be less than the balance of the
reserve account. If the amount required to be withdrawn from any reserve account
to cover shortfalls in collections on the related Receivables exceeds the amount
of cash in the reserve account a temporary shortfall in the amounts paid to the
related securityholders could result. This temporary shortfall could, in turn,
increase the average life of the securities of that series. The related
prospectus supplement will provide whether or not investment earnings on funds
deposited in the accounts, net of losses and investment expenses, will be
available to pay securityholders.
The accounts will be maintained with a federally or state chartered
depository institution and in a manner satisfactory to each rating agency rating
the securities of the related series.
To the extent that a servicer's unsecured debt ratings are acceptable to the
rating agencies, amounts deposited to any account maintained by the servicer may
be commingled with the servicer's general account monies. Any rights to so
commingle monies will be described in the related prospectus supplement.
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THE SERVICER
The servicer under each Trust Agreement will be named in the related
prospectus supplement. The entity serving as servicer may be an affiliate of the
Receivables seller or the depositor and may have other business relationships
with the Receivables seller or the depositor or their affiliates. The servicer
for each series will service the Receivables contained in the trust fund for
that series. Any servicer may delegate its servicing responsibilities to one or
more sub-servicers, but will not be relieved of its liabilities by doing so.
Each servicer will make certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related Trust Agreement. An uncured breach of a representation or warranty that
in any respect materially and adversely affects the interests of the
securityholders will constitute a default by the servicer under the related
Trust Agreement.
SERVICING PROCEDURES
Each Trust Agreement will provide that the related servicer will make
reasonable efforts to collect all payments due with respect to the Receivables
held in the related trust fund. The servicer will also continue the collection
procedures that the servicer follows with respect to the particular type of
Receivable in the particular pool it services for itself and others in a manner
consistent with the related Trust Agreement. Consistent with its normal
procedures, and, to the extent described in the related prospectus supplement,
the servicer may, in its discretion and on a case-by-case basis, arrange with
the obligor to extend or modify the payment schedule on a Receivable. Some of
the arrangements, including, any extension of the payment schedule beyond the
final scheduled payment date for the related securities, may result in the
servicer acquiring the Receivable if the Receivable becomes a defaulted
Contract. The servicer may sell the asset underlying the defaulted Receivable,
if any, at a public or private sale, or take any other action permitted by
applicable law. See "Certain Legal Aspects of the Receivables" in this
prospectus.
The material aspects of any particular servicer's collections procedures will
be set forth in the related prospectus supplement.
PAYMENTS ON RECEIVABLES
With respect to each series of securities, the related servicer will deposit
all payments on the related Receivables and all proceeds of the Receivables
collected in the related collection facility, such as a lock-box account or
collection account. Monies deposited in a collection facility for a trust fund
may be commingled with funds from other sources. As will be further specified in
the related prospectus supplement, the related servicer will be required to
deposit payments on the related Receivables collected during each collection
period into the related collection account on a specified day each month.
Pending deposit into the related collection account, collections in the
collection facility may be invested by the related servicer at its own risk and
for its own benefit, and will not be segregated from funds of the related
servicer.
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SERVICING COMPENSATION
With respect to any series of securities, the related servicer will be
entitled to receive a servicing fee for each collection period. The servicing
fee will be in an amount equal to a percentage per annum set forth in the
related prospectus supplement of the value of the Receivables held in the
related trust fund, generally as of the first day of the collection period. Each
prospectus supplement and servicing agreement will specify the priority of
payments with respect to the servicing fee, together with any portion of the
servicing fee that remains unpaid from prior payment dates. The servicing fee
may be paid prior to any payment to the related securityholders.
Each servicer may also, if specified in the related prospectus supplement,
collect and retain any late fees, the penalty portion of interest paid on past
due amounts and other administrative fees or similar charges allowed by
applicable law with respect to the Receivables. Each servicer will generally be
entitled to reimbursement from the related trust fund for expenses and
liabilities incurred by it in servicing the Receivables. Payments by or on
behalf of obligors will be allocated to scheduled payments and late fees and
other charges in accordance with the servicer's normal practices and procedures.
The servicing fee will:
(1) compensate the related servicer for performing the functions of a third
party servicer of similar types of Receivables as an agent for their
beneficial owner, including:
o collecting and posting all payments;
o responding to inquiries of obligors on the related Receivables;
o investigating delinquencies;
o sending payment coupons to obligors;
o reporting tax information to obligors;
o paying costs of collection and disposition of defaults; and
o policing the collateral.
(2) compensate the related servicer for administering the related
Receivables, accounting for collections and furnishing statements to the
applicable trustee and the applicable indenture trustee;
(3) reimburse the related servicer for:
o certain taxes;
o accounting fees;
o outside auditor fees; and
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o data processing costs and other costs incurred in connection with
administering the Receivables.
PAYMENTS
With respect to each series of securities, beginning on the payment date
specified in the related prospectus supplement, payments of principal and
interest, or, where applicable, of principal or interest only, on each class of
the securities entitled to those payments will be made by the applicable
indenture trustee to the noteholders and by the applicable trustee to the
certificateholders of those series. The timing, calculation, allocation, order,
source, priorities of and requirements for each class of noteholders and all
payments to each class of certificateholders of each series will be set forth in
the related prospectus supplement.
With respect to each series of securities, on each payment date collections
on the related Receivables will be transferred from the collection account to
the payment account for payment to securityholders, to the extent provided in
the related prospectus supplement. Credit enhancement, such as a reserve
account, may be available to cover any shortfalls in the amount available for
payment on that date, to the extent specified in the related prospectus
supplement. As may be more fully described in the related prospectus supplement,
payments in respect of principal of a class of securities of a given series will
be subordinate to payments in respect of interest on that class, and payments in
respect of the certificates of that series may be subordinate to payments in
respect of the notes of that series.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of credit enhancement arrangements, if any, and the
provider of the credit enhancements, if applicable, for each class of securities
of a given series will be set forth in the related prospectus supplement. If and
to the extent provided in the related prospectus supplement, credit enhancement
may be in the form of:
o a financial guaranty insurance policy;
o subordination of one or more classes of securities;
o reserve accounts;
o over-collateralization;
o letters of credit;
o credit or liquidity facilities;
o third party payments or other support;
o surety bonds;
o guaranteed cash deposits or any other arrangements as may be described in
the related prospectus supplement; or
o any combination of two or more of the above forms of credit enhancement.
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If specified in the related prospectus supplement, credit enhancement for a
class of securities may cover one or more other classes of securities of the
same series, and credit enhancement for a series of securities may cover one or
more other series of securities.
The presence of credit enhancement for the benefit of any class or series of
securities is intended to enhance the likelihood of receipt by the
securityholders or the class or series of the full amount of principal and
interest due and to decrease the likelihood that the securityholders will
experience losses. As may be more specifically provided in the related
prospectus supplement, the credit enhancement for a class or series of
securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance and interest on the
principal balance. If losses occur which exceed the amount covered by any credit
enhancement or which are not covered by any credit enhancement, securityholders
of any class or series will bear their allocable share of deficiencies, as may
be described in the related prospectus supplement. In addition, if a form of
credit enhancement covers more than one series of securities, securityholders of
those series will be subject to the risk that the credit enhancement will be
exhausted by the claims of securityholders of other series.
STATEMENTS TO INDENTURE TRUSTEES AND TRUSTEES
Prior to each payment date with respect to each series of securities, the
related servicer will be required to provide to the applicable indenture trustee
and/or the applicable trustee and credit enhancer a statement setting forth the
information described in the related prospectus supplement, which may include
the same information as is required to be provided in the periodic reports
provided to securityholders of that series described under "Description of the
Securities--Reports to Securityholders" in this prospectus. The statement will
be as of the close of business on the last day of the preceding related
remittance period.
EVIDENCE AS TO COMPLIANCE
Each Trust Agreement will generally provide that a firm of independent public
accountants will furnish to the related issuer and/or the applicable trustee, an
annual statement as to compliance by the related servicer during the preceding
twelve months with the standards relating to the servicing of the Receivables.
In the case of the first certificate, the period will cover the time since the
applicable closing date.
Each Trust Agreement will also generally provide for delivery to the related
issuer and/or the applicable trustee of a certificate signed by an officer of
the related servicer. The certificate will either:
o state that the servicer has fulfilled its obligations under the Trust
Agreement in all material respects throughout the preceding 12 months, or,
in the case of the first certificate, the period from the applicable
closing date; or
o describe the default if there has been a default in the fulfillment of its
obligation in any material respect.
Each servicer may also be required to agree to give the issuer and the
trustee notice of certain servicer defaults under the related Trust Agreement.
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CERTAIN MATTERS REGARDING THE SERVICERS
The servicer may not resign from its obligations and duties as servicer,
except upon determination that the performance by the servicer of its duties is
no longer permissible under applicable law and except pursuant to terms
specified in the related prospectus supplement. The resignation will not become
effective until the related trustee or a successor servicer has assumed the
servicer's servicing obligations and duties under the Trust Agreement.
Neither the related servicer nor any of its respective directors, officers,
employees, or agents will be under any liability to the related issuer or the
related securityholders for taking any action or for refraining from taking any
action under the Trust Agreement, or for errors in judgment, other than as may
be described in the related prospectus supplement. However, neither the servicer
nor any similar 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 duties or by reason of reckless disregard of obligations
and duties under the Trust Agreement. In addition, the Trust Agreement may
provide that the related servicer is under no obligation to appear in,
prosecute, or defend any legal action that is not incidental to its servicing
responsibilities under the Trust Agreement and that, in its opinion, may cause
it to incur any expense or liability.
Under the circumstances specified in the Trust Agreement the following
entities may be the successor to the servicer under the Trust Agreement:
o any entity into which the related servicer may be merged or consolidated;
o any entity resulting from any merger or consolidation to which the
servicer is a party;
o any entity succeeding to the business of the servicer; or
o any corporation or other entity that assumes the obligations of the
servicer.
SERVICER DEFAULT
A "servicer default" under a Trust Agreement may include:
(1) any failure by the related servicer to deliver to the applicable trustee
for deposit in any of the applicable accounts any required payment or to
direct the trustee to make any required payments from the applicable
accounts, which failure continues unremedied for greater than 2 business
days after written notice from the trustee is received by the servicer or
after discovery by the servicer;
(2) any failure by the servicer or the related Receivables seller to observe
or perform in any material respect any other covenant or agreement in the
Trust Agreement, which failure materially and adversely affects the
rights of the related securityholders and which continues unremedied for
a period greater than 120 days after written notice is given of the
failure; and
(3) any Insolvency Event.
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RIGHTS UPON SERVICER DEFAULT
As long as a servicer default under a Trust Agreement remains unremedied, the
applicable trustee, credit enhancer or holders of securities of the related
series with not less than a percentage of the voting rights of the outstanding
securities as specified in the related prospectus supplement may terminate all
the rights and obligations of the servicer, if any, under the Trust Agreement.
After the rights and obligations of the servicer are terminated the trustee or a
successor servicer appointed by the trustee will succeed to all the
responsibilities, duties and liabilities of the servicer under the Trust
Agreement and will be entitled to similar compensation arrangements. If,
however, a bankruptcy trustee or similar official has been appointed for the
servicer, and no servicer default other than the appointment has occurred, the
bankruptcy trustee or official may have the power to prevent the applicable
trustee or the securityholders from effecting a transfer of servicing. In the
event that the trustee is unwilling or unable to so act, it may appoint, or
petition a court of competent jurisdiction for the appointment of, a successor
with a net worth of an amount set forth in the related Trust Agreement and whose
regular business includes the servicing of a similar type of Receivables. This
trustee may make the arrangements for compensation to be paid, which in no event
may be greater than the servicing compensation payable to the servicer under the
related Trust Agreement.
WAIVER OF PAST DEFAULTS
Subject to the approval of any credit enhancer, the holders of securities
evidencing at least a majority of the voting rights of the outstanding
securities may, on behalf of all securityholders of the related securities,
waive any default by the servicer, or by the related Receivables seller, in the
performance of its obligations under the related Trust Agreement and its
consequences. However, a default in making any required deposits to or payments
from any of the accounts in accordance with the Trust Agreement may not be
waived. No waiver will impair the securityholders' rights with respect to
subsequent defaults.
AMENDMENT
To the extent provided in the related prospectus supplement, each of the
Trust Agreements may be amended by the parties to the Trust Agreement, without
the consent of the related securityholders. This amendment may be for the
purpose of
o adding any provisions to or changing in any manner or eliminating any of
the provisions of the Trust Agreements or
o modifying in any manner the rights of the securityholders.
This type of amendment may be made if it does not materially and adversely
affect the interests of any of those securityholders.
The Trust Agreements may also be amended by the depositor, the servicer, and
the applicable trustee with the consent of any credit enhancer and the holders
of securities evidencing at least a majority of the voting rights of the
outstanding securities for the purpose of:
o adding any provisions to or changing in any manner or eliminating any of
the provisions of the Trust Agreements; or
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o modifying in any manner the rights of the securityholders;
This type of amendment may be made if it does not:
o increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the related Receivables or payments
that are required to be made for the benefit of the securityholders; or
o reduce the percentage of the securities of the series which are required
to consent to the amendment, without the consent of the securityholders of
that series.
TERMINATION
With respect to each trust, the obligations of the related servicer, the
related Receivables seller(s), the depositor and the applicable trustee under
the related Trust Agreement will terminate upon the earlier to occur of:
(1) the maturity or other liquidation of the last related Receivable and the
disposition of any amounts received upon liquidation of any remaining
Receivables and
(2) the payment to securityholders of the related series of all amounts
required to be paid to them under the Trust Agreement.
In order to avoid excessive administrative expense, the related servicer,
Receivables seller, depositor or other party be permitted to purchase from a
trust fund all the remaining Receivables, as of the end of any collection period
immediately preceding a payment date. The purchase will be permitted only if the
current balance of the Receivables is less than a specified percentage set forth
in the related prospectus supplement of the initial pool balance for the trust
fund, and the price for the purchase will be set forth in the related prospectus
supplement. The related securities will be redeemed following the purchase.
A trustee may solicit bids for the purchase of the Receivables remaining in a
trust within ten days following a payment date as of which the pool balance is
equal to or less than the percentage of the initial pool balance specified in
the related prospectus supplement. This purchase must be in accordance with the
terms and conditions set forth in the related prospectus supplement. If the
trustee receives satisfactory bids as described in the prospectus supplement,
then the Receivables remaining in that trust fund will be sold to the highest
bidder.
Any outstanding notes of the related series may be redeemed concurrently
with either of the events specified above. The subsequent payment to the related
certificateholders of all amounts required to be paid to them under the
applicable Trust Agreement may effect the prepayment of the certificates of that
series.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
FINANCED VEHICLES--GENERAL
A number of federal and state laws, including the UCC as in effect in various
states, govern:
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o the transfer of the Receivables by the related Receivables seller to the
depositor under each Receivables Acquisition Agreement;
o the transfer of the Receivables by the depositor to the trustee under the
related Trust Agreement;
o the perfection of the security interests in the Receivables; and
o the enforcement of rights to realize on the Receivables and the
Recreational Vehicles and Vehicles as collateral for the Receivables.
The related servicer will take the actions required to perfect the rights of
the trustee in the Receivables. If, through inadvertence or otherwise, a third
party were to purchase, including the taking of a security interest, a
Receivable for new value in the ordinary course of its business, without actual
knowledge of the issuer's interest, and take possession of a Receivable, the
purchaser would acquire an interest in the Receivable superior to the interest
of the issuer. As may be further specified in the related prospectus supplement,
no action will be taken to perfect the rights of the trustee in proceeds of any
vendor's single interest physical damage policy or of any other insurance
policies covering individual property or obligors. Therefore, the rights of a
third party with an interest in the proceeds could prevail against the rights of
the issuer prior to the time the proceeds are deposited by the related servicer
into a account.
SECURITY INTERESTS IN THE FINANCED VEHICLES
The Trustee's Interests in the Loan Contracts
Retail installment sale contracts and note and security agreements, such as
the Loan Contracts related to the Recreational Vehicles and Vehicles, evidence
the credit sale by dealers to consumers or indebtedness of consumers incurred to
acquire Recreational Vehicles and Vehicles. These Loan Contracts also constitute
personal property security agreements and include grants of security interests
in the related Recreational Vehicles and Vehicles under the UCC. Perfection of
security interests in Recreational Vehicles and Vehicles is generally governed
by the registration or titling laws of the state in which each Recreational
Vehicle or Vehicle is registered or titled. In most states a security interest
in a Recreational Vehicle or Vehicle is perfected by notation of the secured
party's lien on the Recreational Vehicle's or Vehicle's certificate of title.
The related prospectus supplement may provide that the Loan Contracts
acquired from Receivables seller name the related Receivables seller as obligee
or assignee and as the secured party. As may be specified in the related
prospectus supplement, the related Receivables seller will represent that it has
taken all actions necessary under the laws of the state in which the related
Recreational Vehicle and Vehicle is titled to perfect its security interest in
the Recreational Vehicles and Vehicles, including, where applicable, having a
notation of its lien recorded on the related certificate of title.
Perfection
Under the related Receivables Acquisition Agreement, the Receivables seller
will sell and assign or, if so specified in the related prospectus supplement,
either sell and assign or pledge the
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Loan Contracts and the related security interests in the Boats, Recreational
Vehicles and Vehicles to the depositor. Under the related Trust Agreement, the
depositor will assign to the trustee the Loan Contracts and its interest in the
Receivables seller's security interests in the Boats, Recreational Vehicles and
Vehicles. Because of the administrative burden and expense, none of the
depositor, the related servicer nor the trustee will generally amend any
certificate of title to identify the depositor or the trustee as the new secured
party on the certificates of title relating to the Boats, Recreational Vehicles
and Vehicles. The trustee, if so specified in the related prospectus supplement,
will continue to hold the Receivables and any certificates of title relating to
the Boats, Recreational Vehicles and Vehicles in its possession as custodian for
the trustee under the related Trust Agreement even though the depositor and the
trustee may not be relying on possession as the legal basis for the perfection
of their interests in the Receivables or in the security interests in the Boats,
Recreational Vehicles and Vehicles. This, as a practical matter, should preclude
any other party from claiming a competing security interest in the Receivables
on the basis that the security interest is perfected by possession.
A security interest in a motor vehicle registered in most states may be
perfected against creditors and subsequent purchasers without notice for
valuable consideration only by one or more of the following:
o depositing with the related state department of motor vehicles or
analogous state office a properly endorsed certificate of title for the
vehicle showing the secured party as legal owner or lienholder on the
vehicle;
o filing a sworn notice of lien with the related state department of motor
vehicles or analogous state office and noting the lien on the certificate
of title; or
o if the vehicle has not been previously registered, filing an application
in usual form for an original registration together with an application
for registration of the secured party as legal owner or lienholder.
However, under the laws of most states, a transferee of a security interest
in a motor vehicle is not required to reapply to the related state department of
motor vehicles for a transfer of registration in order to obtain an effective
assignment of the security interest. The transferee also is not required to
reapply when the interest of the transferee arises from the transfer of a
security interest by the lienholder to secure payment or performance of an
obligation. Accordingly, under the laws of those states, the assignment by the
related Receivables seller of their interests in the Receivables to the
depositor under the related Receivables Acquisition Agreement, and the
assignment by the depositor of its interest in the Receivables to the trustee
under the related Trust Agreement should be effective conveyances of the
respective security interests of the related Receivables seller and the
depositor in the Receivables, and specifically, the Recreational Vehicles and
Vehicles. Without this re-registration and without amendment of any lien noted
on the related certificate of title, the depositor should succeed to the related
Receivables seller's rights as secured party and the trustee should succeed to
the depositor's rights as secured party.
Although re-registration of the Recreational Vehicle or Vehicle is not
necessary to convey a perfected security interest in the Recreational Vehicle or
Vehicles to the trustee, the trustee's security interest could be defeated
through:
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o fraud;
o negligence;
o forgery; or
o administrative error since it may not be listed as legal owner or
lienholder on the certificates of title to the Recreational Vehicle or
Vehicles.
However, in the absence of fraud, negligence, forgery or administrative
error, the notation of the related Receivables seller's lien on the certificates
of title will be sufficient to protect the issuer against the rights of
subsequent purchasers of a property or subsequent creditors who take a security
interest in a Recreational Vehicle or Vehicle. If there are any Recreational
Vehicles or Vehicles as to which the related Receivables seller failed to obtain
a first priority perfected security interest, its security interest would be
subordinate to, among others, subsequent purchasers of the Recreational Vehicles
or Vehicles and holders of first priority perfected security interests in the
Recreational Vehicles or Vehicles.
Continuity of Perfection
Under the laws of most states, a perfected security interest in a motor
vehicle continues for four months after the vehicle is moved to a new state from
the one in which it is initially registered and then 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 vehicle. In those
states that require a secured party to hold possession of the certificate of
title to maintain perfection of the security interest, the secured party would
learn of the re-registration through the request from the obligor under the
related installment sale contract or note and security agreement to surrender
possession of the certificate of title to assist in the re-registration. In the
case of vehicles registered in states providing for the notation of a lien on
the certificate of title but not requiring 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 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 debtor somehow procures a new certificate of title
that does not list the secured party's lien. Additionally, in states that do not
require surrender of a certificate of title for re-registration of a vehicle,
re-registration could defeat perfection.
In each of the Trust Agreements, the related servicer will be required to
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 vehicle, the related servicer will have an opportunity to require satisfaction
of the related Receivable before release of the lien, either because the related
servicer will be required to surrender possession of the certificate of title in
connection with the sale, or because the related servicer will receive notice as
a result of its lien noted on the certificate of title. Under the related Trust
Agreement, the related servicer will hold the certificates of title for the
related property as custodian for the trustee. Under the related Trust
Agreement, the related servicer will be obligated to take appropriate steps, at
its own expense, to maintain perfected security interests in the Vehicles.
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Priority of Certain Liens Arising by Operation of Law
Under the laws of most states, certain of the following statutory liens take
priority over even a first priority perfected security interest in the
Recreational Vehicle or Vehicle by operation of law:
o mechanics' liens;
o repairmen's liens;
o garagemen's liens for repairs performed on a motor vehicle;
o motor vehicle accident liens;
o towing and storage liens;
o liens arising under various state and federal criminal statutes; and
o liens for unpaid taxes.
The UCC also grants priority to certain federal tax liens over the lien of a
secured party. The laws of most states and federal law permit the confiscation
of motor vehicles by governmental authorities under certain circumstances if
used in or acquired with the proceeds of unlawful activities. This confiscation
may result in the loss of a secured party's perfected security interest in a
confiscated vehicle. Liens for repairs or taxes superior to the security
interest of the trustee in the Recreational Vehicle or Vehicle, or the
confiscation of the Recreational Vehicle or Vehicle, could arise at any time
during the term of a Receivable. No notice will be given to the trustee or any
securityholder in the event the superior lien for repairs or taxes or
confiscation arises. In addition, the superior lien for repairs or taxes or
confiscation arising after the related closing date would not give rise to the
related Receivables seller's repurchase obligation under the related Receivables
Acquisition Agreement.
THE TRUSTEE'S INTERESTS IN LEASED VEHICLES
The Receivables seller, with respect to Lease Contracts, will be required, to
the extent not done previously, to deliver to the appropriate Department of
Motor Vehicles in the related states duly completed and executed applications
for:
(a) transfer of the certificates of title to the related leased vehicles from
the current title holder to either a finance subsidiary or to the related
issuer;
(b) release of any prior liens recorded on such certificates of title; and
(c) in the event that the leased Vehicles will be titled in the name of a
finance subsidiary of the Receivables seller and not the issuer, a
notation of lien in favor of the related trustee on the certificates of
title, except, to the extent that the laws of any particular state do not
require such a lien notation to be made to perfect the trustee's security
interest.
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Various liens and interests could be imposed upon all or part of the related
trust fund that, by operation of law, would take priority over the trustee's
interest in the trust fund, however perfected. These liens include tax liens
arising against the Receivables seller or, a finance subsidiary of the
Receivables seller, mechanic's, repairman's, garagemen's and motor vehicle
accident liens and certain liens for personal property taxes, in each case
arising with respect to a particular leased Vehicle, and liens arising under
various state and federal criminal statutes.
SECURITY INTERESTS IN BOATS
Except for Boats registered under the laws of non-U.S. jurisdictions,
generally, security interests in Boats may be perfected in one of three ways:
o in "title" states, a security interest is perfected by notation of the
secured party's lien on the certificate of title issued by an applicable
state department of motor vehicles or other appropriate state agency;
o in other states, a security interest may be perfected by filing a UCC-1
financing statement. However, in some jurisdictions a purchase money lien
in consumer goods may be perfected without any filing requirement; and
o if a Boat qualifies for documentation under federal law, a preferred
mortgage may be obtained under the federal ship mortgage statutes by
filing the preferred mortgage with the Secretary of Transportation of the
United States, who conducts that function through the United States Coast
Guard.
To qualify for documentation under federal law, a boat must measure at least
five net tons, which is a measure not of weight but of units of 100 cubic feet
of enclosed, internal volume after certain deductions of space, as measured
under federal law. If a boat with a security interest perfected under state law
is later documented under federal law, or an application for documentation is
filed, the exclusive method of perfecting a security interest in it is to have
the Boat owner sign a preferred mortgage and for the preferred mortgage to be
filed with the United States Coast Guard. When a Boat becomes documented under
federal law, or an application for documentation is duly filed, the state law
security interest will coexist with the federal security interest.
Typically arrangements are made so that the necessary documents to grant and
perfect the desired security interest or mortgage are signed by the consumer and
are filed by the dealer or the applicable Receivables seller. In the event of
clerical error or otherwise, the necessary actions will not have been taken, or
taken in a timely fashion. In this event, the Receivables seller may not have a
perfected security interest in the financed Boat or the security interest may be
subordinate to the interests of subsequent purchasers of the financed Boat,
other lienholders, or bankruptcy trustees or receivers of the owner of the
financed Boat. The Receivables seller's security interest or preferred mortgage
may also be subordinate to these third parties in the event of fraud or forgery
by the obligor or administrative error by state or federal recording and filing
officials.
In addition, under certain state certificate of title statutes the
Receivables seller must separately perfect its security interest in boat motors,
unless the financed Boat is properly
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documented under federal law. As a matter of federal law, the particular boat
motor is considered to be an appurtenance of the financed Boat.
A security interest perfected by a preferred mortgage has a nationwide scope
and no further action is necessary when an obligor moves or relocates the
collateral. Security interests perfected under state law may have to be refiled
if the obligor moves to a state other than the state in which a security
interest is originally perfected. In addition if the security interest is
perfected under the UCC, a new filing must be made under the UCC in order to
continue the perfected security interest.
If the security interest in the Boat is perfected under a title statute and
the related obligor moves to a state other than the state in which the Boat is
registered, under the laws of most title states the perfection of the security
interest in the Boat would continue for a brief period of time after the
relocation. Some states issuing certificates of title on Boats require surrender
of a certificate of title to reregister a Boat. In those states that also
provide for possession of the certificate of title by the secured party, the
Receivables seller must surrender possession of the certificate of title in
these circumstance for any related financed Boat to be reregistered. Some states
do not give the secured party possession of the certificate of title, but
indicate the secured party on the certificate of title and provide notice to the
secured party of surrender of the certificate of title by another person. If
either the servicer is in possession of a certificate of title that must be
surrendered to reregister the financed Boat or the servicer receives notice of
any surrender of the certificate of title by another person, the servicer would
then have the opportunity to continue the perfection of the security interest in
the financed Boat in the state of registration. If the obligor moves to a state
which does not require surrender of a certificate of title for reregistration of
a boat, re-registration could defeat perfection. When an obligor sells a boat,
under the laws of many states, the purchaser cannot reregister the boat unless
the related lienholder of record surrenders possession of the certificate of
title. Accordingly the servicer, in this circumstance, would have an opportunity
to require satisfaction of the related Receivable before release of the lien.
If the Receivables seller has perfected its security interest in the boat by
the filing of a UCC-1 financing statement, or the obligor moves from a title
state to a non-title state, the servicer will be required to file a UCC-1
financing statement in the new state of the obligor as soon as possible after
receiving notice of the obligor's change of residence. If the servicer does not
learn of the change or act in time, the perfection of the security interest
could lapse. UCC-1 financing statements generally expire after five years. When
the term of a loan exceeds five years, the filing must be continued in order to
maintain the Receivables seller's perfected security interest. In the event that
an obligor moves to a state other than the state in which the UCC-1 financing
statement is filed or in certain states to a different county in that state,
under the laws of most states the perfection of the security interest in the
financed Boat would continue for four months after the relocation, unless the
perfection in the original jurisdiction would have expired earlier. A new
financing statement must be filed in the state of relocation or, if the state is
a title state, a notation on the certificate of title must be made in order to
continue the Receivables seller's security interest.
Generally, none of the certificates of title of financed Boats will be
endorsed, delivered and filed nor will UCC-1 financing statements be amended or
assigned of record, nor will transfers of preferred mortgages be filed. This is
so because of the administrative burden and expense of:
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o endorsing the certificate of title of each financed Boat to reflect an
issuer's interest in that Boat and delivering each certificate of title to
the trustee for filing, and the payment of related filing fees, in the
case of financed Boats licensed in states where security interests in
boats are subject to certificate of title statutes;
o filing amendments to or assignments of record of UCC-1 financing
statements relating to each financed Boat, and the payment of related
filing fees, to reflect the issuer's interest in that Boat, in the case of
financed Boats licensed in states where security interests in boats are
perfected by filing a UCC-1 financing statement; and
o filing each transfer of the preferred mortgages, and the payment of
related filing fees, as required under federal law to perfect the trust's
interest in that preferred mortgage, in the case of financed Boats which
are documented under federal law.
In the absence of these procedures, neither the depositor nor the issuer may
have a perfected security interest in the financed Boats licensed in certificate
of title or UCC states, and will not have a perfected security interest in
financed Boats documented under federal law. However, the failure to make these
endorsements, filings or recordations will not affect the validity of the
original security interest as against the obligor under a Loan Contract in UCC
states.
In the case of the "title" states, in the absence of endorsement of the
certificate of title of each financed Boat to reflect an issuer's interest in
that Boat and delivery of each certificate of title to the trustee for filing,
the Receivables seller will continue to be named as the secured party on the
certificates of title relating to the financed Boats registered in those states.
In most of those states, a transfer of the related Receivable would be an
effective conveyance of a security interest and the new secured party would
succeed to the rights of the Receivables seller as the secured party. In the
absence of fraud or forgery by the obligor or administrative error by federal,
state or local recording officials, the notation of the lien of the Receivables
seller on the certificate of title will be sufficient to protect the issuer
against the rights of subsequent lenders who take a security interest by the
laws of that state or subsequent lenders who take a security interest in the
financed Boat. There exists a risk, however, in not identifying the issuer as
the new secured party on the certificate of title, that the issuer or trustee
may in some states be subordinate to claims of creditors or the receiver of a
Receivables seller in the event of the insolvency of the Receivables seller and
that, through fraud or negligence, the security interest of the issuer or
trustee could be released by the Receivables seller as security of record.
Similarly, the Receivables seller will not cause the documentation for
financed Boats which are subject to a preferred mortgage to be endorsed to
reflect the issuer's interest in them. In addition, the transfer will not be
filed with the Secretary of Transportation, and under federal law no transfer of
a preferred mortgage is valid against a third party without notice until the
transfer is recorded. While the interpretation of this provision by a court
might depend upon the factual circumstances, under the terms of the federal
statue, an issuer's or trustee's security interest in federally documented
financed Boats is subordinate to creditors and the receiver or trustee of the
originator or any other holder of the related Receivable, in the event of the
insolvency of the originator or any other holder of the related Receivable and
to the rights of subsequent purchasers of the financed Boat and the bankruptcy
trustee of the obligor. This provision does not affect the validity of the
original security interest as against the obligor. As a general rule, a
preferred mortgage on a financed Boat is subordinate to:
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o the costs incurred by the court and the custodian of the financed Boat
incurred during foreclosure proceedings;
o liens for crew wages, salvage, general average, and tort claims, whenever
they arise;
o preferred mortgages granted and perfected prior in time to the mortgage in
question;
o liens under federal law for "necessaries," which are generally goods and
services rendered or delivered to the financed Boat, furnished before the
preferred mortgage in question is perfected; and
o certain stevedoring charges, which are a type of "necessaries" claims,
whenever they arise.
A security interest perfected under state law is subordinate to the same
costs and liens, and is also subordinate to liens for necessaries, including:
o stevedoring charges, whenever they arise;
o previously perfected state law security interest; and
o certain other liens, including liens for storage, repairs and taxes.
The priority of all security interests, mortgages, and liens is subject to
the application of principles of equitable subordination and other changes due
to the exercise by courts of their equitable discretion in appropriate cases.
Certain states laws and federal law permit the confiscation of boats by
governmental authorities under certain circumstances if used in unlawful
activities, which may result in the loss of a secured party's perfected security
interest in the confiscated boat. Federal law protects a preferred mortgage from
this result for violation of federal laws if he mortgagor did not authorize,
consent or conspire with respect to the unlawful act.
The enforceability and priority of security interests in Boats that journey
outside the United States are subject to the laws of each country where those
Boats go, which laws vary from place to place.
The validity of a preferred mortgage or a state law security interest in a
financed Boat that has never been operated other than for pleasure could be
challenged if securityholders having a controlling interest with respect to the
issuer were determined:
o to be nationals of, or under the control of entities in, countries that
the U.S. Maritime Administration has named pursuant to applicable
regulations as being contrary to United States foreign policy interests,
or
o to be foreign nationals or subject to foreign control in time of war or
national emergency and any related transfers of securities to these
nationals or entities could also be challenged.
The holder of a preferred maritime lien who arrests a Boat under federal law
to enforce that lien is required to give notice of the suit to all lienholders
of record. However, if the holder of a
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preferred mortgage does not receive notice of the suit, the Boat can be sold
free and clear of the preferred mortgage. If the holder of the preferred
mortgage does not arrest the Boat and foreclose the mortgage under federal law
in federal court, but rather repossesses and resells the Boat under state law,
any preferred maritime liens on the Boat are not terminated by that sale and may
impair the preferred mortgage holder's ability to transfer clear title to the
Boat.
Liens that take priority over a perfected security interest in a financed
Boat could arise, or the confiscation of a financed Boat could occur, at any
time during the term of a related Receivable. No notice will be given to the
trustee, any indenture trustee, any noteholders or the certificateholders in
respect of a given issuer if the lien arises or confiscation occurs. See "Risk
Factors - Competing Claims to Ownership of Receivables May Result in Reduced
Payments on Your Securities" in this prospectus.
REPOSSESSION
In the event of default by an obligor, the holder of the related retail
installment sale contract or note and security agreement has all the remedies of
a secured party under the UCC, except where specifically limited by other state
laws. The UCC remedies of a secured party include the right to repossession by
self-help means, unless the means would constitute a breach of the peace. Unless
a vehicle is voluntarily surrendered, self-help repossession is accomplished
simply by taking possession of the related financed vehicle. In cases where the
obligor objects or raises a defense to repossession, or if otherwise required by
applicable state law, a court order is obtained from the appropriate state
court, and the vehicle must then be recovered in accordance with that order. In
some jurisdictions, the secured party is required to notify the debtor of the
default and the intent to repossess the collateral and give the debtor a time
period within which to cure the default prior to repossession. Generally, this
right of cure may only be exercised on a limited number of occasions during the
term of the related contract. Other jurisdictions permit repossession without
prior notice if it can be accomplished without a breach of the peace. However,
in some states, a course of conduct in which the creditor has accepted late
payments has been held to create a right by the obligor to receive prior notice.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require a secured party to provide the obligor
with reasonable notice of the date, time, and place of any public sale and/or
the date after which any private sale of the collateral may be held.
In addition, some states also impose substantive timing requirements on the
sale of repossessed vehicles in certain circumstances and/or various substantive
timing and content requirements on those notices. In most states, after a
financed vehicle has been repossessed, the obligor may redeem the collateral by
paying the delinquent installments and other amounts due. The obligor has the
right to redeem the collateral prior to actual sale or entry by the secured
party into a contract for sale of the collateral by paying the secured party:
o the unpaid principal balance of the obligation;
o accrued interest on the obligation;
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o reasonable expenses for repossessing, holding, and preparing the
collateral for disposition and arranging for its sale;
o in some jurisdictions, reasonable attorneys' fees and legal expenses; or
o in some states, by payment of delinquent installments on the unpaid
principal balance of the related obligation.
In addition to these notice requirements, 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. In addition, the UCC permits the debtor 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 debtor or other interested
person to obtain an order mandating that the secured party refrain 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.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the property generally will be applied first to the
expenses of resale and repossession and then to the satisfaction of the
indebtedness. In many instances, the remaining principal amount of the
indebtedness will exceed the proceeds. Under the UCC and laws applicable in some
states, a creditor is entitled to bring an action to obtain a deficiency
judgment from a debtor for any deficiency on repossession and resale of a motor
vehicle securing the debtor's loan. However, in some states, a creditor may not
seek a deficiency judgment from a debtor whose financed vehicle had an initial
cash sales price of less than specified amounts.
Some states impose prohibitions, limitations, or notice requirements on
actions for deficiency judgments. Any 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.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a subordinate lien with respect
to the vehicle or if that lienholder does not exist or if there are remaining
funds, the UCC requires the creditor to remit the surplus to the obligor under
the contract.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended, a lessee who enters the military service after the origination of the
lessee's Lease Contract, may not be charged interest above an annual rate of 6%
during the period of such lessee's active duty status, unless a court orders
otherwise upon application of the lender. This also applies to a lessee who
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is a member of the National Guard or is in reserve status at the time of the
origination of the Lease Contract and is later called to active duty. Any
shortfall in interest collections resulting from the application of this Act, to
the extent not covered by credit support, could result in losses to
securityholders. In addition, this Act imposes limitations which would impair
the ability of the servicer to repossess the leased Vehicle relating to an
affected Lease Contract, or otherwise to take legal action with respect to that
Lease Contract, during the lessee's period of active duty status. Thus, in the
event that the Lease Contract goes into default, there may be delays and losses
occasioned by the inability to realize upon the related leased Vehicle in a
timely fashion.
CONSUMER PROTECTION LAWS
Loan Contracts
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon creditors and servicers involved in
consumer finance. These laws include:
o the Truth-in-Lending Act;
o the Equal Credit Opportunity Act;
o the Federal Trade Commission Act;
o the Fair Credit Billing Act;
o the Fair Credit Reporting Act;
o the Fair Debt Collection Practices Act;
o the Magnuson-Moss Warranty Act;
o the Federal Reserve Board's Regulations B and Z;
o state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code;
o state motor vehicle retail installment sale acts, state "lemon" laws; and
o other similar laws.
In addition, the laws of some states, impose finance charge ceilings and
other restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose specific
statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect the ability of an assignee such as
the trustee to enforce consumer finance contracts such as the Receivables.
The so-called "holder-in-due-course rule" of the Federal Trade Commission has
the effect of subjecting any assignee of the seller in a consumer credit
transaction to all claims and defenses which the obligor in the transaction
could assert against the seller. Liability under the holder-in-due-course rule
is limited to the amounts paid by the obligor under the contract, and
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the holder of the contract may also be unable to collect any balance remaining
due under the contract from the obligor. The holder-in-due-course rule is
generally duplicated by:
o the Uniform Consumer Credit Code;
o other state statutes; or
o the common law in certain states.
To the extent that the Receivables will be subject to the requirements of the
holder-in-due-course rule, the trustee, as holder of the Receivables, will be
subject to any claims or defenses that the purchaser of the related Vehicle may
assert against the seller of that Vehicle. The claims will be limited to a
maximum liability equal to the amounts paid by the obligor under the related
Receivable.
Under most state vehicle dealer licensing laws, sellers of automobiles and
light duty trucks are required to be licensed to sell vehicles at retail sale.
In addition, with respect to used vehicles, the Federal Trade Commission's rule
on sale of used vehicles requires that all sellers of used vehicles prepare,
complete and display a "buyer's guide" which explains the warranty coverage for
those vehicles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act and the motor vehicle title laws
of most states require that all sellers of used vehicles furnish a written
statement signed by the seller certifying the accuracy of the odometer reading.
If a seller is not properly licensed or if either a buyer's guide or odometer
disclosure statement was not provided to the purchaser of a vehicle, the obligor
may be able to assert a defense against the seller of the vehicle. If an obligor
on a Receivable were successful in asserting any of these claims or defenses,
the related servicer would pursue on behalf of the issuer any reasonable
remedies against the seller or manufacturer of the vehicle, subject to
limitations as to the expense of those actions to be specified in the related
Trust Agreement.
Any of these losses, to the extent not covered by credit support, as may be
specified in the related prospectus supplement, could result in losses to the
securityholders.
Courts have applied general equitable principles to secured parties pursuing
repossession or litigation involving deficiency balances. These equitable
principles may have the effect of relieving an obligor from some or all of the
legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections of the 14th Amendment to the Constitution of the United States.
Courts have generally either upheld the notice provisions of the UCC and related
laws as reasonable or have found that the creditor's repossession and resale do
not involve sufficient state action to afford constitutional protection to
consumers.
Lease Contracts
Numerous federal and state consumer protection laws imposed requirements upon
lessors and servicers involved in consumer leasing. The federal Consumer Leasing
Act of 1976 and Regulation M, issued by the Board of Governors of the Federal
Reserve System, for example, require that a number of disclosures be made at the
time a Vehicle is leased. These disclosures
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include the amount of any down payment, a description of the lessee's liability
at the end of the lease term, the amount of any periodic payments and the
circumstances under which the lessee may terminate the lease prior to the end of
the lease term. The various consumer protection laws would apply to the
Receivables seller as the initial lessor, and may also apply to the issuer and
the trustee as purchasers or assignees of the Lease Contracts. The failure to
comply with these consumer protection laws may give rise to liabilities on the
part of the servicer, the Receivables seller, the depositor and the trustee,
including liabilities for statutory damages and attorneys' fees. In addition,
claims by the servicers, the Receivables seller, the depositor and the trustee
may be subject to set-off as a result of this noncompliance.
Courts have applied general equitable principles in litigation relating to
repossession and deficiency balances. These equitable principles may have the
effect of relieving a lessee from some or all of the legal consequences of a
default.
In several cases, consumers have asserted that the self-help remedies of
lessors violate the due process protections provided under the Fourteenth
Amendment to the Constitution of the United States. Courts have generally found
that repossession and resale by a lessor do not involve sufficient state action
to afford constitutional protection to consumers.
Some states have adopted "lemon" laws providing redress to consumers who
purchase or lease a Vehicle that remains out of conformance with its
manufacturer's warranty after a specified number of attempts to correct a
problem or after a specific time period. Should any leased Vehicle become
subject to an applicable lemon law, a lessee could compel the issuer to
terminate the related Lease Contract and refund a portion of prior scheduled
monthly payments. Although the issuer may be able to assert a claim against the
manufacturer of the defective vehicle, we cannot assure you that the claim would
be successful. Any loss, to the extent not covered by credit support specified
in the related prospectus supplement, could result in losses to the
securityholders.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a creditor to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy, leaving the party providing financing
as a general unsecured creditor for the remainder of the indebtedness. A
bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness. Any
shortfalls, to the extent not covered by the credit support that may be
specified in the related prospectus supplement, could result in losses to the
securityholders.
VICARIOUS TORT LIABILITY WITH RESPECT TO THE LEASED VEHICLES
Although the issuer may own the leased Vehicles, they will be operated by the
related lessees and their respective invitees. State laws differ as to whether
anyone suffering injury to person or
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property involving a leased vehicle may bring an action against the owner of the
vehicle merely by virtue of that ownership.
Some state statutes provide that a victim of an accident has no cause of
action against the owner of the leased vehicle arising from the negligent
operation of the leased vehicle unless the owner has negligently entrusted or
continues to negligently entrust the vehicle to an inappropriate lessee. Other
state statutes provide that the owner of a motor vehicle that is subject to a
lease having an initial term of at least one year is exempt from liability for
tort claims arising out of the negligent operation of the leased vehicle or
negligent acts of the operator in the event of an accident in which the leased
vehicle is involved if the lessee is required under the lease to maintain
certain specified levels of insurance, and that insurance is in effect.
Generally, the Lease Contracts contain provisions requiring the lessees to
maintain levels of insurance satisfying applicable state requirements.
Actions by third parties might arise against the owner of a leased Vehicle
based on legal theories other than negligence. These theories include product
defect or improper vehicle preparation prior to the origination of the related
Lease Contract. Even if the issuer were to be the subject of an action for
damages as a result of its ownership of a leased vehicle, the damages may be
covered by contingent and excess liability insurance policies if, as may be
specified in the related prospectus supplement, the issuer is named as a
beneficiary of those policies. In the event that all the insurance coverage were
exhausted and damages were assessed against the issuer, claims could be imposed
against the assets of the issuer, including the leased Vehicles. However, these
claims would not take priority over any items comprising the trust fund to the
extent that the trustee has a perfected security interest in those items. If
these claims were imposed the assets of the issuer, you could incur a loss on
your investment. See "Risk Factors--Vicarious Tort Liability Could Cause Losses"
in this prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
considerations of the purchase, ownership and disposition of the securities. The
summary does not purport to deal with federal income tax considerations
applicable to all categories of holders, some of which may be subject to special
rules. For example, it does not discuss the tax treatment of securityholders
that are insurance companies, regulated investment companies or dealers in
securities. You are urged to consult your own tax advisors in determining the
federal, state, local, foreign and any other tax consequences to you of the
purchase, ownership and disposition of the securities.
The following summary is based upon current provisions of the Code, the
Treasury regulations issued under the Code and judicial or ruling authority, all
of which are subject to change, which change may be retroactive. The depositor
will be provided with an opinion of Cadwalader, Wickersham & Taft regarding
certain federal income tax matters discussed below. Those opinions, however, are
not binding on the IRS or the courts. No ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the issuer, the notes, the certificates and related terms, parties
and documents will be deemed to refer, unless otherwise specified in this
prospectus, to each issuer, the notes and the certificates and the related
terms, parties and documents applicable to that issuer.
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The federal income tax consequences to certificateholders will vary depending
on:
o whether the issuer is treated as a partnership under the Code and
applicable Treasury regulations or
o whether the issuer will be treated as a grantor trust.
The prospectus supplement for each series of certificates will specify
whether the issuer will be treated as a partnership or as a grantor trust.
FASITS
Sections 860H through 860L of the Code provide for the creation of an entity
for federal income tax purposes, referred to as a FASIT. These provisions were
effective as of September 1, 1997, but many technical issues concerning FASITs
have not yet been addressed by final Treasury regulations. To qualify as a
FASIT, an entity must meet certain requirements under Section 860L of the Code
and must elect that treatment. The applicable Trust Agreement, if applicable,
may be amended to provide that the depositor and trustee will cause a FASIT
election to be made for the issuer if the depositor delivers an opinion of
Cadwalader, Wickersham & Taft to the effect that, for federal income tax
purposes,
(1) the deemed issuance of FASIT regular interests, occurring in connection
with the election, will not adversely affect the federal income tax treatment of
the securities,
(2) following the election the issuer will not be deemed to be an
association, or publicly traded partnership, taxable as a corporation, and
(3) the election will not cause or constitute an event in which gain or loss
would be recognized by any securityholder or the issuer.
ISSUERS TREATED AS PARTNERSHIPS
Tax Characterization of the Issuer as a Partnership
An issuer which is not treated as a grantor trust and which does not
affirmatively elect to be treated as a corporation will be treated as a
partnership under applicable Treasury regulations as long as there are two or
more beneficial owners. The issuer will be ignored as a separate entity where
there is a single beneficial owner of all equity classes of the related series,
including any class of notes treated as equity for federal income tax purposes.
Cadwalader, Wickersham & Taft will deliver their opinion that an issuer will not
be an association, or publicly traded partnership, taxable as a corporation for
federal income tax purposes. This opinion will be based on the assumption that
the terms of the trust and servicing agreement or pooling and servicing
agreement and indenture and related documents will be complied with, including
the making of no affirmative election to be treated as a corporation.
Cadwalader, Wickersham & Taft's opinion will also conclude that either:
(1) the nature of the income of the issuer will exempt it from the rule that
certain publicly traded partnerships are taxable as corporations; or
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(2) the restrictions on transfer of certain classes of the securities will
prevent the issuer from being classified as a publicly traded
partnership.
If an issuer were taxable as a corporation for federal income tax purposes,
it would be subject to corporate income tax on its taxable income. The issuer's
taxable income would include all of its income on the related Receivables, less
servicing fees and other deductible expenses, which may include its interest
expense on the notes. Any corporate income tax could materially reduce cash
available to make payments on the securities, and beneficial owners of
securities could be liable for the part of the tax that is unpaid by the issuer.
Tax Consequences to Holders of the Notes
Treatment of the Notes as Indebtedness. The depositor will agree, and the
noteholders will agree by their purchase of notes, to treat the notes as debt
for federal income tax purposes. Cadwalader, Wickersham & Taft will, except as
otherwise provided in the related prospectus supplement, advise the depositor
that the notes will be classified as debt for federal income tax purposes. The
discussion below assumes this characterization of the notes is correct.
OID. The discussion below assumes that all payments on the notes are
denominated in U.S. dollars, and that the interest formula for the notes meets
the requirements for "qualified stated interest" under Treasury regulations
relating to original issue discount, and that any OID on the notes (i.e., any
excess of the principal amount of the notes over their issue price) does not
exceed a de minimis amount (i.e., 0.25% of their principal amount multiplied by
the number of full years included in their term), all within the meaning of the
OID Regulations. If these conditions are not satisfied with respect to any given
series of notes, additional tax considerations with respect to the notes will be
disclosed in the applicable prospectus supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed in the following paragraph, the notes will not be considered issued
with OID. The stated interest on the notes will be taxable to a noteholder as
ordinary interest income when received or accrued in accordance with the
noteholder's method of tax accounting. Under the OID Regulations, a holder of a
note issued with more than a de minimis amount of OID must include the OID in
income, on a pro rata basis as principal payments are made on the note. A
purchaser who buys a note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a note that has a fixed maturity date of not more than one year
from the issue date of the short-term note may be subject to special rules. An
accrual basis holder of a short-term note, and certain cash method holders,
including regulated investment companies, as set forth in Section 1281 of the
Code, generally would be required to report interest income as interest accrues
on a straight-line basis over the term of each interest period. Other cash basis
holders of a short-term note would, in general, be required to report interest
income as interest is paid, or, if earlier, upon the taxable disposition of the
short-term note. However, a cash basis holder of a short-term note reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
short-term note until the taxable disposition of the short-term note. A cash
basis taxpayer may elect under Section 1281 of the Code to accrue interest
income on all
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nongovernment debt obligations with a term of one year or less, in which case
the taxpayer would include interest on the short-term note in income as it
accrues, but would not be subject to the interest expense deferral rule referred
to in the preceding sentence. Certain special rules apply if a short-term note
is purchased for more or less than its principal amount.
Sale or Other Disposition. If a noteholder sells a note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the note. The
adjusted tax basis of a note to a particular noteholder will equal the holder's
cost for the note, increased by any market discount, acquisition discount, OID
and gain previously included by the noteholder in income with respect to the
note and decreased by the amount of bond premium, if any, previously amortized
and by the amount of principal payments previously received by the noteholder
with respect to the note. The gain or loss will be capital gain or loss if the
note was held as a capital asset, except for gain representing accrued interest
and accrued market discount not previously included in income. Capital losses
generally may be used only to offset capital gains.
Non-U.S. Holders. Interest payments made, or accrued, to a noteholder who is
a nonresident alien, foreign corporation or other holder who is a Non-U.S.
Person generally will be considered "portfolio interest" and generally will not
be subject to United States federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the Non-U.S. Person and the Non-U.S. Person:
(1) is not actually or constructively a "10 percent shareholder" of the
issuer or the depositor or an affiliate (including a holder of 10% of the
outstanding certificates) or a "controlled foreign corporation" with
respect to which the issuer or the depositor or an affiliate is a
"related person" within the meaning of the Code and
(2) provides the trustee or other person who is otherwise required to
withhold U.S. tax with respect to the notes with an appropriate statement
(on Form W-8 or a similar form), signed under penalties of perjury,
certifying that the beneficial owner of the note is a Non-U.S. Person and
providing the Non-U.S. Person's name and address.
If a note is held through a securities clearing organization or certain other
financial institutions, the organization or institution may provide the relevant
signed statement to the withholding agent. In that case, however, the signed
statement must be accompanied by a Form W-8 or substitute form provided by the
Non-U.S. Person that owns the note. If this interest is not portfolio interest,
then it will be subject to United States federal income and withholding tax at a
rate of 30 percent, unless reduced or eliminated pursuant to an applicable tax
treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a Non-U.S. Person will be exempt from United
States federal income and withholding tax, provided that:
(1) the gain is not effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Person and
(2) in the case of an individual Non-U.S. Person, the individual is not
present in the United States for 183 days or more in the taxable year.
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Final regulations dealing with withholding tax on income paid to Non-U.S.
Persons and related matters were issued by the Treasury Department on October 6,
1997. These new withholding regulations will generally be effective for payments
made after December 31, 2000, subject to certain transition rules. Current
withholding certificates will remain valid until the earlier of December 31,
2000 or the due date of expiration of the certificate under the rules as
currently in effect. The new withholding regulations would require, in the case
of notes held by a foreign partnership, that:
(1) the certification described above be provided by the partners rather than
by the foreign partnership and
(2) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships.
Prospective investors who are Non-U.S. Persons are strongly urged to consult
their own tax advisors with respect to the new withholding regulations.
Backup Withholding. Each noteholder (other than an exempt holder such as a
corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt noteholder fail to
provide the required certification, the issuer will be required to withhold 31
percent of the amount otherwise payable to the holder, and remit the withheld
amount to the IRS as a credit against the holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the opinion of
Cadwalader, Wickersham & Taft, the IRS successfully asserted that one or more
classes of notes in a series did not represent debt for federal income tax
purposes, the notes might be treated as equity interests in the issuer. If so
treated, unless otherwise indicated in the applicable prospectus supplement, the
issuer should be treated as a publicly traded partnership that would not be
taxable as a corporation because it would meet certain qualifying income tests.
Nonetheless, treatment of the notes as equity interests in this kind of publicly
traded partnership could have adverse tax consequences to certain holders. For
example, income to certain tax-exempt entities (including pension funds) would
be "unrelated business taxable income", income to Non-U.S. Persons generally
would be subject to U.S. tax and U.S. withholding tax requirements, and
individual holders might be subject to certain limitations on their ability to
deduct their share of issuer expenses.
Tax Consequences to Holders of the Certificates
Treatment of the Issuer as a Partnership. The depositor will agree, and the
related certificateholders will agree by their purchase of certificates, to
treat the issuer 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 issuer, the partners of
the partnership being the certificateholders (including the holder of any
certificates representing the retained interest in the issuer) and the notes
being debt of the partnership.
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However, the proper characterization of the arrangement involving the issuer,
the certificates, the notes and the depositor is not clear because there is no
authority on transactions closely comparable to that contemplated in this
prospectus.
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 issuer. This type of characterization would not
result in materially adverse tax consequences to certificateholders as compared
to the consequences from treatment of the certificates as equity in a
partnership, described below. The following discussion assumes that the
certificates represent equity interests in a partnership.
Partnership Taxation. As a partnership, the issuer 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 issuer. The issuer's income will consist
primarily of interest and finance charges earned on the related Receivables
(including appropriate adjustments for market discount, OID and bond premium)
and any gain upon collection or disposition of the Receivables. The issuer's
deductions will consist primarily of interest accruing with respect to the
notes, servicing and other fees, and losses or deductions upon collection or
disposition of Receivables.
The tax items of a partnership are allocable to the partners in accordance
with the Code, Treasury regulations and the partnership agreement (i.e., the
Trust Agreement and related documents). The Trust Agreement will provide, in
general, that the certificateholders will be allocated taxable income of the
issuer for each month equal to the sum of:
(1) the interest that accrues on the certificates in accordance with their
terms for that month, including interest accruing at the related
pass-through rate for that month and interest, if any, on amounts
previously due on the certificates but not yet paid;
(2) any issuer income attributable to discount on the related Receivables
that corresponds to any excess of the principal amount of the
certificates over their initial issue price;
(3) any other amounts of income payable to the certificateholders for that
month; and
(4) in the case of an individual, estate or trust, the certificateholder's
share of income corresponding to the miscellaneous itemized deductions
described in the next paragraph.
This allocation of interest will be reduced by any amortization by the issuer
of premium on Receivables that corresponds to any excess of the issue price of
certificates over their principal amount. Unless otherwise provided in the
related prospectus supplement, all remaining taxable income of the issuer will
be allocated to the owner of the retained interest of the issuer. Losses of the
issuer will be allocated to the retained interest and to the certificates in the
order in which such losses are borne, and additional income will be allocated to
a class that receives a recovery of a previously allocated loss.
In the event the issuer issues certificates which are Strip Securities, the
amount allocated to the certificateholders will equal the excess of
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(1) the pass-through rate applicable to the Strip Securities times the
notional principal amount for the Strip Securities for the month over
(2) the portion of the amount paid with respect to the Strip Securities for
the month that would constitute a return of basis if the Strip Securities
constituted an instrument described in Section 860G(a)(1)(B)(ii) of the
Code, applying the principles of Section 1272(a)(6) of the Code and
employing the constant yield method of accrual (utilizing the appropriate
prepayment assumption).
However, no negative accruals will be permitted, and other deductions of the
issuer will be allocated to the Strip Securities up to their remaining capital
account balances immediately before the final redemption.
The portion of expenses of the issuer (including fees to the servicer, but
not interest expense) allocated to taxpayers that are individuals, estates or
trusts would be miscellaneous itemized deductions to those taxpayers. The
deductions might be disallowed to the taxpayers in whole or in part and might
result in those taxpayers being taxed on an amount of income that exceeds the
amount of cash actually paid to those taxpayers over the life of the issuer. Any
net loss of the issuer will be allocated first to the retained interest holder
to the extent of its adjusted capital account, then to the other
certificateholders in the priorities set forth in the Trust Agreement to the
extent of their respective adjusted capital accounts, and thereafter to the
retained interest holder.
The issuer intends to make all calculations relating to market discount
income and amortization of premium with respect to both simple interest
Receivables and precomputed Receivables on an aggregate basis rather than a
Receivable-by-Receivable basis. If the IRS were to require that the calculations
be made separately for each Receivable, the issuer might be required to incur
additional expense, but it is believed that there would not be a material
adverse effect on certificateholders.
Discount and Premium. Except as otherwise provided in the related prospectus
supplement, it is believed that the Receivables were not issued with OID, and,
therefore, the issuer should not have OID income. However, the purchase price
paid by the issuer for the related Receivables may be greater or less than the
remaining principal balance of the Receivables at the time of purchase. If so,
the Receivables will have been acquired at a premium or discount, as the case
may be. (As indicated above, the issuer will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the issuer acquires the related Receivables at a market discount or
premium, it will elect to include that discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on those Receivables. As indicated above, a portion of the
market discount income or premium deduction may be allocated to
certificateholders.
Section 708 Termination. Under Section 708 of the Code, the issuer will be
deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the issuer are sold or exchanged within a
12-month period. Under applicable Treasury regulations, this kind of 50% or
greater transfer would cause a deemed contribution of the assets of the issuer
to a new partnership in exchange for interests in the issuer. These interests in
a new
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partnership would be deemed paid to the partners of the issuer in liquidation
thereof, which would not constitute a sale or exchange. The issuer will not
comply with certain technical requirements that might apply when this kind of
constructive termination occurs. As a result, the issuer may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the issuer might not be able to
comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the depositor's tax basis in the certificates
sold. With respect to noncorporate certificateholders, this capital gain or loss
will be short-term or long-term, depending on whether the certificate has been
held for
(1) 12 months or less, or
(2) more than 12 months, respectively.
Long-term capital gain tax rates are lower for noncorporate
certificateholders as compared with short-term capital gains, which are taxed at
ordinary income tax rates. A certificateholder's tax basis in a certificate will
generally equal the holder's cost increased by the holder's share of issuer
income (includible in income) and decreased by any payments received with
respect to the certificate. In addition, both the tax basis in the certificates
and the amount realized on a sale of a certificate would include the holder's
share of the liabilities of the issuer. A holder acquiring certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in the certificates and, upon sale or other disposition of some of the
certificates, to 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 related Receivables would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The issuer does not expect to have any other assets that
would give rise to these special reporting requirements. Thus, to avoid these
special reporting requirements, the issuer will elect to include market discount
in income as it accrues.
If a certificateholder is required to recognize an aggregate amount of income
(not including income attributable to disallowed itemized deductions described
above) over the life of the certificates that exceeds the aggregate cash
payments with respect thereto, this excess will generally give rise to a capital
loss upon the retirement of the certificates.
Allocations Between Transferors and Transferees. In general, the issuer's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the certificateholders in
proportion to the principal amount of certificates (or notional principal
amount, in the case of any Strip Securities) owned by them as of the close of
the last day of that 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 this type of 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
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interest), taxable income or losses of the issuer might be reallocated among the
certificateholders. The retained interest holder, acting as tax matters partner
for the issuer, will be authorized to revise the issuer's method of allocation
between transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a certificateholder sells its
certificates at a profit (loss), the purchasing certificateholder will have a
higher (lower) basis in the certificates than the selling certificateholder had.
The tax basis of the issuer's assets will not be adjusted to reflect that higher
(or lower) basis unless the issuer 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 issuer will not make that election. As a
result, certificateholders might be allocated a greater or lesser amount of
issuer 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 issuer. These books will be maintained for financial
reporting and tax purposes on an accrual basis, and the fiscal year of the
issuer is expected to be the calendar year. The trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
issuer and will report each certificateholder's allocable share of items of
issuer income and expense to holders and the IRS on Schedule K-I. The issuer
will provide the Schedule K-l information to nominees that fail to provide the
issuer with the information statement described below and these nominees will be
required to forward that information to the beneficial owners of the
certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the issuer or be subject to penalties unless the
holder notifies the IRS of all the 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 issuer
with a statement containing certain information on the nominee, the beneficial
owners and the certificates so held. The 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 that person,
(b) whether that person is a U.S. Person, a tax-exempt entity or a
foreign government, an international organization, or any wholly
owned agency or instrumentality of either of the foregoing, and
(c) certain information on certificates that were held, bought or sold on
behalf of that person throughout the year.
In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the issuer information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Securities Exchange Act of 1934 is not required
to furnish the information statement to the issuer. The information referred
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to above for any calendar year must be furnished to the issuer on or before the
following January 31. Nominees, brokers and financial institutions that fail to
provide the issuer with the information described above may be subject to
penalties.
The retained interest holder will be designated as the tax matters partner
for each issuer in the related Trust Agreement and, as such, will be responsible
for representing the certificateholder in any dispute with the IRS. The Code
provides for administrative examination of a partnership as if the partnership
were a separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the issuer 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 issuer. 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 issuer.
Tax Consequences to Non-U.S. Certificateholders. Pursuant to a change in the
safe harbor provisions of Section 864(b)(2)(A) of the Code (applicable to tax
years beginning after December 31, 1997), certificateholders who are Non-U.S.
Persons will not be considered to be engaged in a trade or business in the
United States for purposes of federal withholding taxes with respect to Non-U.S.
Persons solely as a result of owning or trading certificates. As a result, the
issuer is not obligated to withhold on the portion of its taxable income that is
allocable to Non-U.S. Persons at regular graduated rates (35% for Non-U.S.
Persons that are taxable as corporations and 39.6% for all other Non-U.S.
Persons), unless those Non-U.S. Persons hold certificates in connection with the
conduct of a U.S. trade or business.
Interest allocable to a Non-U.S. Person that does not hold certificates in
connection with the conduct of a U.S. trade or business will not qualify for the
exemption for portfolio interest under Section 871(h) of the Code, because
underlying Receivables owned by the issuer are not in "registered form" as that
term is defined in applicable Treasury regulations. As a result, this Non-U.S.
Person who holds certificates will be subject to United States withholding tax
on interest or OID attributable to the underlying Receivables (whether or not
that amount is paid) at a rate of 30 percent, unless reduced or eliminated
pursuant to an applicable treaty. Potential investors who are Non-U.S. Persons
should consult their own tax advisors regarding the specific tax consequences of
owning a certificate.
Backup Withholding. Payments made on the certificates and proceeds from the
sale of the certificates will be subject to a "backup" withholding tax of 3l%
if, in general, the certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
ISSUERS TREATED AS GRANTOR TRUSTS
Tax Characterization of Grantor Trusts
The prospectus supplement may provide an opinion by Cadwalader, Wickersham &
Taft that the issuer will not be classified as an association taxable as a
corporation and that the issuer will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code (a "grantor
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trust fund"). In this case, beneficial owners of grantor trust certificates will
be treated for federal income tax purposes as owners of a portion of the
issuer's assets as described below. The certificates issued by an issuer that is
treated as a grantor trust are referred to as grantor trust certificates.
Grantor trust certificates may either be "standard certificates" or "strip
certificates" as described below.
Standard Certificates. The holder of certificates representing the same
percentage of interest and principal payments in the Receivables with respect to
a series, referred to in this prospectus as "standard certificates," will be
treated as the owner of a pro rata undivided interest in the interest and
principal portions of the issuer represented by the standard certificates and
will be considered the equitable owner of a pro rata undivided interest in each
of the Receivables in the issuer. Any amounts received by a standard
certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each standard certificateholder will be required to report on its federal
income tax return in accordance with that standard certificateholder's method of
accounting its pro rata share of the entire income from the Receivables in the
issuer represented by the standard certificates, including interest, OID, if
any, prepayment fees, assumption fees, any gain recognized upon an assumption
and late payment charges received by the servicer. Under Code Sections 162 or
212, each standard certificateholder will be entitled to deduct its pro rata
share of servicing fees, prepayment fees, assumption fees and late payment
charges retained by the servicer, provided that the amounts are reasonable
compensation for services rendered to the issuer. Standard certificateholders
that are individuals, estates or trusts will be entitled to deduct their share
of expenses only to the extent those expenses plus all other miscellaneous
itemized deductions exceed two percent of their respective adjusted gross
incomes. Such expenses are not deductible at all for purposes of computing the
alternative minimum tax, which may expose such holders to significant additional
tax liability. A standard 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 standard certificateholder using an
accrual method of accounting must take into account its pro rata share of income
and deductions as they become due or are paid to the servicer, whichever is
earlier. If the servicing fees paid to the servicer are deemed to exceed
reasonable servicing compensation, the amount of the excess could be considered
as an ownership interest retained by the servicer (or any person to whom the
servicer assigned for value all or a portion of the servicing fees) in a portion
of the interest payments on the Receivables. The Receivables would then be
subject to the "coupon stripping" rules of the Code discussed below.
Original Issue Discount. Except as discussed below with respect to strip
certificates or as otherwise discussed in the applicable prospectus supplement,
it is not anticipated that the receivables or the standard certificates will be
issued with original issue discount ("OID") for federal income tax purposes.
Market Discount. A standard certificateholder that acquires an undivided
interest in Receivables may be subject to the market discount rules of Sections
1276 through 1278 to the extent an undivided interest in a Receivable is
considered to have been purchased at a "market discount." Generally, the amount
of market discount is equal to the excess of the portion of the principal amount
of the Receivable allocable to the holder's undivided interest over the holder's
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tax basis in that interest. Market discount with respect to a standard
certificate will be considered to be zero if the amount allocable to the
standard certificate is less than 0.25% of the standard certificate's stated
redemption price at maturity multiplied by the weighted average maturity
remaining after the date of purchase. Treasury regulations implementing the
market discount rules have not yet been issued; therefore, investors should
consult their own tax advisors regarding the application of these rules and the
advisability of making any of the elections allowed under Code Section 1276 and
1278. The IRS may require you to compute market discount on a Receivable by
Receivable basis, based on the allocation of your purchase price among the
Receivables based on their fair market values. However, we will not furnish
information to you on a Receivable by Receivable basis. Accordingly, if you
compute premium amortization on an aggregate basis, you may be required by the
IRS to recompute the premium on a Receivable by Receivable basis.
The Code provides that any principal payment (whether a scheduled payment or
a prepayment) or any gain or disposition of a market discount bond shall be
treated as ordinary income to the extent that it does not exceed the accrued
market discount at the time of the payment. The amount of accrued market
discount for purposes of determining the tax treatment of subsequent principal
payments or dispositions of the market discount bond is to be reduced by the
amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue regulations
providing for the computation of accrued market discount on debt instruments,
the principal of which is payable in more than one installment. While the
Treasury Department has not yet issued regulations, rules described in the
relevant legislative history will apply. Under those rules, the holder of a
market discount bond may elect to accrue market discount either on the basis of
a constant interest rate or in an amount, for each accrual period, equal to the
product of
(1) the total remaining market discount and
(2) a fraction, the numerator of which is the amount of stated interest paid
during the accrual period and the denominator of which is the total
amount of stated interest remaining to be paid at the beginning of the
accrual period.
For purposes of calculating market discount under any of the above methods in
the case of instruments (such as the standard certificates) that provide for
payments that may be accelerated by reason of prepayments of other obligations
securing those instruments, a prepayment assumption will apply. Because the
regulations described above have not been issued, it is impossible to predict
what effect those regulations might have on the tax treatment of a standard
certificate purchased at a discount or premium in the secondary market.
A holder who acquired a standard certificate at a market discount also may be
required to defer a portion of its interest deductions for the taxable year
attributable to any indebtedness incurred or continued to purchase or carry the
standard certificate purchased with market discount. For these purposes, the de
minimis rule referred to above applies. This 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. If the holder elects to include market
discount in income currently as it
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accrues on all market discount instruments acquired by that holder in that
taxable year or thereafter, the interest deferral rule described above will not
apply.
Premium. The price paid for a standard certificate by a holder will be
allocated to that holder's undivided interest in each Receivable based on each
Receivable's relative fair market value, so that the holder's undivided interest
in each Receivable will have its own tax basis. A standard certificateholder
that acquires an interest in Receivables at a premium may elect to amortize the
premium under a constant interest method. Amortizable bond premium will be
treated as an offset to interest income on the standard certificate. The basis
for the standard certificate will be reduced to the extent that amortizable
premium is applied to offset interest payments. We cannot tell you whether a
reasonable prepayment assumption should be used in computing amortization of
premium allowable under Section 171 of the Code. A standard certificateholder
that makes this election for a standard 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
standard certificateholder acquires during the year of the election or
thereafter. We will not furnish information to you on a Receivable by Receivable
basis. Accordingly, if you compute premium amortization on an aggregate basis,
the IRS may require you to recompute the premium.
If a premium is not subject to amortization using a reasonable prepayment
assumption, the holder of a standard certificate acquired at a premium should
recognize a loss if a Receivable prepays in full, equal to the difference
between the portion of the prepaid principal amount of the Receivable that is
allocable to the standard certificate and the portion of the adjusted basis of
the standard certificate that is allocable to that Receivable. If a reasonable
prepayment assumption is used to amortize the premium, it appears that that type
of loss would be available, if at all, only if prepayments have occurred at a
rate faster than the reasonable assumed prepayment rate. It is not clear whether
any other adjustments would be required to reflect differences between an
assumed prepayment rate and the actual rate of prepayments.
Election to Treat All Interest as OID. The OID regulations permit a standard
certificateholder to elect to accrue all interest, discount (including de
minimis market discount or OID) and premium in income as interest, based on a
constant yield method. If that kind of election were to be made with respect to
a standard certificate with market discount, the standard 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 standard certificateholder acquires during the year of the election or
thereafter. Similarly, a standard certificateholder that makes this election for
a standard 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 standard certificateholder owns or acquires.
See "-- Premium" above. The election to accrue interest, discount and premium on
a constant yield method with respect to a standard certificate is irrevocable.
Sale or Exchange of a Standard Certificate. Sale or exchange of a standard
certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the owner's adjusted basis
in the standard certificate. This adjusted basis generally will equal the
depositor's purchase price for the standard certificate, increased by the OID
and any market discount included in the depositor's gross income with respect to
the standard certificate, and reduced by any market premium amortized by the
depositor and by principal
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payments on the standard certificate previously received by the depositor. This
gain or loss will be capital gain or loss to an owner for which a standard
certificate is a "capital asset" within the meaning of Section 1221 of the Code
(except in the case of gain attributable to accrued market discount, as noted
above under "--Market Discount") and, with respect to noncorporate owners, will
be short-term or long-term, depending on whether the standard certificate has
been held for 12 months or less, or more than 12 months, respectively.
(Long-term capital gain tax rates are less than short-term capital gains rates
for individuals, which are taxed at ordinary income tax rates.)
Standard certificates will be "evidences of indebtedness" within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a standard certificate by a bank or a thrift institution to which that
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. Interest or OID paid to Non-U.S. Persons who own standard
certificates will be treated as "portfolio interest" for purposes of United
States withholding tax. That interest (including OID, if any) attributable to
the underlying Receivables will not be subject to the normal 30% (or any lower
rate provided for by an applicable tax treaty) withholding tax imposed on those
amounts provided that
(1) the Non-U.S. Person is not a "10% shareholder" (within the definition of
Section 871(h)(3)) of any obligor on the Receivables; and is not a
controlled foreign corporation (within the definition of Section 957)
related to any obligor on the Receivables and
(2) that certificateholder fulfills certain certification requirements.
Under these requirements, the certificateholder must certify, under penalty
of perjury, that it is not a U.S. Person and must provide its name and address.
If, however, the interest or gain is effectively connected to the conduct of a
trade or business within the U.S. by that certificateholder, that owner will be
subject to U.S. federal income tax on the interest or gain at graduated rates.
Potential investors who are not U.S. Persons should consult their own tax
advisors regarding the specific tax consequences of owning a certificate.
Information Reporting and Backup Withholding. The servicer will furnish or
make available, within a reasonable time after the end of each calendar year, to
each person who was a standard certificateholder at any time during that year,
any information that servicer deems necessary or desirable to assist standard
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 standard certificates as nominees on behalf of
beneficial owners. If a holder, beneficial owner, financial intermediary or
other recipient of a payment on behalf of a beneficial owner fails to supply a
certified taxpayer identification number or if the Secretary of the Treasury
determines that the 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.
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Strip Certificates
General. Strip Certificates are subject to the rules of Code Section 1286,
under which the separation of ownership of the right to receive some or all of
the principal payments on an obligation from ownership of the right to receive
some or all of the interest payments results in the creation of "stripped bonds"
with respect to principal payments and "stripped coupons" with respect to
interest payments. The securities will be subject to those rules. if:
(1) the depositor or any of its affiliates is treated as having an ownership
interest in the Receivables to the extent it is paid or retains servicing
compensation in an amount greater than reasonable consideration for servicing
the mortgage loans, or
(2) securities are issued in two or more classes or subclasses representing
the right to non-pro-rata percentages of the interest and principal payments on
the Receivables.
In general, a holder of a Strip Certificate will be considered to own
"stripped bonds" with respect to its pro rata share of all or a portion of the
principal payments on each Receivable and/or "stripped coupons" with respect to
its pro rata share of all or a portion of the interest payments on each
Receivable, including the Strip Certificate's allocable share of the servicing
fees paid to a servicer, to the extent that those fees represent reasonable
compensation for services rendered. Although not free from doubt, for purposes
of reporting to holders of Strip Certificates, the servicing fees will be
allocated to the classes of Strip Certificates in proportion to the
distributions to the classes for the related period or periods. The holder of a
Strip Certificate generally will be entitled to a deduction each year in respect
of the servicing fees, as described above under "--Standard
Securities--General," subject to the limitation described in that section.
Code Section 1286 treats a stripped bond or a stripped coupon generally as an
obligation issued on the date that the stripped interest is purchased. Although
the treatment of Strip Certificates for federal income tax purposes is not clear
in certain respects, particularly where Strip Certificates are issued with
respect to a pool of Receivables containing variable-rate Receivables, the
depositor has been advised by counsel that:
(1) The Issuer will be treated as a grantor trust under subpart E, Part I of
subchapter J of the Code and not as an association or publicly traded
partnership taxable as a corporation and
(2) each Strip Certificate should be treated as a single installment
obligation for purposes of calculating OID and gain or loss on disposition.
This treatment is based on the interrelationship of Code Section 1286, Code
Sections 1272 through 1275, and the OID regulations. Although it is possible
that computations with respect to Strip Certificates could be made in one of the
ways described below under "--Possible Alternative Characterizations," the OID
regulations state, in general, that two or more debt instruments issued by a
single issuer to a single investor in a single transaction should be treated as
a single debt instrument. Accordingly, for OID purposes, all payments on any
Strip Certificates should be aggregated and treated as though they were made on
a single debt instrument. The applicable agreement will require that the trustee
make and report all computations described below using this aggregate approach,
unless substantial legal authority requires otherwise.
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Furthermore, Treasury regulations provide for treatment of a Strip
Certificate as a single debt instrument issued on the date it is purchased for
purposes of calculating any OID. In addition, under those regulations, a Strip
Certificate that represents a right to payments of both interest and principal
may be viewed either as issued with OID or market discount, as described below,
at a de minimis, or, presumably, at a premium. This treatment indicates that the
interest component of a Strip Certificate of this type would be treated as
qualified stated interest under the OID Regulations (reportable as interest
under the cash or accrual method, as the case may be), assuming it is not an
interest-only Strip Certificate. Further, these regulations provide that the
purchaser of a Strip Certificate will be required to account for any discount as
market discount rather than OID if either:
(1) the initial discount with respect to the Stripped Certificate was treated
as zero under the de minimis rule, or
(2) no more than 100 basis points in excess of reasonable servicing is
stripped off the related Receivables. Any market discount would be reportable as
described above under "Standard Certificates--Market Discount," without regard
to the de minimis rule described in this prospectus, assuming that a prepayment
assumption is employed in that computation.
Taxation of Strip Certificates. Except as described above under "General,"
each Strip Certificate will be considered to have been issued with OID for
federal income tax purposes. OID with respect to a Strip Certificate must be
included in ordinary income as it accrues, in accordance with a constant yield
method that takes into account the compounding of interest, which may be prior
to the receipt of the cash attributable to that income. For Receivables that are
prepayable, such accrual will likely employ a prepayment assumption. With the
apparent exception of a Strip Certificate qualifying as a market discount
obligation as described above under "--General," the issue price of a Strip
Certificate will be the purchase price paid by each holder of the Strip
Certificate. The stated redemption price at maturity will include the aggregate
amount of the payments to be made on the Strip Certificate to the holder of
securities, presumably under the prepayment assumption, other than qualified
stated interest.
If the Receivables prepay at a rate either faster or slower than under the
applicable prepayment assumption, a holder's recognition of OID will be either
accelerated or decelerated and the amount of the OID will be either increased or
decreased depending on the relative interests in principal and interest on each
Receivable represented by the holder's Strip Certificate. While the matter is
not free from doubt, the holder of a Strip Certificate should be entitled in the
year that it becomes certain, assuming no further prepayments, that the holder
will not recover a portion of its adjusted basis in that Strip Certificate to
recognize a loss, which may be a capital loss, equal to that portion of
unrecoverable basis.
As an alternative to the method described above, the fact that some or all of
the interest payments with respect to the Strip Certificates will not be made if
the Receivables are prepaid could lead to the interpretation that those interest
payments are "contingent" within the meaning of the OID regulations. The OID
regulations, as they relate to the treatment of contingent interest, are by
their terms not applicable to repayable securities. However, if final
regulations dealing with contingent interest with respect to the Strip
Certificates apply the same principles as the OID regulations, those regulations
may lead to different timing of income inclusion than would be the case under
the OID regulations. Furthermore, application of those principles could
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lead to the characterization of gain on the sale of contingent interest Strip
Certificates as ordinary income. Investors should consult their tax advisors
regarding the appropriate tax treatment of Strip Certificates.
Sale or Exchange of Strip Certificates. Sale or exchange of a Strip
Certificate prior to its maturity will result in gain or loss equal to the
difference, if any, between the amount received and the holder's adjusted basis
in that Strip Certificate, as described above under "Standard Certificates--Sale
or Exchange of a Standard Certificate." To the extent that a subsequent
purchaser's purchase price is exceeded by the remaining payments on the Strip
Certificates, the subsequent purchaser will be required for federal income tax
purposes to accrue and report the excess as if it were OID in the manner
described above. It is not clear for this purpose whether the assumed prepayment
rate that is to be used in the case of a holder of securities other than an
original holder of securities should be the original prepayment assumption or a
new rate based on the circumstances at the date of subsequent purchase.
Purchase of More Than One Class of Strip Certificates. When an investor
purchases more than one class of Strip Certificates, it is currently unclear
whether for federal income tax purposes the classes of Strip Certificates should
be treated separately or aggregated for purposes of the rules described above.
Possible Alternative Characterization. The characterizations of the Strip
Certificates discussed above are not the only possible interpretations of the
applicable Code provisions. For example, the holder of securities may be treated
as the owner of:
(1) one installment obligation consisting of the Strip Certificate's pro rata
share of the payments attributable to principal on each Receivable and a second
installment obligation consisting of the respective Strip Certificate's pro rata
share of the payments attributable to interest on each Receivable,
(2) as many stripped bonds or stripped coupons as there are scheduled
payments of principal and/or interest on each Receivable, or
(3) a separate installment obligation for each Receivable, representing the
Strip Certificate's pro rata share of payments of principal and/or interest to
be made with respect to that Strip Certificate.
Alternatively, the holder of one or more classes of Strip Certificates may be
treated as the owner of a pro rata fractional undivided interest in each
Receivable to the extent that the related Strip Certificate, or classes of Strip
Certificates in the aggregate, represent the same pro rata portion of principal
and interest on each Receivable, and a stripped bond or stripped coupon, as the
case may be, treated as an installment obligation or contingent payment
obligation, as to the remainder. Treasury regulations regarding OID on stripped
obligations make the foregoing interpretations less likely to be applicable. The
preamble to these regulations states that they are premised on the assumption
that an aggregation approach is appropriate for determining whether OID on a
stripped bond or stripped coupon is de minimis, and solicits comments on
appropriate rules for aggregating stripped bonds and stripped coupons under Code
Section 1286.
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Because of these possible varying characterizations of Strip Certificates and
the resultant differing treatment of income recognition, holders of securities
are urged to consult their own tax advisors regarding the proper treatment of
Strip Certificates for federal income tax purposes.
Information Reporting and Backup Withholding. The trustee will furnish,
within a reasonable time after the end of each calendar year, to each holder of
Strip Certificates at any time during that calendar year, information, prepared
on the basis described above, as is necessary to enable the holder of those
Strip Certificates to prepare its federal income tax returns. The information
will include the amount of OID accrued on Strip Certificates held by persons
other than holders exempted from the reporting requirements. However, the amount
required to be reported by the trustee may not be equal to the proper amount of
OID required to be reported as taxable income by a holder of Strip Certificates
other than an original holder that purchased at the issue price. In particular,
in the case of Strip Certificates, the reporting will be based on a
representative initial offering price of each class of Strip Certificates or a
price as set forth in the related prospectus supplement. The trustee will also
file OID information with the IRS. If a holder of securities fails to supply an
accurate taxpayer identification number or if the Secretary of the Treasury
determines that a holder of securities has not reported all interest and
dividend income required to be shown on his federal income tax return, 31%
backup withholding may be required in respect of any reportable payments, as
described above under "Standard Certificates--Information Reporting and Backup
Withholding."
Non-U.S. Persons. To the extent that a Strip Certificate evidences ownership
in Receivables that are issued on or before July 18, 1984, interest or OID paid
by the person required to withhold tax under Code Section 1441 or 1442 to
nonresident aliens, foreign corporations, or other Non-U.S. Persons generally
will be subject to 30% United States withholding tax, or any lower rate as may
be provided for interest by an applicable tax treaty. Accrued OID recognized by
the holder of Strip Certificates on a sale or exchange also will be subject to
federal income tax at the same rate.
Treasury regulations provide that interest or OID paid by the trustee or
other withholding agent to a Non-U.S. Person evidencing ownership interest in
mortgage loans issued after July 18, 1984 will be "portfolio interest" and will
be treated in the manner, and these persons will be subject to the same
certification requirements, described above under "Standard
Certificates--Non-U.S. Persons."
* * *
The federal tax discussion set forth above is included for general
information only and may not be applicable to your particular tax situation. You
should consult your own tax advisor with respect to the tax consequences of the
purchase, ownership and disposition of securities, including the tax
consequences under state, local and foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
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ERISA CONSIDERATIONS
GENERAL
ERISA and Section 4975 of the Code impose certain requirements on those
employee benefit plans and arrangements to which they apply and on those persons
who are fiduciaries with respect to the employee benefit plans and arrangements.
The following is a general discussion of the requirements, and certain
applicable exceptions to and administrative exemptions from the requirements.
For purposes of this discussion, an IRA is an ERISA Plan if the IRA is endorsed
by or contributed to by the IRA participant's employer or employee organization.
Other IRAs and Non-ERISA Plans are not considered ERISA Plans, but the Non-ERISA
Plans are subject to ERISA-like requirements as well as the prohibited
transaction provisions of the Code. Exempt Plans are exempt from the provisions
of Title I of ERISA and the prohibited transaction provisions of the Code.
Accordingly, Exempt Plans also are not considered ERISA Plans, but the Exempt
Plans may be subject to the provisions and special requirements of other
applicable federal, state and local law.
CERTAIN REQUIREMENTS UNDER ERISA AND THE CODE
General
In accordance with ERISA's general fiduciary standards, before investing in a
certificate, an ERISA Plan fiduciary should determine whether to do so is
permitted under the governing ERISA Plan instruments and is appropriate for the
ERISA Plan in view of its overall investment policy and the composition and
diversification of its portfolio. An ERISA Plan fiduciary should especially
consider the ERISA requirement of investment prudence and the sensitivity of the
return on the certificates to the rate of principal repayments, including
prepayments on a retail installment sale or installment loan contract, as
discussed in "The Receivables--Maturity and Prepayment Considerations" in this
prospectus.
Parties in Interest/Disqualified Persons
Other provisions of ERISA, and corresponding provisions of the Code, prohibit
certain transactions involving the assets of an ERISA Plan and persons who have
certain specified relationships to the ERISA Plan, so-called "parties in
interest" within the meaning of ERISA or "disqualified persons" within the
meaning of the Code. The depositor, the master servicer or the trustee or
certain affiliates of these parties might be considered or might become "parties
in interest" or "disqualified persons" with respect to an ERISA Plan. If so, the
acquisition or holding of certificates by or on behalf of ERISA Plan could be
considered to give rise to a "prohibited transaction" within the meaning of
ERISA and the Code unless an administrative exemption or some other exemption is
available.
Special caution should be exercised before the assets of an ERISA Plan,
including assets that may be held in an insurance company's separate or general
accounts where assets in the accounts may be deemed plan assets for purposes of
ERISA, are used to purchase a certificate if, with respect these assets, the
depositor, the master servicer or the trustee or an affiliate of these parties
either:
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o has investment discretion with respect to the investment of the assets of
the ERISA Plan; or
o has authority or responsibility to give, or regularly gives, investment
advice with respect to the assets for a fee and under an agreement or
understanding that the advice will serve as a primary basis for investment
decisions with respect to the assets and that the advice will be based on
the particular investment needs of the ERISA Plan.
Delegation of Fiduciary Duty
Further, if the assets included in a trust fund were deemed to constitute
assets of an ERISA Plan, it is possible that an ERISA Plan's investment in the
certificates might be deemed to constitute a delegation, under ERISA, of the
duty to manage plan assets by the fiduciary deciding to invest in the
certificates, and certain transactions involved in the operation of the trust
estate might be deemed to constitute prohibited transactions under ERISA and the
Code. Neither ERISA nor the Code define the term "plan assets."
The U.S. Department of Labor has issued regulations concerning whether or not
an ERISA Plan's assets would be deemed to include an interest in the underlying
assets of an entity, such as a Trust Estate, for purposes of the reporting and
disclosure and general fiduciary responsibility provisions of ERISA, as well as
for the prohibited transaction provisions of ERISA and the Code, if the ERISA
Plan acquires an "equity interest", such as a Certificate, in this type entity.
Certain exceptions are provided in the Department of Labor regulations
whereby an investing ERISA Plan's assets would be deemed merely to include its
interest in the certificates instead of being deemed to include an interest in
the assets of a trust fund. However, it cannot be predicted in advance nor can
there be any continuing assurance whether the exceptions may be met, because of
the factual nature of certain of the rules set forth in the regulations. For
example, one of the exceptions in the regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of the
value of all classes of equity interests are held by "benefit plan investors,"
which term is defined to include ERISA Plans, Non-ERISA Plans and Exempt Plans
and any entity whose assets include "plan assets" by reason of benefit plan
investments in the entity, but this exception is tested immediately after each
acquisition of an equity interest in the entity whether upon initial issuance or
in the secondary market.
NON-ERISA PLANS AND EXEMPT PLANS
Although Non-ERISA Plans and Exempt Plans are not considered ERISA Plans for
purposes of the above discussion, since Non-ERISA Plans are subject to the
prohibited transaction provisions of the Code, the discussion above with respect
to "disqualified persons," prohibited transactions, delegation of fiduciary duty
and plan assets applies to Non-ERISA Plans as well as ERISA Plans, and both
Non-ERISA Plans and Exempt Plans may be subject to certain other ERISA-like
requirements of applicable law. Therefore, before purchasing any certificates by
or on behalf of a Non-ERISA Plan or any Exempt Plan, the prospective purchaser
should exercise special caution and should consult with its legal counsel
concerning the propriety and implications of the investment under the Code or
other applicable law.
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Before purchasing any certificates, an ERISA Plan fiduciary should consult
with its counsel and determine whether there exists any prohibition to the
purchase under the requirements of ERISA or the Code, whether prohibited
transaction class exemptions such as PTE 83-1 or any individual administrative
exemption applies, including whether the appropriate conditions set forth there
would be met, or whether any statutory prohibited transaction exemption is
applicable, and further should consult the applicable prospectus supplement
relating to the series of certificates.
UNRELATED BUSINESS TAXABLE INCOME--RESIDUAL CERTIFICATES
The purchase of a residual certificate by an IRA or any employee benefit plan
qualified under Code Section 401(a) and exempt from taxation under Code Section
501(a), including most varieties of Benefit Plans, may give rise to "unrelated
business taxable income" as described in Code Sections 511 through 515 and 860E.
Further, prior to the purchase of residual certificates, a prospective
transferee may be required to provide an affidavit to a transferor that it is
not, nor is it purchasing a residual certificate on behalf of, a Disqualified
Organization. In addition, prior to the transfer of a residual certificate, the
trustee or the depositor may require an opinion of counsel to the effect that
the transferee is not a Disqualified Organization and that the transfer will not
subject the trustee, the depositor, the master servicer or any servicer to
additional obligations imposed by ERISA or the Code.
DUE TO THE COMPLEXITY OF THESE RULES AND THE PENALTIES IMPOSED UPON PERSONS
INVOLVED IN PROHIBITED TRANSACTIONS, IT IS PARTICULARLY IMPORTANT THAT POTENTIAL
INVESTORS WHO ARE ACTING ON BEHALF OF A BENEFIT PLAN OR ANY OTHER EMPLOYEE
BENEFIT PLAN OR ARRANGEMENT CONSULT WITH THEIR COUNSEL REGARDING THE
CONSEQUENCES UNDER ERISA, THE CODE OR OTHER APPLICABLE LAW OF THEIR ACQUISITION
AND OWNERSHIP OF CERTIFICATES.
THE SALE OF CERTIFICATES TO A BENEFIT PLAN OR ANY OTHER EMPLOYEE BENEFIT PLAN
OR ARRANGEMENT IS IN NO RESPECT A REPRESENTATION BY THE DEPOSITOR OR THE
APPLICABLE UNDERWRITER THAT THIS INVESTMENT MEETS ALL RELEVANT LEGAL
REQUIREMENTS WITH RESPECT TO INVESTMENTS BY EMPLOYEE BENEFIT PLANS GENERALLY OR
ANY PARTICULAR PLAN OR ARRANGEMENT, OR THAT THIS INVESTMENT IS APPROPRIATE FOR
EMPLOYEE BENEFIT PLANS GENERALLY OR ANY PARTICULAR PLAN OR ARRANGEMENT.
METHODS OF DISTRIBUTION
The securities offered by this prospectus and by the supplements to this
prospectus will be offered in series. The distribution of the securities may be
effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment for a sale. The
related prospectus supplement will specify whether the securities will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by PaineWebber Incorporated acting as
underwriter with other underwriters, if any, named in the related underwriting
agreement. If it is a firm commitment underwriting, the related prospectus
supplement may also specify that the underwriters will not be obligated to pay
for any securities agreed to be purchased by purchasers pursuant to purchase
agreements acceptable to the depositor. In connection with the sale of the
securities, underwriters may receive compensation
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from the depositor or from purchasers of the securities in the form of
discounts, concessions or commissions. The related prospectus supplement will
describe any compensation paid by the depositor to the underwriters.
Alternatively, the related prospectus supplement may specify that the
securities will be distributed by PaineWebber Incorporated acting as agent or in
some cases as principal with respect to securities which it has previously
purchased or agreed to purchase. If PaineWebber Incorporated acts as agent in
the sale of securities, PaineWebber Incorporated will receive a selling
commission with respect to each series of securities, depending on market
conditions, expressed as a percentage of the aggregate principal balance of the
related residential loans as of the related cut-off date. The exact percentage
for each series of securities will be disclosed in the related prospectus
supplement. To the extent that PaineWebber Incorporated elects to purchase
securities as principal, PaineWebber Incorporated may realize losses or profits
based on the difference between its purchase price and the sales price. The
prospectus supplement with respect to any series offered other than through
underwriters will contain information regarding the nature of the offering and
any agreements to be entered into between the depositor and purchasers of
securities of the related series.
The depositor will indemnify PaineWebber Incorporated and any underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or will contribute to payments PaineWebber Incorporated and any
underwriters may be required to make in respect of any liability.
The related prospectus supplement relating to securities of a particular
series offered by this prospectus will specify whether the depositor or any
other person or persons specified in the prospectus supplement may purchase some
or all of the securities from the underwriter or underwriters or other person or
persons specified in the related prospectus supplement. A purchaser may
thereafter from time to time offer and sell, pursuant to this prospectus and the
related prospectus supplement, some or all of the securities so purchased,
directly, through one or more underwriters to be designated at the time of the
offering of these securities, through dealers acting as agent and/or principal
or in any other manner as may be specified in the related prospectus supplement.
The related offering may be restricted in the manner specified in the related
prospectus supplement. The related transactions may be effected at market prices
prevailing at the time of sale, at negotiated prices or at fixed prices. Any
underwriters and dealers participating in the purchaser's offering of the
related securities may receive compensation in the form of underwriting
discounts or commissions from a purchaser and dealers may receive commissions
from the investors purchasing the related securities for whom they may act as
agent. The discounts or commissions will not exceed those customary in those
types of transactions involved. Any dealer that participates in the distribution
of the related securities may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended. Any commissions and discounts
received by a dealer and any profit on the resale or the securities by that
dealer might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended.
In the ordinary course of business, PaineWebber Incorporated and the
depositor, or their affiliates, may engage in various securities and financing
transactions. These financing transactions include repurchase agreements to
provide interim financing of the depositor's
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residential loans pending the sale of residential loans or interests in
residential loans, including the securities.
The depositor anticipates that the securities will be sold primarily to
institutional investors. Purchasers of securities, including dealers, may,
depending on the facts and circumstances of the related purchases, be deemed to
be "underwriters" within the meaning of the Securities Act of 1933, as amended
in connection with reoffers and sales by them of securities. Holders of
securities should consult with their legal advisors in this regard prior to any
reoffer or sale.
As to each series of securities, only those classes rated in one of the four
highest rating categories by any rating agency will be offered by this
prospectus. Any unrated class may be initially retained by the depositor, and
may be sold by the depositor at any time to one or more institutional investors.
If required by applicable law or regulation, this prospectus will be used by
PaineWebber Incorporated, our affiliate, in connection with offers and sales
related to market-making transactions in the securities previously offered by
this prospectus in transactions in which PaineWebber Incorporated acts as
principal. PaineWebber Incorporated may also act as agent in those transactions.
Sales may be made at negotiated prices determined at the time of sale.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
With respect to each series of securities offered by this prospectus, there
are incorporated in this prospectus and in the related prospectus supplement by
reference all documents and reports filed by the depositor as required by
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 that
specifically concern the related series of securities. We will provide or cause
to be provided a copy of any or all reports incorporated in this prospectus by
reference without charge to each person to whom this prospectus and a related
prospectus supplement is delivered in connection with the offering of one or
more classes of series of securities, if they request it orally or in writing.
We will provide these reports only to the extent the reports relate to one or
more of classes of the related series of securities, and without the exhibits to
these documents, unless the exhibits are specifically incorporated by reference
in these documents. Requests should be directed in writing to PaineWebber Asset
Acceptance Corporation, 1285 Avenue of the Americas, New York, New York 10019,
Attention: General Counsel, or by telephone at (212) 713-2000.
We filed a registration statement relating to the securities with the SEC.
This prospectus is part of the registration statement, but the registration
statement includes additional information.
Copies of the registration statement may be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549, if payment of the
prescribed charges is made, or may be examined free of charge at the SEC's
offices, 450 Fifth Street N.W., Washington, D.C. 20549 or at the regional
offices of the Commission located at Suite 1300, 7 World Trade Center, New York,
New York 10048 and Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. The SEC also maintains a site on the World Wide
Web at "http://www.sec.gov" at which you can view and download copies of
reports, proxy and information statements and other information filed
electronically through the Electronic Data Gathering, Analysis and Retrieval --
EDGAR -- system. The depositor filed the registration
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statement, including all exhibits to the registration statement, through the
EDGAR system and therefore these materials should be available by logging on to
the SEC's Web site. The SEC maintains computer terminals providing access to the
EDGAR system at each of the offices referred to above.
LEGAL MATTERS
The validity of the securities and certain federal income tax matters in
connection with the securities will be passed on for the depositor by
Cadwalader, Wickersham & Taft, New York, New York.
FINANCIAL INFORMATION
A trust fund will be formed with respect to each series of securities and no
trust fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of securities, except
for serial issuances by a master trust. The depositor's activities will be
limited solely to the activities of trust funds to be formed with respect to
each series of securities. Accordingly, no financial statements with respect to
any trust fund will be included in this prospectus or in the related prospectus
supplement.
A prospectus supplement may contain the financial statements of the related
credit enhancer, if any.
ADDITIONAL INFORMATION
This prospectus, together with the prospectus supplement for each series of
securities, contains a summary of the material terms of the applicable exhibits
to the registration statement and the documents referred to in this prospectus
and in the registration statement. Copies of the exhibits are on file at the
offices of the Securities and Exchange Commission in Washington, D.C., and may
be obtained at rates prescribed by the Commission upon request to the Commission
and may be inspected, without charge, at the Commission's offices.
RATING
It will be a condition to the issuance of the securities of each series
offered by this prospectus and by the related prospectus supplement that they
shall have been rated in one of the four highest rating categories by the
nationally recognized statistical rating agency or agencies specified in the
related prospectus supplement.
Any rating would be based on, among other things, the adequacy of the value
of the assets of the trust fund and any credit enhancement with respect to the
related class. A rating will reflect the specified rating agency's assessment
solely of the likelihood that holders of a class of securities of the related
class will receive payments to which holders of securities are entitled by their
terms. The rating will not constitute:
(1) an assessment of the likelihood that principal prepayments on the
related residential loans will be made,
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(2) the degree to which the rate of prepayments might differ from that
originally anticipated or
(3) the likelihood of early optional termination of the series of securities.
The rating should not be deemed a recommendation to purchase, hold or sell
securities, inasmuch as it does not address market price or suitability for a
particular investor.
The rating will not address the possibility that prepayment at higher or
lower rates than anticipated by an investor may cause the investor to experience
a lower than anticipated yield. The rating will not address that an investor
purchasing a security at a significant premium might fail to recoup its initial
investment under certain prepayment scenarios.
We cannot assure you that any rating will remain in effect for any given
period of time or that it may not be lowered or withdrawn entirely by the rating
agency in the future if in its judgment circumstances in the future so warrant.
A rating may be lowered or withdrawn due to any erosion in the adequacy of the
value of the assets of the trust fund or any credit enhancement with respect to
a series. The rating might also be lowered or withdrawn among other reasons,
because of an adverse change in the financial or other condition of a credit
enhancement provider or a change in the rating of the credit enhancement
provider's long term debt.
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GLOSSARY OF TERMS
"ACCRUAL SECURITIES" are one or more classes of fixed income securities as to
which a portion of the accrued interest will not be paid but rather will be
added to the principal balance, or nominal balance in the case of Accrual
Securities which are also Strip Securities, of those classes of fixed income
securities on each payment date.
"BENEFIT PLANS" are Exempt Plans, ERISA Plans and Non-ERISA Plans referred to
collectively.
"BOATS" are recreational sport and power boats, including any boat motors and
accompanying trailers, and yachts, both power and sail and any other related
property, together with any related proceeds which may be included in each trust
fund.
"CLEARSTREAM" is Clearstream Banking, societe anonyme.
"CLEARSTREAM PARTICIPANTS" are participating organizations for which
Clearstream holds securities.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACTS" are Lease Contracts and Loan Contacts.
"COOPERATIVE" is the Euroclear Clearance System, S.C., a Belgian cooperative
corporation.
"DEFINITIVE SECURITY" is a physical certificate representing a security
issued in the name of the beneficial owner of the security rather than DTC.
"DISCOUNTED CONTRACT BALANCE" of a Contract as of any cut-off date is the
present value of all of the remaining payments scheduled to be made with respect
to that Contract, discounted at a rate specified in the related prospectus
supplement and the Trust Agreement
"DISQUALIFIED ORGANIZATION" means the United States, any state or political
subdivision of the United States, any foreign government, any international
organization, any agency or instrumentality of any of those bodies, provided
that the term does not include an instrumentality if all of its activities are
subject to tax and a majority of its board of directors is not selected by these
governmental entities, any cooperative organization furnishing electric energy
or providing telephone service to persons in rural areas as described in Code
Section 1381(a)(2)(C), and any organization, other than a farmers' cooperative
described in Code Section 521, that is exempt from taxation under the Code
unless that organization is subject to the tax on unrelated business income
imposed by Code Section 511.
"ERISA PLANS" are retirement plans and other employee benefit plans and
arrangements, including individual retirement accounts and annuities and Keogh
plans, which are subject to ERISA, and bank collective investment funds and
insurance company general and separate accounts in which the plans, accounts or
arrangements are invested.
"EUROCLEAR" is the Euroclear System.
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"EUROCLEAR OPERATOR" is the Belgian branch of a New York banking corporation
which is a member bank of the Federal Reserve System.
"EUROCLEAR PARTICIPANTS" are participating organizations for which Euroclear
holds securities.
"EXEMPT PLANS" are employee benefit plans that are governmental plans, (as
defined in Section 3(32) of ERISA) and certain church plans (as defined in
Section 3(33) of ERISA).
"FASIT" is a financial asset securitization investment trust.
"FIXED VALUE CONTRACTS" are Loan Contracts that provide for monthly payments
with a final fixed value payment which is greater than the scheduled monthly
payment.
"INSOLVENCY EVENT" is financial insolvency, bankruptcy, readjustment of debt,
marshaling of assets and liabilities, or similar proceedings with respect to the
servicer or the Receivables seller and actions by the servicer or the related
Receivables seller indicating its insolvency, reorganization under bankruptcy
proceedings, or inability to pay its obligations.
"LEASE CONTRACTS" with respect to each trust fund may consist of any
combination of closed-end or open-end lease contracts secured by new and used
Boats, Recreational Vehicles and Vehicles financed by those contracts, or
participation or security interests in them, together with all related monies.
"LOAN CONTRACTS" with respect to each trust fund may consist of any
combination of retail installment sales contracts and note and security
agreements secured by new and used Boats, Recreational Vehicles and Vehicles
financed by those contracts, or participation or security interests in them,
together with all related monies.
"MASTER TRUST AGREEMENT" is a Trust Agreement which authorizes the trustee to
issue certificates evidencing the equity interest in a master trust.
"NON-U.S. PERSON" is a person who is not a U.S. Person.
"OID" is original issue discount.
"OID REGULATIONS" are U.S. Treasury regulations relating to OID.
"PARTICIPANTS" are participating organizations through which a securityholder
can hold its book-entry security.
"RECEIVABLES" are Contracts and Structure Settlements.
"RECEIVABLES ACQUISITION AGREEMENT" the agreement between the Receivables
seller and the depositor under which the Receivables will be acquired by the
depositor from the related Receivables seller.
"RECREATIONAL VEHICLES" means new and used recreational vehicles and any
related property, together with any related proceeds which may be financed or
leased under Loan Contracts or Lease Contracts, respectively.
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"RULE OF 78S" is the provision of payments according to a "sum of periodic
balances" or "sum of monthly payments" method and under which the portion of
each payment allocable to interest is higher during the early months of the term
of a Loan Contract and lower during later months than that under a constant
yield method for allocating payments between interest and principal.
"RULE OF 78S CONTRACTS" are contracts that provide for fixed level monthly
payments which will amortize the full amount of the Loan Contract over its term
and that provide for allocation of payments according to the "sum of periodic
balances" or "sum of monthly payments" method. Each Rule of 78s Contract
provides for the payment by the obligor of a specified total amount of payments,
payable in monthly installments on the related due date, which total represents
the principal amount financed and finance charges in an amount calculated on the
basis of a stated annual percentage rate for the term of the Loan Contract.
"SIMPLE INTEREST CONTRACTS" are contracts that provide for the amortization
of the amount financed under the Receivable over a series of fixed level monthly
payments. Unlike the monthly payment under Rule of 78s Contracts, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed, as a fraction of a calendar
year, since the preceding payment of interest was made. As payments are received
under a Simple Interest Contract, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to reduce the
unpaid principal balance.
"STRIP CERTIFICATES" means securities subject to Code Section 1286, under
which the separation of ownership of the right to receive some or all of the
principal payments on an obligation from ownership of the right to receive some
or all of the interest payments results in the creation of "stripped bonds" with
respect to principal payments and "stripped coupons" with respect to interest
payments.
"STRIP SECURITIES" are one or more classes of fixed income securities
entitled to:
(1) principal payments, with disproportionate, nominal or no interest
payments; or
(2) interest payments, with disproportionate, nominal or no principal
payments.
"STRUCTURED SETTLEMENTS" means lottery proceeds and litigation settlement
proceeds and other structured cash settlements and any related property,
together with any related proceeds.
"TRUST AGREEMENT" as used with respect to a trust fund means any and all
agreements relating to the establishment of the trust, the servicing of the
related Receivables and the issuance of the related securities, including an
indenture and a pooling and servicing agreement.
"UCC" means the Uniform Commercial Code.
"U.S. PERSON" means a citizen or resident of the United States, a
corporation, partnership (except as provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States,
any state or the District of Columbia, including an entity treated as a
corporation or partnership for U.S. federal income tax purposes, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if a court
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within the United States is able to exercise primary supervision over the
administration of the trust, and one or more of those U.S. Persons have the
authority to control all substantial decisions of the trust (or, to the extent
provided in applicable Treasury regulations, certain trusts in existence on
August 20, 1996, which are eligible to elect to be treated as U.S. Persons).
"VEHICLES" means new and used automobiles, motorcycles and light duty trucks
and any related property, together with any related proceeds which may be
financed or leased under Loan Contracts or Lease Contracts, respectively.
"VSI INSURANCE POLICY" means a policy of vendor's single interest physical
damage insurance which provides insurance against physical damage risks.
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The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement 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.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS SUPPLEMENT DATED __________, 200_
TO PROSPECTUS DATED __________, 200_
$____________ (APPROXIMATE)
________ EQUIPMENT CONTRACT TRUST 200_-_
EQUIPMENT CONTRACT-BACKED CERTIFICATES, SERIES 200_-_
$__________ ______% CLASS A CERTIFICATES
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
(DEPOSITOR)
[____________________________]
(ORIGINATOR/SERVICER)
The Trust Fund--
o The trust fund consists primarily of a pool of receivables consisting of
direct finance leases and commercial loans and the security interests in
the underlying equipment.
The Offered Certificates--
o The trust will issue 3 classes of certificates. Only the Class A
certificates are offered by this prospectus supplement.
PRICE TO THE UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT DEPOSITOR
------------ ------------ ---------------
% % $
The proceeds to depositor are less expenses, estimated at $[ ]. See
"Underwriting" in this prospectus supplement.
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-__ OF THIS
PROSPECTUS SUPPLEMENT AND PAGE ___ IN THE PROSPECTUS.
The certificates will not represent obligations of the depositor, originator,
the trustee or any other person or entity. No governmental agency will insure
the certificates or the collateral securing the certificates.
You should consult with your own advisors to determine if the offered
certificates are appropriate investments for you and to determine the applicable
legal, tax, regulatory and accounting treatment of the offered certificates.
- --------------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE OFFERED
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS sUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAINEWEBBER INCORPORATED
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information about the certificates in two separate documents that
progressively include more detail:
(1) the accompanying prospectus dated ___________, 200_. The accompanying
prospectus provides general information, some of which may not apply to your
series of certificates.
(2) this prospectus supplement, which describes the specific terms of your
series of certificates. Sales of the certificates may not be completed unless
you have received both this prospectus supplement and the prospectus. You are
urged to read both this prospectus supplement and the prospectus in full.
IF THE TERMS OF THE CERTIFICATES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, THEN YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
Cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials are included to assist in locating
further related discussions. The following table of contents and the table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
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TABLE OF CONTENTS
Page
Summary......................................................................S-4
Risk Factors.................................................................S-9
Forward-Looking Statements..................................................S-10
Defined Terms...............................................................S-11
The Contract Pool...........................................................S-11
The Contracts............................................................S-11
The Equipment Subject to the Contracts...................................S-12
Subsequent Contracts.....................................................S-13
Substitutions and Modifications..........................................S-13
Description of Originator and its Originating Practices.....................S-23
Description of Servicer and its Servicing Standards.........................S-23
Formation of the Trust......................................................S-23
Description of the Certificates.............................................S-24
The Offered Certificates.................................................S-24
Conveyance of Receivables................................................S-24
Representations and Warranties of the Originator.........................S-25
Indemnification..........................................................S-25
Servicer Advances........................................................S-26
Flow of Funds............................................................S-26
Withholding..............................................................S-27
Reports to Certificateholders............................................S-27
Optional Purchase........................................................S-28
Servicing................................................................S-28
The Servicer Not to Resign...............................................S-28
Events of Servicing Termination..........................................S-29
Rights Upon an Event of Servicing Termination............................S-30
Amendment................................................................S-30
The Trustee.................................................................S-31
Duties and Immunities of the Trustee.....................................S-31
Prepayment and Yield Considerations.........................................S-32
Weighted Average Lives of the Offered Certificates.......................S-32
Federal Income Tax Considerations...........................................S-34
ERISA Considerations........................................................S-35
Legal Investment............................................................S-38
Underwriting................................................................S-38
Additional Information......................................................S-39
Legal Matters...............................................................S-40
Ratings.....................................................................S-40
Glossary of Terms...........................................................S-41
S-3
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN INVESTMENT
DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE CERTIFICATES,
YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS.
RELEVANT PARTIES
Issuer....................... ___________ Trust 200_-_ will issue the
certificates.
Depositor.................... PaineWebber Asset Acceptance Corporation will
transfer the receivables to the trustee.
PaineWebber Asset Acceptance Corporation is a
Delaware corporation. The depositor's principal
executive offices are located at 1285 Avenue of
the Americas, New York, New York 10019,
telephone number (212) 713-2000.
Servicer..................... ______________ will service the receivables
transferred to the trustee. The servicer is a
_________ with its principal place of business
in __________. The servicer is a wholly owned
subsidiary of __________, a ________
corporation. The servicer's address is
____________, telephone number (___) ____. ____.
Trustee...................... The ____________________, a
____________________. The trustee's address is
____________________________________, and its
telephone number is ___________________. For a
description of the trustee and its
responsibilities with respect to the
certificates, see "The Trustee" in this
prospectus supplement.
RELEVANT DATES
Cut-Off Date................. ________, 200_.
Closing Date................. On or about ________, 200_.
Distribution Dates
and Record Dates........... Distribution dates will be on the _____ day of
each month, or the next succeeding business day,
commencing in __________. Record dates are the
calendar day of each month.
The Transfer Agreements...... The initial leases and loan contracts are
originated by the servicer and assigned by the
servicer to one of two subsidiaries of the
servicer. On or prior to the date of
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formation of the trust, these subsidiaries will
assign the initial leases and loan contracts back
to the servicer. On the date of formation of
the trust, the servicer will transfer all of its
right, title and interest in and to the initial
leases and loan contracts, the initial equipment
and the related property to a special-purpose
finance vehicle, ___________ under a contribution
agreement. ______________ will then transfer the
initial transferred property to the depositor
under a receivables transfer agreement. Under the
pooling and servicing agreement, the depositor
will transfer the trust assets to the trust.
Trust Assets................. The assets of the trust will initially consist
of:
o non-cancelable equipment leases;
o installment sale contracts and loans
relating to the equipment;
o other loans and leases and all related payments
due and related proceeds received after the
cut-off date with respect to the initial
leases;
o the underlying equipment; and
o other related property.
The Class A Certificates..... The Class A certificates will represent the right
to receive a specified principal amount and
monthly interest at a rate of ______% per annum on
the unpaid portion of that principal amount. The
rights to the payments are based solely on the
interest in the trust represented by the Class A
certificates. The Class A certificates will be
issued in a principal amount of $__________, which
is approximately _____________% of the aggregate
lease principal balance of the initial leases as
of the cut-off date with respect to the initial
leases. The Class A certificates are available in
book-entry form only, through the facilities of
DTC.
The trust will also issue two classes of
subordinate certificates, the Class B certificates
and the trust certificate.
The subordinate certificates are not offered by
this prospectus supplement, and will be issued
initially to the depositor. The depositor will
deliver the subordinate certificates to __________
as partial consideration for the conveyance of the
property initially transferred to the depositor.
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<PAGE>
____________________ expects that the Class B
certificates will be privately placed with one or
more qualified institutional investors.
____________________ will retain the trust
certificate. From time to time the depositor may
transfer new property to the trust.
Credit Enhancement........... Credit enhancement is provided by means of the
subordination.
Subordination................ The Class A certificates are senior to the
Class B certificates, which are senior to the
residual interests. More senior classes are
entitled to principal payments prior to the
subordinate classes or interests, which
provides credit enhancement for the senior
classes. Losses resulting from defaults on the
underlying contracts will be absorbed first, by
the residual interest holders, second, by the
Class B certificateholders, and third, by the
Class A certificateholders.
The Contracts................ The principal source of payment for the
certificates will be the payments received from
the contract pool. You should not rely on the
sale of the underlying leased or financed
equipment for payments on your certificate.
The contracts have the following characteristics:
o The contracts are small-ticket equipment leases
and commercial loans, with an initial aggregate
discounted principal balance expected to be
approximately $__________ on the closing date.
o The discounted principal balance of a contract
at any time will be calculated by discounting
the remaining scheduled payments and any final
scheduled payment on the contract at a discount
rate equal to ______%.
o The contracts are triple-net leases. This means
that the obligor is required to pay all taxes,
maintenance and insurance associated with the
leased equipment.
o The contracts are noncancellable by the
obligors.
o A contract cannot be prepaid unless the obligor
pays at least the outstanding discounted
contract principal balance of the contract and
any other delinquent scheduled payments due
under the contract.
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<PAGE>
o All payments under the contracts are absolute,
unconditional obligations of the obligors.
o The contracts provide that the payments are not
subject to set-off or reduction without the
lessor's consent.
Pre-Funding Account.......... On the closing date, approximately $__________
will be deposited into a pre-funding account.
These funds will be used from time to time, on or
before ____________, 200_, to fund the acquisition
of subsequent contracts for addition to the
contract pool.
To the extent that any amounts on deposit in the
pre-funding account are not used to purchase
subsequent contracts by ____________, 200_, the
trust will apply these amounts as a pro rata
prepayment of the principal balance of the
certificates on the distribution date immediately
succeeding the end of the pre-funding period.
Servicing of
The Contracts.............. ________________________ will act as servicer
and will be obligated to service and administer
the contracts.
Optional Purchase............ The servicer may purchase all of the
receivables as of the last day of any month in
which the aggregate principal balance as a
percentage of the original aggregate principal
balance is 10% or less. See "Description of
the Certificates--Optional Purchase" in this
prospectus supplement.
Federal Income
Tax Considerations......... In the opinion of Cadwalader, Wickersham & Taft,
special tax counsel to the depositor, for federal
income tax purposes the trust will not be treated
as an association taxable as a corporation or as a
"publicly traded partnership" taxable as a
corporation.
The trustee and the certificateholders will agree
to treat the trust as a partnership for federal
income tax purposes. As a partnership, the trust
will not be subject to federal income tax and the
certificateholders will be required to report
their respective shares of the trust's taxable
income, deductions and other tax attributes. See
"Federal Income Tax Considerations" in this
prospectus supplement and in the accompanying
prospectus.
ERISA Considerations......... As described in this prospectus supplement, the
Class A certificates may be purchased by employee
benefit plans
S-7
<PAGE>
that are subject to ERISA or entities using assets
of the plans. Any benefit plan fiduciary
considering purchase of the Class A certificates
should, among other things, consult with its
counsel in determining whether all required
conditions have been satisfied. See "ERISA
Considerations" in this prospectus supplement.
Ratings...................... The trust will not issue the certificates
unless they have been assigned the following
ratings:
CLASS
----------- ----------- ----------- -----------
A
These ratings may be lowered, qualified or
withdrawn by the rating agencies.
S-8
<PAGE>
RISK FACTORS
Before making an investment decision, you should carefully consider the
following risks in addition to the risk factors discussed in the prospectus
which we believe describe the principal factors that make an investment in the
certificates speculative or risky. In particular, payments on your certificates
will depend on payments received on and other recoveries with respect to the
receivables. Therefore, you should carefully consider the risk factors relating
to the receivables. Unless otherwise noted, all statistical percentages are
based upon the contract pool that existed on a statistical calculation date of
_____________, 200_.
CONCENTRATIONS OF THE OBLIGORS AND THE EQUIPMENT UNDERLYING THE CONTRACTS IN
PARTICULAR GEOGRAPHIC JURISDICTIONS MAY RESULT IN LOSSES ON YOUR CERTIFICATE IF
THOSE REGIONS EXPERIENCE ECONOMIC DOWNTURNS.
As of the statistical calculation date, the obligors and underlying equipment
with respect to approximately _____% and _____% of the contracts were located in
the states of ____________ and ______________, respectively. To the extent
adverse events or economic conditions are particularly severe in these
jurisdictions or in the event an obligor or group of obligors in these
jurisdictions were to experience financial difficulties due to the economic
conditions specific to these jurisdictions, the delinquency and loss experience
of the contract pool could be adversely impacted. As a result, you could
experience delays in receiving payments or suffer losses on your certificate.
PREPAYMENTS OF PRINCIPAL MAY ADVERSELY AFFECT THE YIELD ON YOUR CERTIFICATE.
Payments on the contracts may include several types of prepayments. These
prepayments include partial and full prepayments by the obligor, payments upon
the liquidation of defaulted contracts and payments by the originator or the
servicer on account of breaches of representations and warranties concerning the
receivables. These prepayments will be distributed to the certificateholders in
reduction of the principal balance of the certificates. The risk of reinvesting
these early distributions of the principal will be borne by you and we cannot
assure you that you will be able to reinvest them at a yield equaling or
exceeding the yield on your certificate.
The yield to maturity on certificates purchased at premiums or discounts to
par will be extremely sensitive to the rate of prepayments. You should consider,
in the case of certificates purchased at a discount, the risk that a slower than
anticipated rate of prepayments on the contracts could result in an actual yield
that is less than the anticipated yield. In the case of any certificates
purchased at a premium, the risk that a faster than anticipated rate of
prepayments on the contracts could result in an actual yield that is less than
the anticipated yield.
In addition, if the funds on deposit in the pre-funding account are not fully
applied to the purchase of subsequent contracts during the pre-funding period,
the remaining funds will be used to make a principal prepayment on the
certificates following the end of the pre-funding period. The purchase of
subsequent contracts is dependent on the ability of the originator to originate
sufficient subsequent contracts that meet the eligibility criteria described in
this prospectus supplement. The ability of the originator to originate
subsequent contracts may be affected by a variety of social and economic
factors, including:
o interest rates;
S-9
<PAGE>
o unemployment levels;
o the rate of inflation; and
o consumer perception of economic conditions generally.
If the originator does not originate sufficient subsequent contracts, there
will be a prepayment on the certificates. The risk of reinvesting a prepayment
of the principal will be borne by you and there can be no assurance that you
will be able to reinvest them at a yield equaling or exceeding the yield on your
certificate.
PAYMENTS ON THE CERTIFICATES ARE PRIMARILY FUNDED BY COLLECTIONS ON THE CONTRACT
POOL; IF CREDIT ENHANCEMENT IS EXHAUSTED FOR YOUR CLASS OF CERTIFICATES, LOSSES
ON THE CONTRACT POOL WILL LEAD TO LOSSES ON YOUR CERTIFICATE.
The principal source of funds for the repayment of the certificates are the
collections on the contract pool. Thus, losses on the contract pool may cause
losses on your certificate. The structure of the transaction provides for a
limited level of credit enhancement for the certificates by means of
subordination. The residual interests are in a first-loss position. Losses on
the contract pool will be allocated to the residual interests prior to any
losses being allocated to the certificates.
THE BANKRUPTCY OF THE ORIGINATOR COULD LEAD TO DELAYS IN PAYMENTS OR LOSSES ON
YOUR CERTIFICATE.
If the originator, or the third-party companies from which the originator
purchased the contracts, were to file for bankruptcy, the bankruptcy trustee
might seek to repudiate the contracts and/or claim an interest in the contract
pool. This attempt, even if unsuccessful, could result in delays in payments on
your certificate. If these attempts were successful, the recovery on the
contracts would be limited to the then current value of the contracts. Thus, the
certificateholders would lose the right to future payments and could possibly
incur reinvestment losses on amounts recovered.
FORWARD-LOOKING STATEMENTS
In this prospectus supplement and the accompanying prospectus, we use certain
forward-looking statements. These forward-looking statements are found in the
material, including each of the tables, set forth under "Risk Factors" and
"Prepayment and Yield Considerations" in this prospectus supplement.
Forward-looking statements are also found elsewhere in this prospectus
supplement and prospectus and include words like "expects," "intends,"
"anticipates," "estimates" and other similar words. These statements are
intended to convey our projections or expectations as of the date of this
prospectus supplement. These statements are inherently subject to a variety of
risks and uncertainties. Actual results could differ materially from those we
anticipate due to changes in, among other things:
(1) economic conditions and industry competition,
(2) political and/or social conditions, and
(3) the law and government regulatory initiatives.
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We will not update or revise any forward-looking statement to reflect changes
in our expectations or changes in the conditions or circumstances on which these
statements were originally based.
DEFINED TERMS
We define and use capitalized terms in this prospectus supplement and the
prospectus to assist you in understanding the terms of the offered certificates
and this offering. We define the capitalized terms we used in this prospectus
supplement under the caption "Glossary of Terms" beginning on page S-[__] in
this prospectus supplement.
THE CONTRACT POOL
THE CONTRACTS
The Contracts consist of small-ticket leases and commercial loans acquired by
the originator from third parties or originated directly by the originator or
its affiliates. The Receivables consist of the Contracts and certain interests
in the related Equipment or other property. See "Description of Originator and
its Originating Practices" in this prospectus supplement.
The statistical information concerning the pool of Contracts set forth in
this prospectus supplement is based upon the Contract pool that existed on a
statistical calculation date of _______________, 200_. As of the statistical
calculation date, the Contracts had an Aggregate Discounted Contract Principal
Balance of $_____________, which was calculated using a statistical discount
rate ____%. The Aggregate Discounted Contract Principal Balance of the actual
Contracts pool will be calculated using an actual discount rate of _____%, which
is equal to the sum of the servicing fee rate, the trustee fee rate and the
Class B Certificate Rate. The Aggregate Discounted Contract Principal Balance of
the Contracts in the actual Contract pool on the closing date is expected to be
greater than the Aggregate Discounted Contract Principal Balance of the
Contracts in the statistical Contract pool as set forth in this prospectus
supplement. The additional Contracts will represent Contracts acquired by the
transferors on or prior to the closing date.
Between the statistical calculation date and the closing date, some
amortization of the pool is expected to occur. In addition, certain Contracts
included in the pool as of the statistical calculation date may be determined
not to meet the eligibility requirements for the final Contract pool, and may
not be included in the final Contract pool. While the statistical distribution
of the characteristics as of the closing date for the final Contract pool and
calculated at the discount rate will vary somewhat from the statistical
distribution of those characteristics as of the statistical calculation date and
calculated at the statistical discount rate as presented in this prospectus
supplement, we do not expect that variance to be material.
In the event that the transferors do not, as of the closing date, have the
full amount of Contracts which they expected, the pre-funding account will be
increased accordingly. However, the Pre-Funded Collateral Amount will in no
event exceed 25% of the Initial Aggregate Collateral Balance. Unless otherwise
noted, all statistical percentages in this prospectus supplement are measured by
the Aggregate Discounted Contract Principal Balance of the statistical Contract
pool.
The Contracts generally require the periodic, scheduled payment of rent or
other payments on a monthly basis, in arrears. In connection with all
calculations required to be made under the transaction documents with respect to
the determination of Discounted Contract Principal
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Balances, on any determination date the Discounted Contract Principal Balance
for each Contract will be calculated assuming:
(1) scheduled payments are due on the last day of each collection period;
(2) scheduled payments are discounted on a monthly basis using a 30-day month
and a 360-day year; and
(3) scheduled payments are discounted to the last day of the collection
period prior to the determination date.
The Contracts have the characteristics specified in the Transfer Agreements
and described in this prospectus supplement, and the Contracts eligible to be
designated as substitute Contracts or subsequent Contracts will conform to the
characteristics specified in the Transfer Agreements or subsequent Transfer
Agreements, as applicable, and in this prospectus supplement.
References in this prospectus supplement to percentages refer in each case to
the percentage of the Aggregate Discounted Contract Principal Balance of the
statistical Contract pool as of the statistical calculation date.
As of the statistical calculation date, the Contracts in the statistical
Contract pool had the following characteristics:
o the Contracts had original terms to maturity of __ to __ months, with a
weighted average original term to maturity of approximately __ months;
o the Contracts had remaining terms to maturity of __ to __ months, with a
weighted average remaining term to maturity of approximately __ months;
o the Discounted Contract Principal Balances of the Contracts ranged from
$________ to $__________;
o the Contracts relating to the largest obligor are equal to ____% of the
Aggregate Discounted Contract Principal Balance of the statistical
Contract pool; and
o the average Discounted Contract Principal Balance is $_________.
THE EQUIPMENT SUBJECT TO THE CONTRACTS
The Equipment subject to the Contracts consists of equipment used in a wide
variety of businesses consistent with equipment leasing. The Equipment and other
property underlying the Contracts may include, but is not limited to, the
following:
o equipment utilized in the offices and clinics of dentists, medical
doctors, chiropractors, optometrists, ophthalmologists, veterinarians, and
other professional service providers;
o restaurant equipment;
o point of sale equipment;
o computer equipment;
o copier and facsimile equipment;
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o telecommunications equipment;
o automobile servicing equipment;
o materials handling equipment; and
o other general use equipment in the service sector.
SUBSEQUENT CONTRACTS
Subject to the conditions set forth below, prior to the end of the
pre-funding period, all or a portion of the balance of funds in the pre-funding
account may be released for the purchase by the transferors of subsequent
Receivables consisting of subsequent Contracts and the related Equipment.
SUBSTITUTIONS AND MODIFICATIONS
Under the Pooling and Servicing Agreement, one or more substitute Contracts
and the related Equipment may be substituted for a Contract and the related
Equipment that
(x) becomes a Defaulted Contract, a Prepayment or an Early Termination
Contract or
(y) is required to be reacquired by the originator pursuant to the Pooling
and Servicing Agreement.
Each substitute Contract will be a Contract which satisfies certain
representations and warranties set forth in this prospectus supplement and in
the Pooling and Servicing Agreement as of the Cut-Off Date for that substitute
Contract. In addition, the following conditions must be satisfied:
o With respect to Contracts substituted for Defaulted Contracts, Prepayments
or Early Termination Contracts, on a cumulative basis from the initial
Cut-Off Date, the sum of the Discounted Contract Principal Balance of the
substitute Contracts, as of the Cut-Off Date for the substitute Contract,
would not exceed __% of the Initial Aggregate Collateral Balance;
o As of the Cut-Off Date for the substitute Contract, the substitute
Contract then being transferred have an Aggregate Discounted Contract
Principal Balance that is not less than the Discounted Contract Principal
Balance of the __________ being replaced;
o The servicer makes a good faith determination, in accordance with its
underwriting guidelines, that the credit quality of the substitute
Contract is not worse than that of the Contract being replaced; and
o No substitution will be permitted if, as a result of the substitution, (x)
the sum of the scheduled payments and any Final Scheduled Payments on all
Contracts, after giving effect to the substitutions, due in any collection
period thereafter would be less than (y) the sum of the scheduled payments
and any Final Scheduled Payments which would otherwise be due in that
collection period, prior to giving effect to the substitution.
Under the Pooling and Servicing Agreement, the servicer is permitted to allow
an obligor to prepay a Contract in an amount not less than the Prepayment
Amount. In addition, in the event that an obligor requests an upgrade or
trade-in of Equipment, the servicer may remove the
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Equipment and related Contract from the pool, but only upon payment of an amount
equal to the Reacquisition Amount.
The servicer may waive, modify or vary any term of a Contract if the
servicer, in its reasonable and prudent judgment, determines that it will not be
materially adverse to the certificateholders. However, the servicer will
covenant in the Pooling and Servicing Agreement that,
o it will not forgive any payment of rent or principal,
o unless an obligor is in default, it will not permit any modification with
respect to a Contract which would defer the payment of any scheduled
payment or Final Scheduled Payment or change the final maturity date on
any Contract. However, no change in the final maturity date of any
Contract will be permitted under any circumstances if the new maturity
date for the Contract is later than the maturity date of the latest
maturing Contract then transferred to the trust, and
o the servicer may accept Prepayment in part or in full;
provided, however, that,
o in the event of Prepayment in full, the servicer may consent to the
Prepayment only in an amount not less than the Prepayment Amount, and
o in the event of a partial Prepayment, the servicer may consent to
the partial Prepayment only if
(1) following the partial Prepayment, all delinquent scheduled
payments then due under the Contract have been paid,
(2) the partial Prepayment is paid along with an amount equal to the
product of (x) one-twelfth, (y) the discount rate and (z) the
Discounted Contract Principal Balance of the Contract prior to the
partial Prepayment and
(3) the partial Prepayment will not reduce the Discounted Contract
Principal Balance by more than the amount of the partial
Prepayment.
In the case of a partial Prepayment, the servicer is required to
accurately recalculate the Discounted Contract Principal Balance of the
Contract, and the allocation of scheduled payments to principal and
interest.
Under to the Pooling and Servicing Agreement, the servicer will manage,
administer, service and make collections on the Contracts, in accordance with a
servicing standard which satisfies the terms of the Pooling and Servicing
Agreement, the Contracts, the servicer's current credit and collection policies
and applicable law. To the extent consistent with those terms, the servicer will
service the Contracts in the same manner in which, and with the same care,
skill, prudence and diligence with which, it services and administers leases of
similar credit quality for itself or others, if any, giving due consideration to
customary and usual standards of practice of prudent institutional small-ticket
equipment finance lease servicers and, in each case, taking into account its
other obligations under the Pooling and Servicing Agreement. The servicer will
use commercially reasonable best efforts consistent with the servicing standard
and its customary servicing procedures, to repossess or otherwise comparably
convert the ownership of any
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Equipment that it has reasonably determined should be repossessed or otherwise
converted following a default under the Contract and remarket, either through
sale or re-lease, the Equipment and act as sales and processing agent for
Equipment which it repossesses. The servicer will follow the practices and
procedures as are consistent with the servicing standard and as it deems
necessary or advisable and as is customary and usual in its servicing of
equipment leases and loans and other actions by the servicer in order to realize
recoveries upon the Contract, which may include reasonable efforts to enforce
any recourse obligations of obligors and repossessing and selling the Equipment
at a public or private sale. The foregoing is subject to the provision that, in
any case in which the Equipment has suffered damage, the servicer will not be
required to pay for any repair or towards the repossession of the Equipment
unless it determines in its discretion that the repair and/or repossession will
increase the proceeds and recoveries on the Equipment by an amount greater than
the amount of the expenses.
The following tables set forth certain statistical information relating to
the Contract pool that existed on the statistical calculation date of
__________, 200_ and are calculated using a statistical discount rate of ____%.
Certain columns may not total 100% due to rounding.
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DISTRIBUTION OF THE CONTRACTS BY
CURRENT DISCOUNTED CONTRACT PRINCIPAL BALANCE
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
RANGE OF CONTRACT CONTRACT
DISCOUNTED CONTRACT NUMBER OF PRINCIPAL PRINCIPAL
PRINCIPAL BALANCE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- -------------- --------------
$ $ $
%
----------- ---------- -------
Total...................... $ 100.00%
=========== ========== =======
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DISTRIBUTION OF THE CONTRACTS BY
ORIGINAL EQUIPMENT COST
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
RANGE OF NUMBER OF PRINCIPAL PRINCIPAL
ORIGINAL EQUIPMENT COST CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
$ $ $
%
----------- ---------- -------
Total...................... $ 100.00%
=========== ========== =======
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DISTRIBUTION OF THE CONTRACTS BY
TOP 10 INDUSTRIES
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
INDUSTRY CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
[Automotive dealers & service %
stations $
Auto repair, services, and
parking
Business services
Engineering & management
services
Health services
Industrial machinery and
__________
Legal services
Personal services
Printing and publishing
Services, n.e.c.]
Other
----------- ---------- -------
Total...................... $ 100.00%
=========== ========== =======
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DISTRIBUTION OF THE CONTRACTS BY
EQUIPMENT TYPE
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
EQUIPMENT TYPE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
[100% Software $ %
Alarm/Security Systems
Automotive Repair Equipment
Cash Dispensing
Cash Registers
Cleaning/Janitorial Equipment
Communications Equipment
Construction Equipment
Copiers
Dental Equipment
Display Booth
Dry Cleaning
Fixtures
Furniture
General Computers
HVAC
Industrial Equipment
Medical Equipment
Mini Computers
Office Automation Equipment
Photo/Printing Equipment
Restaurant Equipment
Server Computer
Sound Systems
Vending Equipment
Workstation Computers]
Other
----------- ---------- -------
Total......................
=========== ========== =======
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DISTRIBUTION OF THE CONTRACTS BY
OBLIGOR BILLING ADDRESS
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
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PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
Rhode Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total......................
DISTRIBUTION OF THE CONTRACTS BY
REMAINING TERM TO MATURITY
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
RANGE OF REMAINING TERM (IN NUMBER OF PRINCIPAL PRINCIPAL
MONTHS) CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
----------- ---------- -------
Total......................
=========== ========== =======
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DISTRIBUTION OF THE CONTRACTS
BY ORIGINAL TERM TO MATURITY
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
RANGE OF ORIGINAL TERM (IN NUMBER OF PRINCIPAL PRINCIPAL
MONTHS) CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
----------- ---------- -------
Total......................
=========== ========== =======
DISTRIBUTION OF THE CONTRACTS
BY AGE OF CONTRACTS
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF AGE OF CONTRACTS CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
----------- ---------- -------
Total......................
=========== ========== =======
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DESCRIPTION OF ORIGINATOR AND ITS ORIGINATING PRACTICES
[TO BE PROVIDED]
DESCRIPTION OF SERVICER AND ITS SERVICING STANDARDS
[TO BE PROVIDED]
FORMATION OF THE TRUST
The trust, _____________ ____________________ Trust 200_-_, will be formed in
accordance with the laws of the State of [____________________________________]
pursuant to the Pooling and Servicing Agreement, solely for the purpose of
effectuating the transactions described in this prospectus supplement. Prior to
formation, the trust will have had no assets or obligations and no operating
history. Upon formation, the trust will not engage in any business activity
other than acquiring and transferring the Receivables, issuing the certificates
and distributing payments on the certificates. As described under "Description
of the Certificates--Flow of Funds," a portion of the monthly collections with
respect to the Receivables will be paid to the servicer as servicing
compensation and to the trustee, as fees. All other expenses of the trust will
be paid as provided in the Pooling and Servicing Agreement.
The trust fund will consist of the following as well as any and all related
income and proceeds:
o the Receivables;
o the Contracts;
o any scheduled payments on the Contracts;
o Residual Receipts and Defaulted Contract Recoveries to be made by lessees;
o any guaranties of a lessee's or obligor's obligations under a Contract;
o the insurance policies maintained by the lessees or obligors with respect
to the Equipment and the proceeds of those insurance policies;
o any rights of the depositor under the Receivables Transfer Agreement,
including the right to instruct to exercise any unassignable rights of
enforcement under the Contracts and any guaranties of that right;
o funds from time to time deposited in the collection account, the advance
payment account and the subsequent contract funding account.
The Pooling and Servicing Agreement does not permit the trust to acquire any
additional assets other than subsequent Contracts. The trust does not have any
operating history and will not engage in any business activity other than owning
the trust fund, issuing the certificates and making distributions on the
certificates. Thus, there has not been included any historical or pro forma
financial statements or ratios of earnings to fixed charges with respect to the
trust.
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DESCRIPTION OF THE CERTIFICATES
The certificates will be issued pursuant to the Pooling and Servicing
Agreement to be entered into by the servicer, the trust and the trustee. The
servicer will provide a copy of the Pooling and Servicing Agreement to
subsequent certificateholders without charge on written request addressed to it
at _______.
The following summary describes certain terms of the Transfer Agreements. The
summary does not purport to be complete, and is subject to and qualified in its
entirety by reference to the Transfer Agreements.
THE OFFERED CERTIFICATES
The offered certificates, together with the subordinate certificates, will
represent in the aggregate the entire beneficial interest in a trust.
The trust will agree in the Pooling and Servicing Agreement and in the
respective offered certificates to distribute, in each case, at the times, from
the sources and on the terms and conditions set forth in the Pooling and
Servicing Agreement and in the respective offered certificates:
o to the holders of each Class A certificates (a) an amount of principal
equal to the initial certificate principal balance of their class and (b)
Class A Certificate Interest, and
o to the Class B certificateholders (a) an amount of principal equal to the
initial Class B certificate principal balance and (b) Class B Certificate
Interest.
The Class A Certificates will be issued in book-entry form only through DTC.
The trustee is required to make payments on the offered certificates on each
distribution date.
The first distribution date for distributions to the Class A certificates
will be __________, 200_ Distributions are required to be made by the trustee,
by check mailed, or, if requested by the certificateholder, by wire transfer of
immediately available funds, to the certificateholder entitled to the funds at
the address appearing on the certificate register on the record date. For as
long as the Class A certificates are in book-entry form they will be registered
in the name of Cede & Co.
CONVEYANCE OF RECEIVABLES
On the closing date, the trust will acquire all right, title and interest in
and to and all income and proceeds of:
o the initial Receivables;
o insurance policies with respect to the initial Receivables and any related
insurance proceeds;
o the rights of the depositor under the Receivables Transfer Agreement; and
o the security deposits relating to the initial Receivables.
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The servicer will retain possession of the Contracts and the Contract files.
The servicer also will retain copies of any other documents which relate to:
o the Receivables;
o any related evidence of insurance and payment;
o delinquency and related reports maintained by the servicer in the ordinary
course of business with respect to each Receivable.
Prior to transfer of the Receivables to the trust, the servicer will cause
its electronic ledger to be marked to show that the Receivables have been
transferred to ______________, then to the depositor and then to the trust. See
"Certain Legal Aspects of the Receivables" in the prospectus.
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The originator will make certain warranties in the Pooling and Servicing
Agreement with respect to the Contracts for the benefit of the trustee. These
warranties relate to the quality and characteristics of the Contracts and the
Equipment.
Under the terms of the Pooling and Servicing Agreement, following its
discovery or receipt of notice of a breach of a warranty that materially and
adversely affects any Receivable, which breach has not been cured or waived in
all material respects, the originator will be obligated to reacquire that
Receivable and deposit the Reacquisition Amount in the collection account on or
before the earlier of (x) two weeks after discovery or receipt of notice of the
breach or (y) the end of the calendar month.
INDEMNIFICATION
The Pooling and Servicing Agreement will provide that the originator will
defend and indemnify the trust, the trustee and the certificateholders against
any and all losses, claims, damages and liabilities to the extent, but only to
the extent, that the same have been suffered by that party by virtue of:
(x) a breach by the originator of its obligations, other than breach of the
originator's representations and warranties, with respect to which the sole
remedy is expressly limited to the originator's reacquisition of the affected
Receivables and the remittance of the Reacquisition Amount by the originator or
(y) in the case of the trustee, its performance of its duties, except to the
extent that the loss, claim, damage or liability resulted from the trustee's
breach of the terms of the Pooling and Servicing Agreement, negligence or
willful misconduct.
The Pooling and Servicing Agreement will provide that the servicer will
defend and indemnify the trust and the certificateholders against any and all
costs, expenses, losses, damages, claims and liabilities, arising out of or
resulting from the use, repossession or operation by the servicer or any
affiliate of the servicer of any Equipment, as well as from the failure of the
servicer to perform its duties under the Pooling and Servicing Agreement. The
servicer's obligations to indemnify the trust and the certificateholders for
acts or omissions of the servicer will survive the removal of the servicer but
will not apply to any acts or omissions of a successor servicer. This
indemnification does not extend to indirect, incidental, special or
consequential damages.
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SERVICER ADVANCES
In the event that any obligor fails to remit the full scheduled payment or
Final Scheduled Payment due from it with respect to a collection period by the
determination date related to the collection period, the servicer is required to
make a servicer advance from its own funds of an amount equal to the unpaid
portion of a scheduled payment or Final Scheduled Payment if the servicer, in
its sole discretion, determines that eventual recovery of the servicer advance
is likely from collections from or on behalf of the related obligor. The Pooling
and Servicing Agreement provides for the reimbursement of the servicer for these
servicer advances from funds available for distribution in the collection
account on each subsequent distribution date before the required payments to
certificateholders have been made as set forth in "Flow of Funds" below in this
prospectus supplement. If a Contract becomes a Delinquent Contract, and the
servicer determines that recovery of further servicer advances is unlikely, the
servicer will not be required to make a servicer advance or partial servicer
advance, but will be required to enforce its remedies, including acceleration,
under that Contract. Furthermore, if at any time the originator or an affiliate
is no longer the servicer, servicer advances will be permitted but will not be
required. The Pooling and Servicing Agreement will provide that, in the event
that the servicer determines that any servicer advances previously made are not
recoverable from the related obligor, or any Delinquent Contracts for which the
servicer has made a servicer advance then become Defaulted Contracts, the
trustee will draw on the collection account to repay the servicer advances as
set forth in "Flow of Funds" below in this prospectus supplement.
FLOW OF FUNDS
On each determination date, the servicer is required to deliver to the
trustee and each rating agency a servicer's certificate setting forth the
information needed to make payments on the upcoming distribution date.
On each distribution date, the trustee will be required to make the following
payments from the Available Funds and the Residual Receipts then on deposit in
the collection account, in the following order of priority:
(1) to the servicer, the servicer fee then due, together with any
unrecoverable servicer advances and certain miscellaneous amounts;
(2) to the Class A certificateholders, the Class A Certificate Interest and
Class A Overdue Interest for the related collection period;
(3) until the Class A Certificate Principal Balance has been reduced to zero,
to the Class A certificateholders, (a) from the Available Funds then
remaining in the collection account, the sum of (1) the Class A Base
Principal Distribution Amount for that distribution date, and (2) any
Class A Overdue Principal and (b) one-half of the Residual Receipts
received by the servicer during the prior collection period;
(4) to the Class B certificateholders, the Class B Certificate Interest and
the Class B Overdue Interest for the related collection period;
(5) until the Class B Certificate Principal Balance has been reduced to zero,
to the Class B certificateholders, (a) from the Available Funds then
remaining in the collection account, the sum of (1) the Class B Base
Principal Distribution Amount for that distribution date, and (2) any
Class B Overdue Principal and (b) one-half of the Residual Receipts
received by the servicer during the prior collection period;
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(6) from the Available Funds then remaining in the collection account, to the
servicer, certain miscellaneous amounts; and
(7) to the holder of the trust certificate, any remaining amounts.
WITHHOLDING
The trustee is required to comply with all applicable federal income tax
withholding requirements respecting payments to certificateholders of interest
with respect to the offered certificates. The consent of the certificateholders
is not required for this withholding. In the event the certificateholder is
other than DTC, then in the event that the trustee does withhold or causes to be
withheld any amount from interest payments or advances of interest payments to
any certificateholders under federal income tax withholding requirements, the
trustee will indicate the amount withheld annually to those certificateholders.
REPORTS TO CERTIFICATEHOLDERS
On each distribution date, the trustee will furnish or cause to be furnished
with each payment to certificateholders, a statement prepared by the servicer
setting forth the following information:
o With respect to a statement to a Class A certificateholder or a Class B
certificateholder, the amount of the payment allocable to the payment of
the Class A Base Principal Distribution Amount or Class B Base Principal
Distribution Amount and Class A Overdue Principal or Class B Overdue
Principal, as applicable;
o With respect to a statement to a Class A certificateholder or a Class B
certificateholder, the amount of the payment allocable to Class A
Certificate Current Interest or Class B Certificate Current Interest and
Class A Overdue Interest or Class B Overdue Interest, as applicable, for
the certificateholder's class;
o The aggregate amount of fees and compensation received by the servicer
pursuant to the Pooling and Servicing Agreement for the collection period;
o The outstanding aggregate principal balance of each class of certificates
and the ratio of the outstanding aggregate principal balance of each class
of certificates to the initial aggregate principal balance of that class,
after taking into account all distributions made on the distribution date;
o The Aggregate Discounted Contract Principal Balance and the ratio of the
Aggregate Discounted Contract Principal Balance to the Initial Aggregate
Collateral Balance, after taking into account all distributions made on
that distribution date;
o The total unreimbursed servicer advances with respect to the related
collection period;
o The amount of Defaulted Contract Recoveries for the related collection
period and the Aggregate Discounted Contract Principal Balances for all
Contracts that became Defaulted Contracts during the related collection
period, calculated immediately prior to the time the Contracts became
Defaulted Contracts;
o The total number of Contracts and the Aggregate Discounted Contract
Principal Balances of those Contracts, together with the number and
Aggregate Discounted Contract Principal Balances of all Contracts as to
which the obligors were one, two, three or four scheduled payments
delinquent, and Delinquent Contracts reconveyed; and
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o During the pre-funding period only, the amount on deposit in the
pre-funding account and the capitalized interest account after giving
effect to the withdrawals from those accounts on the distribution date.
In addition, by January 31 of each calendar year following any year during
which the certificates are outstanding, commencing January 31, 200__, the
trustee will furnish to each certificateholder of record at any time during the
preceding calendar year, information as to the aggregate of amounts reported
pursuant to items (1) and (2) above for the calendar year to enable
certificateholders to prepare their federal income tax returns.
OPTIONAL PURCHASE
The Pooling and Servicing Agreement will provide that the servicer is
permitted at its option to purchase from the trust, as of the last day of any
month as of which the Aggregate Principal Balance with respect to the
Receivables is less than 10% of the original Aggregate Principal Balance, all
remaining Receivables at a price equal to the aggregate of the Purchase Amounts
of the Receivables as of the last day, plus the appraised value of any other
property held by the trust.
SERVICING
The servicer, as an independent contractor or on behalf of the trust and for
the benefit of the certificateholders, as their interests may appear, will be
responsible for managing, servicing and administering the Receivables and
enforcing and making collections on the Contracts and any insurance policies and
for the enforcing of any security interest in any item of Equipment, all as set
forth in the Pooling and Servicing Agreement. The servicer's responsibilities
will include collecting and posting of all payments, responding to inquiries of
obligors, investigating delinquencies, accounting for collections, furnishing
monthly and annual statements to the trustee with respect to distributions,
making servicer advances, providing appropriate federal income tax information
to certificateholders and collecting and remitting sales and property taxes on
behalf of taxing authorities.
The servicer has agreed to manage, administer and service the Receivables and
to enforce and make collections on the Receivables and any insurance policies,
exercising the degree of skill and care consistent with that which the servicer
customarily exercises with respect to similar property owned, managed or
serviced by it.
For its servicing of the Contracts, the servicer will receive servicing
compensation including the monthly servicer fee for each collection period,
which is payable on the next succeeding distribution date, and servicing charges
consisting of certain fees paid by obligors, including late payment fees.
The servicing compensation will compensate the servicer for customary
contract servicing activities to be performed by the servicer for the trust,
additional administrative services performed by the servicer on behalf of the
trust and expenses paid by the servicer on behalf of the trust.
THE SERVICER NOT TO RESIGN
The Pooling and Servicing Agreement will provide that the servicer may not
resign from its obligations and duties as servicer under the Pooling and
Servicing Agreement, except upon consent of the majority certificateholders or a
determination that the servicer's performance of its duties is no longer
permissible under applicable law.
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EVENTS OF SERVICING TERMINATION
An "Event of Servicing Termination" under the Pooling and Servicing Agreement
includes the following:
o a change of "control" of the servicer. "Control" has the meaning ascribed
to it in the Rules and Regulations under the Securities Exchange Act of
1934, as amended;
o if the servicer fails to make (x) any servicer advance within two business
days of the related determination date, or (y) any other payment or
deposit required under the Pooling and Servicing Agreement within three
business days of the date the payment or deposit is required to be made,
but not more than once in any collection period;
o if the servicer fails to submit a servicer's certificate within two
business days following knowledge or notice of non-receipt;
o (x) if the servicer fails to observe or perform in any material respect
any other covenant or agreement in the Pooling and Servicing Agreement or
the certificates or
(y) if any representation or warranty of the servicer in the Pooling and
Servicing Agreement is incorrect, and the failure or breach materially and
adversely affects the rights of the trustee, the certificateholders and
continues unremedied for 30 days after the earlier to occur of (A) written
notice to the servicer by the trustee or to the trustee or the servicer by
any certificateholder or (B) the date on which any servicing officer or
authorized officer of the trustee knows, or reasonably should have known,
of the failure or of the breach;
o upon the filing of an involuntary petition in bankruptcy or the decree or
order of a court, agency or supervisory authority having jurisdiction over
the servicer for the appointment of a conservator, receiver, trustee in
bankruptcy or liquidator in any bankruptcy, insolvency or similar
proceedings, and the continuance of the petition, decree or order
undismissed or unstayed and in effect for a period of 60 consecutive days;
o upon the voluntary filing of a bankruptcy petition or assignment for the
benefit of creditors, the consent by the servicer to that appointment, the
admission in writing by the servicer of its inability to pay its debts as
they become due or the determination by a court that the servicer is
generally not paying its debts as they come due;
o in the event that the servicer assigns or attempts to assign its rights
and duties under the Pooling and Servicing Agreement except as
specifically permitted in the Pooling and Servicing Agreement;
o a final judgment or order shall be rendered against the servicer for
payment in excess of $_________ and continues for 90 days without a stay;
o ____________________________________ shall fail to have a U.S. GAAP net
worth, excluding goodwill, of at least $__________; or
o (x) the average Delinquency Trigger Ratio for any distribution date and
the two immediately preceding distribution dates exceeds ___%, or (y) the
average Net Charge-
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Off Ratio for any distribution date and the immediately preceding two
distribution dates exceeds ___%.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
If an Event of Servicing Termination has occurred and is continuing, the
trustee may with the consent of the majority of the holders of the certificates,
terminate all, but not less than all, of the servicer's rights and obligations
under the Pooling and Servicing Agreement. Upon the termination, a successor
servicer shall be appointed by the trustee or, if none has been so appointed,
the trustee will succeed to all the responsibilities, duties and liabilities of
the servicer under the Pooling and Servicing Agreement; provided, however, that
the trustee will not:
o assume any obligation to reacquire Receivables by reason of
misrepresentations or breaches of warranties,
o be required to make any servicer advance if the servicer advance would be
prohibited by applicable law or if the trustee determines that the
servicer advance would not be reimbursed, or
o be liable for acts, omissions or breaches of representations or warranties
by the servicer occurring prior to transfer of the servicing functions.
Regardless of the termination, the servicer will be entitled to payment of
amounts payable to it prior to the termination for services rendered prior to
the termination. The trustee also may appoint, or petition a court of competent
jurisdiction for the appointment of, a successor servicer in accordance with the
procedures set forth in the Pooling and Servicing Agreement.
AMENDMENT
The Transfer Agreements may be amended by the respective parties to them at
any time, without consent of the certificateholders, to cure any ambiguity, upon
receipt of an opinion of counsel to the servicer that the amendment will not
adversely affect in any respect the interests of any certificateholder.
The Transfer Agreements may also be amended from time to time by the
respective parties to them and the majority of the holders of the certificates
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Transfer Agreements or of modifying in
any manner the rights of the certificateholders; provided, that the amendment
will not:
(a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the Receivables or distributions
which are required to be made on any certificate without the consent of the
holder of the certificate and written confirmation from each rating agency
that the amendment will not result in the reduction or removal of the rating
then assigned to the certificates or
(b) reduce the percentage of certificateholders required to consent to any
amendment, without unanimous consent of the certificateholders and written
confirmation from each rating agency that the amendment will not result in
the reduction or removal of the rating then assigned to the certificates.
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The trustee is required under the Pooling and Servicing Agreement to furnish
the certificateholders and the rating agencies with written notice of the
substance of any amendment to the Pooling and Servicing Agreement promptly upon
execution of the amendment.
THE TRUSTEE
The trustee has a trust office at ________________________. The trustee's
duties in connection with the certificates are limited solely to its express
obligations under the Pooling and Servicing Agreement.
The trustee may resign, subject to the conditions set forth below, at any
time upon written notice to the transferors and the servicer, in which event the
servicer will be obligated to appoint a successor trustee. If no successor
trustee is appointed and accepted the appointment within 30 days after the
giving of a notice of resignation, the resigning trustee may petition a court of
competent jurisdiction for the appointment of a successor trustee. Any successor
trustee will meet the financial and other standards for qualifying as a
successor trustee under the Pooling and Servicing Agreement. The servicer may
and will, at the direction of the certificateholders of any class evidencing
more than 25% of the percentage interests of that class may also remove the
trustee if the trustee ceases to be eligible to continue as the trustee under
the Pooling and Servicing Agreement and fails to resign after written request
for resignation, or is legally unable to act, or if the trustee is adjudicated
to be insolvent. In these circumstances, the servicer or the certificateholders
will also be obligated to appoint a successor trustee. Any resignation or
removal of the trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by the successor trustee.
DUTIES AND IMMUNITIES OF THE TRUSTEE
The trustee will make no representations as to the validity or sufficiency of
the Pooling and Servicing Agreement, the certificates, other than the
authentication of the certificates, or of any Receivable or related document and
will not be accountable for the use or application by the originator or the
transferors of any funds paid to the transferors in consideration of the sale of
any certificates. If no Event of Servicing Termination has occurred, the trustee
will be required to perform only those duties specifically required of it under
the Pooling and Servicing Agreement. However, upon receipt of the various
resolutions, certificates, statements, opinions, reports, documents, orders or
other instruments required to be furnished to it, the trustee will be required
to examine them to determine whether they conform to the requirements of the
Pooling and Servicing Agreement.
No recourse is available based on any provision of the Pooling and Servicing
Agreement, the certificates or any Receivable or assignment of a Receivable
against the trustee, in its individual capacity, and the trustee will not have
any personal obligation, liability or duty whatsoever to any certificateholder
or any other person with respect to these claims and the claim will be asserted
solely against the trust assets or any indemnitor, except for any liability as
is determined to have resulted from the trustee's own negligence or willful
misconduct.
The trustee will be entitled to receive, pursuant to the priority set forth
in the Pooling and Servicing Agreement, a reasonable trustee fee as compensation
for its services as trustee, and reimbursement for the Trustee Expenses.
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PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on, and the weighted average life of, the
offered certificates will be directly related to the rate of payments on the
underlying Contracts. If purchased at a price other than par, the yield to
maturity will also be affected by the rate of the principal payments. Payments
on the Contracts may be in the form of scheduled payments, prepayments, early
terminations or liquidations due to default, casualty, repurchases for breach
and the like. These payments will result in distributions to certificateholders
of amounts which would otherwise have been distributed over the remaining term
of the Contracts. In general, the rate of these payments may be influenced by a
number of factors, including general economic conditions.
The Contracts generally do not provide for the right of the obligor to
prepay. Under the Pooling and Servicing Agreement, the servicer will be
permitted to allow the Prepayments in full or in part, provided that no
Prepayment of a Contract will be allowed in an amount less than the Prepayment
Amount.
The expected final distribution date for the Class A certificates is
__________, 200_. This date is the dates on which the certificate principal
balance of the related class of certificates would be reduced to zero, assuming,
among other things:
(x) Prepayments with respect to the Contracts are received at a rate of _%
CPR and
(y) the modeling assumptions apply.
The weighted average life of the offered certificates could be shorter than
would be the case if payments actually made on the Contracts conformed to the
foregoing assumptions, and the final distribution dates with respect to the
offered certificates could occur significantly earlier than the final scheduled
distribution dates due to defaults, and because the originator is obligated to
reacquire Contracts in the event of breaches of representations and warranties.
"Weighted average life" refers to the average amount of time that will elapse
from the date of issuance of a certificate to the date of distribution to the
investor in the certificate of each dollar distributed in reduction of principal
of the certificate, assuming no losses. The weighted average lives of the
offered certificates will be influenced by the rate at which payments on the
Contracts are made. Payments on Contracts may be in the form of scheduled
payments or prepayments. For this purpose, the term "prepayment" includes
prepayments and liquidations due to defaults or other dispositions of the
Contracts. The weighted average lives of the offered certificates will also be
influenced by delays associated with realizing on Defaulted Contracts. The
prepayment model used in this prospectus supplement, the CPR, represents an
assumed annualized rate of prepayment relative to the then outstanding balance
on a pool of Contracts. The CPR assumes that a fraction of the outstanding
Contract pool is prepaid on each distribution date, which implies that each
Contract in the Contract pool is equally likely to prepay. This fraction,
expressed as a percentage, is annualized to arrive at the CPR for the Contract
pool. The CPR measures prepayments based on the outstanding principal on the
previous distribution date. The CPR further assumes that all Contracts are the
same size and make scheduled payments at the same rate and that each Contract
will be either paid as scheduled or prepaid in full.
WEIGHTED AVERAGE LIVES OF THE OFFERED CERTIFICATES
The tables below were prepared assuming, among other things, that the
following modeling assumptions apply:
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o the closing date for the certificates occurs on __________, 200_,
o distributions on the certificates are made on the __th day of each month
regardless of the day on which the distribution date actually occurs,
commencing in __________, 200_ in accordance with the priorities described
in this prospectus supplement,
o no delinquencies or defaults in the payment of scheduled payments on the
Contracts are experienced and the payments are timely received,
o no Contract is reacquired for breach of a representation and warranty or
otherwise,
o the actual discount rate is _____% per annum,
o Prepayments with respect to the Contracts are received on the last day of
each calendar month, commencing on __________, 200_,
o no Restricting Event occurs,
o the Class A certificate rate is ______% per annum.
o the Contract pool consists of a pool of Contracts with an Aggregate
Discounted Contract Principal Balance equal to approximately $__________
available on the closing date that make their first payment in __________,
200_, and
o the Contract pool consists of a pre-funded pool of Contracts with an
Aggregate Discounted Contract Principal Balance equal to approximately
$__________ available on __________, 200_, that make their first payment
in __________, 200_.
Since the tables were prepared on the basis of the modeling assumptions,
there are discrepancies between the characteristics of the actual Contracts and
the characteristics of the Contracts assumed in preparing the tables. These
discrepancies may have an effect upon the percentages of the certificate
principal balances outstanding and weighted average lives of the offered
certificates set forth in the tables. In addition, since the actual Contracts in
the trust have characteristics which differ from those assumed in preparing the
tables set forth below, the related weighted average life may be longer or
shorter than as indicated in the tables.
The following tables set forth the percentages of the initial principal
amount of the Class A certificates, assuming a CPR of _%, _%, _%, _%, _% and _%,
respectively.
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PERCENTAGE OF INITIAL CERTIFICATE
PRINCIPAL BALANCE OUTSTANDING
CLASS A CERTIFICATES
Prepayment Speed (CPR)
Distribution Date 0% 2% 4% 5% 6% 8%
- ----------------- -- -- -- -- -- --
Closing Date
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
Weighted Average Life
(years)
The Contracts will not have the characteristics assumed above, and we cannot
assure you that (1) the Contracts will prepay at any of the rates shown in the
tables or at any other particular rate or will prepay proportionately or (2) the
weighted average lives of the offered certificates will be as calculated above.
Because the rate of distributions of principal of the offered certificates will
be a result of the actual payments, including prepayments, of the Contracts,
which will include Contracts that have remaining terms to stated maturity
shorter or longer than those assumed, the weighted average lives of the offered
certificates will differ from those set forth above, even if all of the
Contracts prepay at the indicated constant prepayment rates.
The effective yield to certificateholders will depend upon, among other
things, the price at which the offered certificates are purchased, and the
amount of and rate at which principal, including both scheduled and unscheduled
payments of principal, is paid to the certificateholders.
Due to the subordination provisions applicable to the offered certificates,
it is likely that the certificate principal balance of the certificates will
amortize more rapidly than will the initial Aggregate Discounted Contract
Principal Balance of the Contract pool. See "Description of Certificates--Flow
of Funds" in this prospectus supplement.
FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a summary of certain United States federal income tax
considerations relevant to the beneficial owner of a certificate that holds the
certificate as a capital asset and, unless otherwise indicated below, is a U.S.
Person. This summary does not address special tax rules which may apply to
certain types of investors, and investors that hold certificates as part of an
integrated investment. This summary supplements the discussion contained in the
accompanying prospectus under the heading "Federal Income Tax Considerations."
The authorities on which we based this discussion are subject to change or
differing interpretations, and these changes or interpretations could apply
retroactively. This discussion reflects the
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applicable provisions of the Code, as well as regulations promulgated by the
U.S. Department of Treasury. You should consult your own tax advisors in
determining the federal, state, local and any other tax consequences of the
purchase, ownership and disposition of the certificates.
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to the
seller, the trust will not be treated as an association taxable as a corporation
or a publicly traded partnership taxable as a corporation for federal income tax
purposes, but rather will be disregarded as a separate entity and treated as a
mere security device when there is a single beneficial owner of the trust, or
will be treated as a domestic partnership when there are two or more beneficial
owners of the trust.
The trustee will treat each holder of a certificate for federal income
purposes as a partner in the trust. As a result, such holders will be required
to report their allocable share of the income or losses of the trust as and when
earned thereby, and whether or not distributed. The trustee will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the trust and will report each holder's allocable share of income and
expense to the holders and the IRS on Schedule K-1. Such Schedule will indicate
that each holder will have income in an amount approximately equal to the amount
of income such holder would recognize if the certificates were debt instruments
subject to the rules described above. Generally, holders will be required to
file tax returns that are consistent with any such information return filed by
the trust or be subject to penalties unless the holder notifies the IRS of all
such inconsistencies. See "Federal Income Tax Considerations -- Trusts Treated
as Partnership" in the accompanying prospectus.
Payments of interest and principal, as well as payments of proceeds from the
sale of certificates, may be subject to the "backup withholding tax" under
Section 3406 of the Code at a rate of 31% if you fail to furnish to the trust
certain information, including your taxpayer identification number, or otherwise
fail to establish an exemption from this tax. Any amounts deducted and withheld
from a payment should be allowed as a credit against your federal income tax.
Furthermore, certain penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the
proper manner.
We will report to certificateholders and to the IRS for each calendar year
the amount of any "reportable payments" during that year and the amount of tax
withheld, if any, with respect to payments on the certificates.
Non-U.S. Persons who purchase certificates should not that the trustee will
treat the income received with respect thereto as subject to U.S. tax
withholding at a rate of 30%, unless it is established to the satisfaction of
the trustee that such rate is reduced or eliminated by an applicable tax treaty.
In addition, other U.S. tax withholding and reporting rules may be applicable to
a certificateholder who is a non-U.S. person.
On October 6, 1997, the Treasury Department issued regulations which make
certain modifications to the withholding rules for investors who are non-U.S.
Persons and the backup withholding and information reporting rules described
above. The regulations attempt to unify certification requirements and modify
reliance standards. These regulations will generally be effective for payments
made after December 31, 2000, subject to certain transition rules. Non-U.S.
Persons are urged to consult their tax advisors regarding the effect of these
regulations.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing, or other employee benefit plan from engaging in certain transactions
involving "plan assets" with
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persons that are "parties in interest" under ERISA or "disqualified persons"
under the Code with respect to the Plan. ERISA also imposes certain duties on
persons who are fiduciaries of Plans subject to ERISA and prohibits certain
transactions between a plan and parties in interest with respect to these Plans.
Under ERISA, any person who exercises any authority or control respecting the
management or disposition of the assets of a Plan is considered to be a
fiduciary of the Plan, subject to certain exceptions not here relevant. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and the Code for these persons.
In addition to the matters described below, purchasers of Class A
certificates that are insurance companies should consult with their counsel with
respect to the United States Supreme Court case interpreting the fiduciary
responsibility rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris
Trust and Savings Bank, 114 S. Ct. 517 (1993). In John Hancock, the Supreme
Court ruled that assets held in an insurance company's general account may be
deemed to be "plan assets" for ERISA purposes under certain circumstances.
Prospective purchasers should determine whether the decision affects their
ability to make purchases of the Class A certificates.
Under a final regulation issued by the Department of Labor concerning the
definition of what constitutes the "plan assets" of an employee benefit plan
subject to ERISA or the Code, or an IRA, or any entity whose underlying assets
are deemed to be assets of an employee benefit plan or an IRA by reason of the
employee benefit plan's or the IRA's investment in that entity, the assets and
properties of certain entities in which a Plan makes an equity investment could
be deemed to be assets of the Plan unless certain exceptions under the final
regulation apply or an exemption is available. If Plans that purchase the Class
A certificates are deemed to own an interest in the underlying assets of the
trust, the operations of the trust could result in prohibited transactions.
The Department Of Labor has granted to PaineWebber Incorporated an
administrative exemption, Prohibited Transaction Exemption 90-36 which generally
exempts from the application of the prohibited transaction provisions of Section
406(a), Section 406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA and the
excise taxes imposed under Sections 4975(a) and (b) of the Code, certain
transactions relating to the servicing and operation of asset pools, and the
purchase, sale and holding of asset-backed pass-through certificates, including
pass-through certificates evidencing interests in certain receivables, loans and
other obligations, such as the Class A certificates, provided that certain
conditions set forth in the exemption are satisfied.
If the general conditions of the exemption are satisfied, the exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA, as well as the excise taxes imposed by Sections 4975(c)(1)(A) through
(D) of the Code, in connection with the direct or indirect sale, exchange or
transfer of Class A certificates by Plans in the initial issue of certificates,
the holding of Class A certificates by Plans or the direct or indirect
acquisition or disposition in the secondary market of Class A certificates by
Plans. However, no exemption is provided from the restrictions of Section
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
Class A certificate on behalf of an Excluded Plan by any person who has
discretionary authority or renders investment advice with respect to the assets
of the Excluded Plan.
If the specific conditions of paragraph I.B. of Section I of the exemption
are also satisfied, the exemption may provide an exemption from the restrictions
imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the
Code in connection with
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(1) the direct or indirect sale, exchange or transfer of Class A certificates
in the initial issuance of Class A certificates to a Plan when the person
who has discretionary authority or renders investment advice with respect
to the investment of plan assets in Class A certificates is (a) an
obligor with respect to 5 percent or less of the fair market value of the
Contracts or (b) an affiliate of that person,
(2) the direct or indirect acquisition or disposition in the secondary market
of Class A certificates by Plans and
(3) the holding of Class A certificates by Plans.
Among the specific conditions that must be satisfied is the condition that
immediately after the acquisition of the Class A certificates no more than 25%
of the assets of the Plan with respect to which the person is a fiduciary are
invested in certificates representing an interest in a trust containing assets
sold or serviced by the same entity. As of the date hereof, the seller believes
no obligor with respect to Receivables included in the trust constitutes more
than 5 percent of the aggregate unamortized principal balance of the trust.
If the specific conditions of paragraph I.C. of Section I of the exemption
are satisfied, the exemption may provide an exemption from the restrictions
imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation of
the Trust.
The exemption may provide an exemption from the restrictions imposed by
Section 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code
if the restrictions are deemed to otherwise apply merely because a person is
deemed to be a "party in interest" or a "disqualified person" with respect to an
investing Plan by virtue of providing services to the plan, or by virtue of
having certain specified relationships to that person, solely as a result of the
Plan's ownership of Class A certificates.
The exemption sets forth the following six general conditions which must be
satisfied for a transaction to be eligible for exemptive relief thereunder:
(1) The acquisition of the certificates by a Plan is on terms, including the
price for the certificates, that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by the certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the trust;
(3) The certificates acquired by the Plan have received a rating at the time
of the acquisition that is one of the three highest general rating
categories from either Standard & Poor's Ratings Services, Moody's
Investors Services, Fitch IBCA, Inc. or Duff & Phelps Credit Rating Co.;
(4) The trustee is not an affiliate of any other member of the restricted
group;
(5) The sum of all payments made to and retained by PaineWebber Incorporated
in connection with the distribution of certificates represents not more
than reasonable
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compensation for its services. The sum of all payments made and retained
by the seller under the assignment of the Receivables TO the trust
represents not more than the fair market value of the Receivables. The
sum of all payments made to and retained by the servicer represents not
more than reasonable compensation for that person's services under the
Pooling and Servicing Agreement and reimbursement of that person's
reasonable expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the 1933 Act.
The trust must also meet the following requirements:
(1) the Receivables must consist solely of assets of the type that have been
included in other investment pools;
(2) certificates in the other investment pools must have been rated in one of
the three highest rating categories of Standard & Poor's Ratings
Services, Moody's Investors Services, Fitch IBCA, Inc. or Duff & Phelps
Credit Rating Co. for at least one year prior to the Plan's acquisition
of certificates; and
(3) certificates evidencing interest in the other investment pools must have
been purchased by investors other than Plans for at least one year prior
to the Plan's acquisition of certificates
It is a condition of issuance of the Class A certificates that they be rated
AAA or its equivalent by a nationally recognized rating agency. Before
purchasing a Class A certificate based on the exemption, a fiduciary of a Plan
should itself confirm (1) that the certificate constitutes a "certificate" for
purposes of the exemption and (2) that the specific conditions and other
requirements set forth in the exemption would be satisfied. Any Plan fiduciary
considering the purchase of a Class A certificate should consult with its
counsel with respect to the potential applicability of ERISA and the Code to
that investment. Moreover, each Plan fiduciary should determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the Class A certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio. The subordinate certificates may not be acquired by
any Plan.
LEGAL INVESTMENT
The Class A certificates will be eligible securities for purchase by money
market funds under the Investment Company Act of 1940.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the depositor has agreed to cause the issuer to sell to each of the underwriters
listed below, and each of the underwriters has agreed to purchase, the principal
amount of each class of the certificates set forth opposite its name below.
Under the terms and conditions of the underwriting agreement, each of the
underwriters is obligated to take and pay for all of the certificates if any are
taken.
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CLASS A
UNDERWRITERS CERTIFICATES
- ------------ ------------
PaineWebber Incorporated............... $
[--------------------].................
Total..................................
The depositor has been advised by the underwriters that they propose
initially to offer the certificates to the public at the prices set forth below,
and to selling group members at those prices less a selling concession not in
excess of the percentage set forth below for each class of certificates. The
underwriters may allow, and the selling group members may also allow, a
subsequent concession not in excess of the percentage set forth below for each
class of certificates. After the initial public offering, the public offering
price and such concessions may be changed.
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT CONCESSION REALLOWANCE
-------- ------------ ---------- -----------
Class A Certificates % % % %
The depositor does not intend to apply for listing of the certificates on a
national securities exchange, but has been advised by the underwriters that they
may make a market in the certificates. The underwriters are not obligated,
however, to make a market in the certificates and may discontinue market making
at any time without notice. We cannot assure you as to the liquidity of the
trading market for the certificates.
The depositor, the transferor and the servicer have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, each underwriter and
its affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the depositor, the transferor and the
servicer.
After the initial distribution of the certificates by the underwriters, this
prospectus supplement may be used by the underwriters or its successors, in
connection with offers and sales relating to market making transactions in the
certificates. The underwriters may act as principal or agent in these
transactions. The transactions will be at prices related to prevailing market
prices at the time of sale. Each underwriter is a member of the New York Stock
Exchange, Inc.
The underwriter is an affiliate of the depositor.
ADDITIONAL INFORMATION
PaineWebber Asset Acceptance Corporation has filed with the SEC a
registration statement (Registration No. 333-_____) under the Securities Act of
1933, as amended, with respect to the certificates offered under this prospectus
supplement. This prospectus supplement and the accompanying prospectus, which
form a part of the registration statement, omit certain information contained in
the registration statement under the rules and regulations of the SEC. You may
read and copy the registration statement at the Public Reference Room at the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at
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the SEC's regional offices at Seven World Trade Center, 13th Floor, New York,
New York, 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Rooms. In addition, the SEC maintains a site
on the World Wide Web containing reports, proxy materials, information
statements and other items. The address is http://www.sec.gov.
LEGAL MATTERS
The validity of the certificates and certain federal income tax matters will
be passed upon for the depositor by Cadwalader, Wickersham & Taft, New York, New
York.
RATINGS
As a condition to the issuance of the Class A certificates, the Class A
certificates must be rated "____" by __________________________________ and
"___" by _____________________________.
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time. The ratings assigned to
the offered certificates address the likelihood of the receipt by
certificateholders of all distributions to which such certificateholders are
entitled. The ratings assigned to the offered certificates do not represent any
assessment of the likelihood that principal prepayments might differ from those
originally anticipated or address the possibility that certificateholders might
suffer a lower than anticipated yield.
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GLOSSARY OF TERMS
As used in this prospectus supplement, the following terms have the following
meanings:
ADVANCE PAYMENT: With respect to a Contract and a collection period, any
scheduled payment, Final Scheduled Payment, Purchase Option Payment or portion
of either made by or on behalf of an obligor and received by the servicer during
the collection period, which payment or portion of the payment does not become
due until a subsequent collection period. However, Advance Payments do not
include Prepayment Amounts.
AGGREGATE DISCOUNTED CONTRACT PRINCIPAL BALANCE: Means, at any time of
determination and with respect to any Contracts, any amount equal to the sum of
the Discounted Contract Principal Balances of the Contracts.
AVAILABLE FUNDS: With respect to a distribution date, all amounts-including
scheduled payments, Unscheduled Payments, and servicer advances-held in the
collection account on the related determination date, after taking into account
all deposits required to be made on that determination date, other than any
Advance Payment.
BASE PRINCIPAL AMOUNT: With respect to any distribution date, an amount equal
to the excess of:
o the sum of (1) the Aggregate Discounted Contract Principal Balance of the
Contracts, as of the close of business on the last day of the second
preceding collection period, and (2) the Pre-Funded Collateral Amount, as
of the close of business on the last day of the second preceding
collection period, over
o the sum of (1) the Aggregate Discounted Contract Principal Balance of the
Contracts, as of the close of business on the last day of the immediately
preceding collection period, (2) the Pre-Funded Collateral Amount, as of
the close of business on the last day of the immediately preceding
collection period, (3) the aggregate Prepayment Amounts received by the
servicer during the related collection period, (4) any Defaulted Contract
Amounts relating to the related collection period and (5) the amount of
any funds released from the pre-funding account as a prepayment of
principal on the offered certificates, divided by ____%.
CLASS A ACCELERATED PERCENTAGE: _____%.
CLASS A ADDITIONAL PRINCIPAL DISTRIBUTION AMOUNT: Means (a) with respect to
any distribution date prior to the Class A Termination Date, any Unscheduled
Payments with respect to the related collection period; and (b) with respect to
the Class A Termination Date, the amount described in clause (a) above, to the
extent necessary to reduce the certificate principal balance of each class of
Class A certificates to zero.
CLASS A BASE PRINCIPAL DISTRIBUTION AMOUNT: Means (x) with respect to any
distribution date prior to the Class A Termination Date, the sum of:
(1) the product of (A) the Class A Percentage and (B) the Base Principal
Amount for this distribution date;
(2) the Class A Additional Principal Distribution Amount; and
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(3) the product of (A) the Class A Accelerated Percentage and (B) the amount
of any funds released from the pre-funding account as a prepayment of principal;
and
(y) with respect to the Class A Termination Date, the amount described in
clause (x) above, to the extent necessary to reduce the certificate principal
balance of each class of Class A certificates to zero.
CLASS A CERTIFICATE CURRENT INTEREST: With respect to any distribution date
and each class of Class A certificates, the interest accrued during the related
Interest Accrual Period, equal to the product of:
(1) (A) for the Class A certificates, the actual number of days elapsed in
the Interest Accrual Period divided by 360 days and (B) for each other class of
Class A certificates, one-twelfth;
(2) the certificate rate for that class of Class A certificates; and
(3) the aggregate certificate principal balance of that class of Class A
certificates outstanding on the immediately preceding distribution date, after
taking into account all distributions made on that distribution date.
CLASS A CERTIFICATE INTEREST: Means, for any distribution date and any class
of Class A certificates, the sum of the Class A Current Certificate Interest for
that class of Class A certificates and the Class A Overdue Certificate Interest
for that class of Class A certificates.
CLASS A CERTIFICATE RATE: ______% per annum.
CLASS A DEFAULT INTEREST: Means, for any distribution date and each class of
Class A certificates, the product of:
(1) the sum of clauses (1) and (2) of the definition of Class A Overdue
Interest with respect to that class;
(2) (A) for the Class A certificates, the actual number of days elapsed in
the Interest Accrual Period divided by 360 days and (B) for each other class of
Class A certificates, one-twelfth; and
(3) __%.
CLASS A OVERDUE INTEREST: With respect to any distribution date and each
class of Class A certificates, the difference between (x) the sum of:
(1) the excess, if any, of that portion of any Class A Certificate Interest
due on the immediately preceding distribution date for that class of Class A
certificates over that portion of the Class A Certificate Interest paid on the
immediately preceding distribution date for that class of Class A certificates;
(2) without duplication of the amount described in clause (1), the amount of
the Class A Overdue Interest due and unpaid as of the immediately preceding
distribution date attributable to that class of Class A certificates; and
(3) the product of:
(a) the sum of clauses (1) and (2);
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(b) (1) for the Class A certificates, the actual number of days elapsed
in the Interest Accrual Period divided by 360 days and (2) for each other
class of Class A certificates, one-twelfth; and
(c) the Class A Certificate Rate; and
(d) any Class A Overdue Interest attributable to that class of Class A
certificates paid on that distribution date.
CLASS A OVERDUE PRINCIPAL: With respect to any distribution date, the
difference, if any, equal to (a) the aggregate of the Class A Base Principal
Distribution Amounts due on all prior distribution dates and (b) the aggregate
amount of the principal, from whatever source, actually distributed to Class A
certificateholders on all prior distribution dates.
CLASS A PERCENTAGE: ____%.
CLASS A TERMINATION DATE: The distribution date on which the certificate
principal balance of each class of Class A certificates is reduced to zero.
CLASS B ACCELERATED PERCENTAGE: _____%.
CLASS B ADDITIONAL PRINCIPAL DISTRIBUTION AMOUNT: Means:
(1) with respect to any distribution date prior to the Class A Termination
Date, zero;
(2) with respect to the Class A Termination Date, the excess, if any, of
(A) any Unscheduled Payments with respect to the related collection period,
over (B) the amount of that sum necessary to reduce the certificate principal
balance of each class of Class A certificates to zero; and
(3) with respect to any period following the Class A Termination Date, the
amount described in clause (2)(A) above, to the extent necessary to reduce
the Class B certificate principal balance to zero.
CLASS B BASE PRINCIPAL DISTRIBUTION AMOUNT: Means:
(x) with respect to any distribution date prior to the Class A Termination
Date, the sum of:
(1) the product of (A) the Class B Percentage and (B) the Base Principal
Amount for that distribution date;
(2) the Class B Additional Principal Distribution Amount; and
(3) the product of (A) the Class B Accelerated Percentage and (B) the
amount of any funds released from the pre-funding account as a prepayment of
principal; and
(y) with respect to the Class A Termination Date, the amount described in
clause (x) above plus the portion of the Class A Base Principal Distribution
Amount, not applied as a reduction of the note principal balance of the Class A
notes, on that date.
CLASS B CERTIFICATE INTEREST: With respect to any distribution date, the
interest accrued during the related Interest Accrual Period, equal to the
product of:
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(1) one-twelfth of the Class B Certificate Rate; and
(2) the aggregate Class B Certificate Principal Balance outstanding
immediately prior to the distribution date.
CLASS B CERTIFICATE CURRENT PRIORITY INTEREST: With respect to any payment
date, the interest accrued during the related Interest Accrual Period, equal to
the product of:
(1) one-twelfth of the Class B Certificate Rate; and
(2) the aggregate Class B Collateralized Balance outstanding on the
immediately preceding payment date.
CLASS B CERTIFICATE JUNIOR INTEREST: With respect to any distribution date,
the Class B Certificate Current Junior Interest and the Class B Overdue Junior
Interest.
CLASS B CERTIFICATE PRIORITY INTEREST: With respect to any distribution date,
the Class B Certificate Current Priority Interest and the Class B Overdue
Priority Interest.
CLASS B CERTIFICATE PRINCIPAL BALANCE: At any time, the Initial Class B
Certificate Principal Amount minus all payments previously received by the Class
B certificateholders on account of principal.
CLASS B CERTIFICATE RATE: _____% per annum.
CLASS B COLLATERALIZED BALANCE: The positive difference, if any, of the Class
B certificate principal balance over the Class B Uncollateralized Balance.
CLASS B OVERDUE INTEREST: With respect to any distribution date, the sum of
(x) the sum of:
(1) the excess, if any, equal to (a) the aggregate amount of Class B
Certificate Interest due on all prior distribution dates over (b) the
aggregate amount of Class B Certificate Interest, from whatever source,
actually distributed to Class B certificateholders on all prior distribution
dates; and
(2) the amount, if any, described in clause (y) as of the immediately
preceding distribution date; and
(y) the product of (a) one-twelfth of the Class B Certificate Rate and (b)
the amount described in clause (x) above as of that distribution date.
CLASS B OVERDUE PRINCIPAL: With respect to any distribution date, the
difference, if any, equal to (a) the aggregate of the Class B Base Principal
Distribution Amounts due on all prior distribution dates and (b) the aggregate
amount of the principal, from whatever source, actually distributed to Class B
Certificateholders on all prior distribution dates.
CLASS B OVERDUE PRIORITY INTEREST: With respect to any distribution date, the
difference between (x) the sum of:
(1) the excess, if any, of any Class B Certificate Priority Interest due
on the immediately preceding distribution date over the Class B Certificate
Priority Interest paid on the immediately preceding distribution date;
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(2) without duplication of the amount described in clause (1), the amount
of the Class B Overdue Priority Interest due and unpaid as of the immediately
preceding distribution date; and
(3) the product of (a) the sum of clauses (1) and (2), (b) one-twelfth and
(c) the sum of the Class B Certificate Rate plus _____%; and
(y) any Class B Overdue Priority Interest paid on that distribution date.
CLASS B PERCENTAGE: ____%.
CLASS B UNCOLLATERALIZED BALANCE: The positive difference, if any, of:
(1) the sum of (A) the Class A certificate principal balance and (B) the
Class B certificate principal balance; over
(2) the sum of (A) the Aggregate Discounted Contract Principal Balance of
all of the Contracts and (B) the Pre-Funded Collateral Amount.
CODE: means the Internal Revenue Code of 1986, as amended.
CONTRACT: Means any combination of finance leases or installment sale or loan
contracts relating to Equipment or participation interests in those leases or
contracts, together with all related monies.
CONTROLLING PARTY: Means the majority of the holders of the certificates.
CPR: means the conditional prepayment rate which is the prepayment model used
in this prospectus supplement and which represents an assumed annualized rate of
prepayment relative to the then outstanding balance on a pool of Contracts.
CUMULATIVE LOSS EVENT: Means that the sum of the Defaulted Contract Amounts,
as of the first distribution date for which the Contract is classified as a
Defaulted Contract, of all Contracts which have become Defaulted Contracts, on a
cumulative basis since the closing date, less any Defaulted Contract Recoveries,
exceeds an amount equal to ____% of the Initial Aggregate Collateral Balance.
CUT-OFF DATE: Means (x) with respect to the initial Contracts, the close of
business on ___________, 200_, and (y) with respect to any subsequent Contracts
or substitute Contracts, the close of business on the last day of the month
preceding the month in which the Contract was transferred to the transferors.
DEFAULTED CONTRACT: A Contract becomes a "Defaulted Contract" at the earliest
of the date on which:
o the servicer has determined in its sole discretion, in accordance with the
servicing standard and its customary servicing procedures, that the
Contract is not collectible;
o all or part of a scheduled payment thereunder is more than 120 days
delinquent;
o the servicer elected not to make a servicer advance or for which the
servicer has determined that a prior servicer advance is not recoverable;
or
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o a bankruptcy proceeding has been instituted by or against the obligor, and
the obligor has failed to make a scheduled payment or Final Scheduled
Payment.
DEFAULTED CONTRACT AMOUNTS: Means, with respect to any distribution date, the
sum of:
(1) the present value of all of the remaining scheduled payments and any
Final Scheduled Payment due or to become due under each Contract which became
a Defaulted Contract during the related collection period, discounted monthly
at the actual discount rate; and
(2) any scheduled payments previously due and not paid by the obligor.
DEFAULTED CONTRACT RECOVERIES: All proceeds of the sale or re-lease of
Equipment related to Defaulted Contracts and any amounts collected as judgments
against an obligor or others related to the failure of the obligor to pay any
required amounts under the related Contract or to return the Equipment, in each
case as reduced by (1) any unreimbursed servicer advances with respect to the
Contract and (2) any reasonably incurred out-of-pocket expenses incurred by the
servicer in enforcing the Contract or in liquidating the Equipment.
DELINQUENCY TRIGGER EVENT: Exists on any distribution date on which the
average of the Delinquency Trigger Ratios for the distribution date and the two
immediately preceding distribution dates exceeds _%. Once a Delinquency Trigger
Event occurs, then the condition will be deemed to continue until the
distribution date which is the third consecutive distribution date for which the
average of the Delinquency Trigger Ratio for the distribution date and the two
immediately preceding distribution dates is less than _%.
DELINQUENCY TRIGGER RATIO: With respect to any distribution date, the
quotient, expressed as a percentage of (a) the Aggregate Discounted Contract
Principal Balance of all Contracts as to which all or a portion of a scheduled
payment remained unpaid for more than 60 days from its due date, determined as
of the end of the immediately preceding calendar month, divided by (b) the
Aggregate Discounted Contract Principal Balance of all Contracts as of the last
day of the immediately preceding calendar month.
DELINQUENT CONTRACT: As of any determination date, any Contract, other than a
Contract which became a Defaulted Contract prior to the determination date, with
respect to which all or a portion of any scheduled payment was not received by
the servicer as of 30 days from its due date.
DISCOUNTED CONTRACT PRINCIPAL BALANCE: With respect to any Contract, on any
determination date, the sum of the present value of all of the remaining
scheduled payments and any Final Scheduled Payment becoming due under the
Contract after the end of the prior collection period, discounted monthly at the
actual discount rate in the manner described below. However, except to the
extent expressly provided in the Pooling and Servicing Agreement, the Discounted
Contract Principal Balance of any Defaulted Contract, Early Termination
Contract, Expired Contract or Contract reacquired by the originator pursuant to
the Pooling and Servicing Agreement, will be equal to zero.
In connection with all calculations required to be made pursuant to the
Transfer Agreements with respect to the determination of Discounted Contract
Principal Balances, for any date of determination the "Discounted Contract
Principal Balance" for each Contract will be calculated assuming:
o scheduled payments are due on the last day of each collection period;
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o scheduled payments are discounted on a monthly basis using a 30-day month
and a 360-day year; and
o scheduled payments are discounted to the last day of the collection period
prior to the determination date.
EARLY TERMINATION CONTRACT: Any Contract that has terminated pursuant to the
terms of the Contract prior to its scheduled expiration date, other than a
Defaulted Contract.
EQUIPMENT: The equipment and related property that is being financed or
leased under a Contract, together with the related proceeds.
EVENT OF SERVICING TERMINATION: Has the meaning given in "Description of the
Certificates--Events of Servicing Termination" in this prospectus supplement.
EXCLUDED PLAN: Means, for purposes of the Class A certificates, a Plan
sponsored by (1) PaineWebber Incorporated, (2) the originators, (3) the
servicer, (4) the trustee, (5) the transferors, (6) the depositor, (7) any
obligor with respect to Receivables constituting more than 5 percent of the
aggregate unamortized principal balance of the Receivables as of the date of
initial issuance, and (8) any affiliate or successor of a person described in
(1) to (7).
EXPIRED CONTRACT: Any Contract that has terminated on its scheduled
expiration date.
FINAL SCHEDULED PAYMENT: With respect to any Contract, any payment set forth
in the Contract other than the regular scheduled payment which is required to be
paid by the related obligor at the maturity of the Contract.
INITIAL AGGREGATE COLLATERAL BALANCE: The sum of:
(1) the Aggregate Discounted Contract Principal Balance of the Contracts
as of the Cut-Off Date; and
(2) the Pre-Funded Collateral Amount on the closing date.
INITIAL CLASS B PRINCIPAL BALANCE: $__________.
INITIAL UNPAID AMOUNT: With respect to a Contract, the excess of:
(1) the aggregate amount of all scheduled payments due prior to the
Cut-Off Date; over
(2) the aggregate of all scheduled payments made prior to the Cut-Off Date
with respect to the Contract.
INTEREST ACCRUAL PERIOD: With respect to any distribution date, the period
from and including the prior distribution date to but excluding that
distribution date and with respect to the initial distribution date, (1) for the
Class A certificates, the period from and including the closing date up to but
excluding that distribution date, and (2) for each other class of certificates,
the period from and including __________, 200_ up to but excluding that
distribution date.
NET CHARGE-OFF EVENT: Exists on any distribution date on which the weighted
average of the Net Charge-Off Ratio for the distribution date and the two
immediately preceding distribution dates exceeds ___%. Once a Net Charge-Off
Event occurs, then the condition will be deemed to continue until the
distribution date which is the fourth consecutive distribution date for which
the
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weighted average of the Net Charge-Off Ratio for the distribution dates and the
two immediately preceding distribution dates is less than ___%.
NET CHARGE-OFF RATIO: With respect to any distribution date, twelve times the
quotient, expressed as a percentage, of:
(1) the sum of the Discounted Contract Principal Balance of all Contracts
that become Defaulted Contracts during the immediately preceding calendar
month, regardless of whether a substitute Contract was provided for them,
less all recoveries received during the immediately preceding calendar month,
including, but not limited to, liquidation proceeds; divided by
(2) the Aggregate Discounted Contract Principal Balance of all Contracts
as of the end of the immediately preceding calendar month.
For the purposes of the calculation of the Net Charge-Off Ratio, the
Discounted Contract Principal Balance of any Contract which is a Defaulted
Contract will not be zero, but will instead be calculated as provided in the
definition of Discounted Contract Principal Balance without reference to the
last proviso in that definition.
PLAN: Means any:
(1) employee benefit plan as defined in Section 3(3) of ERISA;
(2) plan described in Section 4975(e)(1) of the Code, including individual
retirement accounts or Keogh plans; or
(3) entity whose underlying assets include plan assets by reason of a
plan's investment in entities specified in clauses (1) and (2) above.
POOLING AND SERVICING AGREEMENT: Means the Pooling and Servicing Agreement
among the depositor, the servicer and the trustee.
PRE-FUNDED COLLATERAL AMOUNT: As of any date of determination, is the amount
on deposit in the pre-funding account, divided by ____%.
PREMIUM AMOUNT: With respect to any distribution date, the product of (1)
one-twelfth, (2) the Premium Rate and (3) the outstanding Class A certificate
principal balance as of the end of the immediately preceding collection period.
PREPAYMENT: With respect to a collection period and a Contract other than a
Defaulted Contract, the amount received by the servicer during the collection
period from or on behalf of an obligor with respect to the Contract in excess of
the sum of:
(1) any scheduled payment and any Final Scheduled Payment due during the
collection period; plus
(2) the aggregate of any overdue scheduled payments, Initial Unpaid
Amounts and unpaid Servicing Charges for the Contract, so long as the amount
is designated by the obligor as a prepayment and the servicer has consented
to the prepayment.
Neither Residual Receipts nor Defaulted Contract Recoveries are Prepayments.
PREPAYMENT AMOUNT: With respect to a distribution date and a Contract, an
amount, without duplication, equal to the sum of:
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o the Discounted Contract Principal Balance as of the beginning of the
immediately preceding collection period--without any deduction for any
security deposit paid by an obligor, unless the security deposit has been
deposited in the collection account under the Pooling and Servicing
Agreement;
o the product of (x) the Discounted Contract Principal Balance of the
Contract as of the beginning of the immediately preceding collection
period and (y) one-twelfth of the actual discount rate; and
o any scheduled payments theretofore due and not paid by an obligor.
PURCHASE AMOUNT: Means, with respect to a Receivable, the principal balance
and accrued interest on the Receivable, including one month's interest on the
Receivable, in the month of payment, at the annual percentage rate less the
servicing fee, after giving effect to the receipt of any moneys collected, from
whatever source, on the Receivable, if any.
PURCHASE OPTION PAYMENT: With respect to a Contract, any payment set forth in
the Contract payable by the obligor. This payment includes any security deposit
applied in respect of that payment, upon the exercise of a purchase option for
the Equipment relating to the Contract at the end of the term of the Contract,
whether or not the obligor actually exercises the purchase option. With respect
to any Contract which does not set forth a purchase option, any payment made by
an obligor to purchase the Equipment relating to the Contract at the end of the
term of the Contract.
REACQUISITION AMOUNT: With respect to a distribution date and a Contract, the
sum, without duplication, of:
o the Discounted Contract Principal Balance as of the beginning of the
immediately preceding collection period, without any deduction for any
security deposit paid by an obligor, unless the security deposit has been
deposited in the collection account pursuant to the Pooling and Servicing
Agreement;
o the product of (x) Discounted Contract Principal Balance of the Contract
as of the beginning of the immediately preceding collection period and (y)
one-twelfth of the actual discount rate; and
o any scheduled payments previously due and not paid by an obligor.
RECEIVABLES: Means the Contracts and all related monies received after the
Cut-Off Date and the underlying Equipment.
RECEIVABLES TRANSFER AGREEMENT: Means the receivables transfer agreement,
dated as of _______________, 200_, among the depositor, the originator and the
transferors.
RESIDUAL BALANCE: As of any distribution date, the difference, if any,
between:
(1) the sum of (a) the Aggregate Discounted Contract Principal Balance of
all Contracts as of the end of the immediately preceding collection period
and (b) the amount on deposit in the pre-funding account; and
(2) the sum of (a) the outstanding Class A certificate principal balance
and (b) the outstanding Class B certificate principal balance, each, without
taking into account any previous distributions on them attributable to
Residual Receipts, after taking into account any distributions on the
distribution date.
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RESIDUAL RECEIPTS: All Purchase Option Payments or other proceeds of the
sale, re-lease or re-marketing of the underlying Equipment, to the extent the
proceeds exceed any scheduled payments and any Final Scheduled Payments
remaining unpaid, but limited to the originator's booked residual value for the
Contract.
RESTRICTED GROUP: Means any affiliate of a person described in (1) to (7) of
the definition of Excluded Plan.
RESTRICTING EVENT: An event which will occur on a distribution date on which:
o an Event of Servicing Termination has occurred under the Pooling and
Servicing Agreement and is not cured within the grace period set forth in
the Pooling and Servicing Agreement;
o a Net Charge-Off Event exists;
o a Delinquency Trigger Event exists;
o a Subordination Deficiency Event exists; or
o a Cumulative Loss Event exists.
SUBORDINATION DEFICIENCY EVENT: Exists on any distribution date on which:
(1) the excess of:
(x) the sum of (A) the Aggregate Discounted Contract Principal Balance
of the Contracts as of the end of the immediately preceding collection
period and (B) the Pre-Funded Collateral Amount as of the end of the
immediately preceding collection period; over
(y) the outstanding Class A certificate principal balance on the
distribution date, after taking into account distributions which would
have been made on the distribution date; is less than
(2) _____% of the Initial Aggregate Collateral Balance.
TRANSFER AGREEMENTS: Means the Receivables Transfer Agreement and the Pooling
and Servicing Agreement.
TRUST OPERATING EXPENSES: With respect to any distribution date, an amount
equal to the amounts owing to the servicer and the trustee pursuant to the
Pooling and Servicing Agreement and payable out of Available Funds in priority
to the Class A Certificate Interest then owing to the Class A
certificateholders.
TRUSTEE EXPENSES: Means the sum of the reimbursement to the trustee for its
reasonable expenses in its capacity as trustee, including, without limitation,
amounts payable to the trustee, in respect of a transfer of servicing.
UNSCHEDULED PAYMENTS: With respect to any distribution date, any Prepayment
Amount, Residual Receipts and Reacquisition Amounts received on account of a
Contract during the preceding calendar month and Defaulted Contract Amounts on
Contracts which became Defaulted Contracts during the preceding calendar month.
S-50
<PAGE>
"U.S. PERSON" means a citizen or resident of the United States, a
corporation, partnership (except as provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States,
any state or the District of Columbia, including an entity treated as a
corporation or partnership for U.S. federal income tax purposes, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more of those U.S.
Persons have the authority to control all substantial decisions of the trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996, which are eligible to elect to be treated as
U.S. Persons).
S-51
<PAGE>
========================================= =====================================
YOU SHOULD RELY ON THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE
ATTACHED PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. $___________ (APPROXIMATE)
WE ARE NOT OFFERING THESE CERTIFICATES _______________________
IN ANY STATE WHERE THE OFFER IS NOT TRUST 200_-_
PERMITTED. ISSUER
TABLE OF CONTENTS ________________-BACKED CERTIFICATES,
SERIES 200_-_
PROSPECTUS SUPPLEMENT _________________________
Summary...........................S-4 SERVICER
Risk Factors......................S-9
Forward-Looking Statements.......S-10 PAINEWEBBER ASSET
Defined Terms....................S-11 ACCEPTANCE CORPORATION
The Contract Pool................S-11 DEPOSITOR
Description of Originator and its
Originating Practices..........S-23
Description of Servicer and its $___________
Servicing Standards............S-23 CLASS A CERTIFICATES
Formation of the Trust...........S-23 PROSPECTUS SUPPLEMENT
Description of the Certificates..S-24
The Trustee......................S-31 PAINEWEBBER INCORPORATED
Prepayment and Yield
Considerations..................S-32
Federal Income Tax ConsiderationsS-34
ERISA Considerations.............S-35 _________, 200_
Legal Investment.................S-38
Underwriting.....................S-38
Additional Information...........S-39
Legal Matters....................S-40
Ratings..........................S-40
Glossary of Terms................S-41
PROSPECTUS
Summary of Terms.................
Risk Factors.....................
Defined Terms....................
The Trust Funds..................
The Issuers......................
The Receivables..................
Pool Factors.....................
Use of Proceeds..................
The Depositor....................
The Trustee......................
Description of the Securities....
Description of the Trust
Agreements......................
Legal Aspects of the Receivables.
Federal Income Tax Considerations
Tax Considerations...............
ERISA Considerations.............
Methods of Distribution .........
Incorporation of Information by
Reference......................
Legal Matters....................
Financial Information............
Additional Information...........
Ratings..........................
Glossary of Terms................
DEALERS WILL BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS
WHEN ACTING AS UNDERWRITERS OF THESE
SECURITIES AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN
ADDITION, ALL DEALERS SELLING THESE
SECURITIES WILL DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS UNTIL
____________, 200_.
=========================================== ===================================
S-52
<PAGE>
The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement 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 of sale is not permitted.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS SUPPLEMENT DATED __________, 200_
(TO PROSPECTUS DATED __________, 200_)
$____________ (APPROXIMATE)
________ EQUIPMENT CONTRACT TRUST 200_-_
EQUIPMENT CONTRACT-BACKED NOTES, SERIES 200_-_
$__________ ______% CLASS A-1 NOTES
$___________ ______% CLASS A-2 NOTES
$___________ ______% CLASS A-3 NOTES
$___________ ______% CLASS A-4 NOTES
$___________ ______% CLASS B NOTES
[_____________________ LOGO]
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
DEPOSITOR
THE TRUST FUND--
o The trust fund consists primarily of a pool of receivables consisting of
direct finance leases and commercial loans and the security interests in the
underlying equipment.
THE OFFERED NOTES--
o The trust will issue 5 classes of notes.
CREDIT ENHANCEMENT--
o [The Class A notes will be unconditionally and irrevocably guaranteed as to
the payment of scheduled interest and to specified payments of principal
pursuant to the terms of a financial guaranty insurance policy to be issued
by _______________]
[____ LOGO]
o The Class A notes are senior to the Class B notes. The Class B notes are
senior to the residual ownership interests in the trust.
PRICE TO THE UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT DEPOSITOR
------------ ------------ ---------------
% % $
The price to public, underwriting discount and proceeds to depositor shown
are for the Class A-1, Class A-2, Class A-3, Class A-4 and Class B notes in the
aggregate. This information is shown for each individual class on page S-[ ].
See "Underwriting" in this prospectus supplement.
The proceeds to depositor are less expenses, estimated at $[ ]. See
"Underwriting" in this prospectus supplement.
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-__ OF THIS
PROSPECTUS SUPPLEMENT AND PAGE __ IN THE PROSPECTUS.
The notes will not represent obligations of the depositor, originator or any
other person or entity. No governmental agency will insure the notes or the
underlying contracts securing the notes.
You should consult with your own advisors to determine if the notes are
appropriate investments for you and to determine the applicable legal, tax,
regulatory and accounting treatment of the notes.
- --------------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE OFFERED
NOTES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAINEWEBBER INCORPORATED
<PAGE>
IMPORTANT NOTICE ABOUT THE INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information about the notes in two separate documents that
progressively include more detail:
(1) the accompanying prospectus dated ___________, 200_. The accompanying
prospectus provides general information, some of which may not apply to your
series of notes.
(2) this prospectus supplement, which describes the specific terms of your
series of notes. Sales of the notes may not be completed unless you have
received both this prospectus supplement and the prospectus. You are urged to
read both this prospectus supplement and the prospectus in full.
IF THE TERMS OF THE NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS, THEN YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
Cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials are included to assist in locating
further related discussions. The following table of contents and the table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
ii
<PAGE>
TABLE OF CONTENTS
PAGE
Summary......................................................................S-1
Risk Factors.................................................................S-8
Concentrations of the obligors and the equipment underlying the
contracts in particular geographic jurisdictions may result in
losses on your notes....................................................S-8
Prepayments of principal may adversely affect the yield on your
note....................................................................S-8
Payments on the notes are primarily funded by collections on the
contract pool; if credit enhancement is exhausted for your class
of notes, losses on the contracts will lead to losses on your
notes...................................................................S-9
The bankruptcy of the originator could lead to delays in payments
or losses on your notes.................................................S-9
[Because the ratings of the Class A notes are dependent upon the
creditworthiness of the note insurer, a downgrade of the note
insurer could cause a downgrade of the Class A notes.]..................S-9
Forward-Looking Statements..................................................S-10
Defined Terms...............................................................S-10
Transaction Overview........................................................S-10
The Transaction..........................................................S-10
The Contract Pool...........................................................S-11
The Contracts............................................................S-11
The Equipment Subject to the Contracts...................................S-13
Subsequent Contracts.....................................................S-13
Substitutions and Modifications..........................................S-13
The Originator And The Servicer.............................................S-24
[Description Of Originator And Its Originating Practices]...................S-24
[Description Of Servicer And Its Servicing Standards].......................S-24
[Description Of Servicer's Delinquency Experience]..........................S-24
Formation of the Trust......................................................S-24
The Owner Trustee........................................................S-24
Description of the Notes....................................................S-24
The Offered Notes........................................................S-25
The Security for the Notes...............................................S-25
Conveyance of Receivables................................................S-26
Representations and Warranties of the Originator.........................S-27
Indemnification..........................................................S-27
Servicer Advances........................................................S-28
Flow of Funds............................................................S-29
Withholding..............................................................S-31
Reports to Noteholders...................................................S-31
Optional Redemption......................................................S-32
Servicing................................................................S-32
The Servicer Not to Resign...............................................S-33
Events of Servicing Termination..........................................S-33
Rights Upon an Event of Servicing Termination............................S-34
Events of Default........................................................S-35
Amendment................................................................S-36
The Indenture Trustee and the Back-up Servicer..............................S-37
Duties and Immunities of the Indenture Trustee...........................S-37
Duties of the Back-up Servicer...........................................S-38
Prepayment and Yield Considerations.........................................S-38
Weighted Average Lives of the Offered Notes..............................S-39
[The Note Insurance Policy].................................................S-43
The Note Insurer............................................................S-46
[Description of the Note Insurer]...........................................S-46
Federal Income Tax Considerations...........................................S-46
Classification of Investment Arrangement.................................S-47
Taxation of Holders......................................................S-47
iii
<PAGE>
Backup Withholding and Information Reporting................................S-49
ERISA Considerations........................................................S-49
Legal Investment............................................................S-50
Underwriting................................................................S-50
Additional Information......................................................S-52
Experts.....................................................................S-52
Legal Matters...............................................................S-52
Ratings.....................................................................S-52
Glossary of Terms...........................................................S-53
iv
<PAGE>
SUMMARY
This summary highlights selected information from this document and does not
contain all of the information that you need to consider in making an investment
decision. To understand all of the terms of the offering of the notes, you
should read carefully this entire document and the accompanying prospectus.
RELEVANT PARTIES
The Trust.................... _______ Equipment Contract Trust 200_-_, a
__________ statutory business trust. The
principal executive office of the trust is in
____________________, in care of the owner
trustee, at the address of the owner trustee
specified below.
The Depositor................ PaineWebber Asset Acceptance Corporation, a
Delaware corporation. The principal executive
office of the depositor is located at 1285
Avenue of the Americas, New York, New York
10019, and its telephone number is (212)
713-2000.
The Transferors.............. _____________________ and
______________________, each of which is owned
by the originator. The principal executive
office of the each of the transferors is at
______________________________________________,
and their telephone number is
__________________.
The Originator............... _________________________________, a
_______________________, originated or
purchased the contracts. For a description of
the business of the originator, see "The
Originator and the Servicer" in this prospectus
supplement.
The Servicer................. ______________________________ will act as
servicer of the contracts. For a description
of the business of the servicer, see "The
Originator and the Servicer" in this prospectus
supplement. The address of the servicer is
_______________________________________________
and its telephone number if ________________.
The Indenture Trustee and the
Back-up Servicer........... The ____________________, a ___________________.
The corporate trust office of the indenture
trustee is located at __________________________
________________________________________________,
and its telephone number is ___________________.
For a description of the indenture trustee and its
responsibilities
S-1
<PAGE>
with respect to the notes, see "The Indenture
Trustee and the Back-up Servicer" in this
prospectus supplement.
The Owner Trustee............ ________________________________________________,
a ______________________________. The
corporate trust office of the owner trustee is
located at _____________________________________
_____________________________________________,
and its telephone number is
______________________. For a description of the
owner trustee and its responsibilities with
respect to the notes, see "Formation of the
Trust--The Owner Trustee" in this prospectus
supplement.
The Collateral Agent......... _______________________________________________,
a _________________________. The corporate
trust office of the collateral agent is located
at _____________________________________________
_______________________________________________,
and its telephone number is __________________.
[The Note Insurer............ _______________________________________________,
a ___________________________________. The note
insurer will issue a financial guaranty insurance
policy for the benefit of the holders of the Class
A notes. For a description of the business and
selected financial information of the note
insurer, see "The Note Insurance Policy" and
"Description of the Note Insurer" in this
prospectus supplement.]
The Rating Agencies.......... ________________________________________________
and __________________________________ will issue
ratings with respect to the Class A and Class B
notes.
THE NOTES AND THE
RESIDUAL INTERESTS......... The ___________ Equipment Contract Trust 200_-_
will issue 5 classes of its equipment contract-
backed notes, series 200_-_ the Class A-1 notes,
the Class A-2 notes, the Class A-3 notes, the
Class A-4 notes and the Class B notes. The notes
are being offered to you by this prospectus
supplement.
Each class of notes will be secured primarily by a
pool of receivables consisting of direct finance
leases and commercial loans and the security
interests in the underlying equipment.
S-2
<PAGE>
Each class of notes will accrue interest at an
interest rate, have an original principal balance
and have a final stated maturity date as specified
below:
Initial Final Stated
Interest Rate Balance Maturity
------------- ------- ------------
%
The trust will also issue residual interests. The
residual interests will represent the entire
beneficial ownership interest in the trust
remaining after payments on the notes have been
made. The residual interest holders will be
entitled to receive specified payments on each
payment date, but only to the extent that all
payments due under the notes have been made to the
noteholders on that payment date. The residual
interests are not offered by this prospectus
supplement.
PAYMENTS..................... Payments on the notes will be made on each
payment date to the holders of record on the
record date. Payments to a holder will be made
in an amount equal to the holder's percentage
interest of the total amount distributed to the
holder's class of notes on that distribution
date.
o Payment Dates. Payments will be made on
the 15th day of each month, or, if the
15th is not a business day, on the next
business day, beginning on ________, 200_.
o Record Dates. The record date for the
notes will be the last calendar day of
the month preceding a payment date, or,
in the case of the first payment date,
the closing date.
PAYMENTS OF
INTEREST................... On each payment date, each class of notes is
entitled to receive its current interest.
o Current Interest. The current interest
for a payment date is the interest which
accrues on a class of notes at that
class's note rate on the outstanding
principal balance of the class during the
accrual period.
o Accrual Period. The accrual period for a
payment date is the period from the
preceding payment date up to, but excluding,
the current payment date.
S-3
<PAGE>
All computations of interest accrued on the Class
A-1 notes will be made on the basis of the actual
number of days in the accrual period and a 360-day
year. All computations of interest accrued on the
other classes of notes will be made on the basis
of a 360-day year consisting of twelve 30-day
months.
PAYMENTS OF
PRINCIPAL.................. The holders of the notes and the residual
interests are generally entitled to receive
payments of principal on each payment date in
an aggregate amount equal to the sum of the
scheduled payments, final scheduled payments
and any recoveries on defaulted contracts
received on the contract pool during the
preceding calendar month. The holders of the
most senior class of notes outstanding are also
entitled to receive additional principal
payments on each payment date in an aggregate
amount equal to the aggregate amount of
prepayments, repurchases of contracts and
amounts received at the end of a contract's
term--up to the originator's booked residual
value for the contract-from the sale or
re-lease of the underlying equipment during the
preceding calendar month and the unpaid amount
of any contract which became a defaulted
contract during the preceding calendar month.
However, in accordance with the subordination
provisions of the transaction, principal payments
will be made first, to the Class A notes, second,
to the Class B notes and third, to the residual
interests. Moreover, all principal payments on the
Class A notes will be made sequentially, so that
100% of the principal payments made to the Class A
notes will be made to the outstanding class of
Class A notes with the lowest numerical
designation-i.e. the Class A-1 notes-until that
class is reduced to zero.
However, if certain restricting events relating to
loss or delinquency levels on the pool occur,
principal payments to the Class B noteholders and
the residual holders may be suspended and those
payments paid to the Class A noteholders or, after
all of the Class A notes have been retired, to the
Class B noteholders, as an additional payment of
principal. This reallocation of payments will
continue until the restricting event is cured,
waived or the Class A notes or Class B notes, as
applicable, are retired.
This general description of distributions of
principal and interest on the notes is subject to
floors and restricting events which may result in
the reallocation of payments.
S-4
<PAGE>
We refer you to "Description of the Notes--Flow of
Funds" in this prospectus supplement for further
information regarding the payment of interest and
principal on the notes.
CREDIT ENHANCEMENT........... Credit enhancement is provided by means of the
subordination [and, for the Class A notes, the
note insurance policy.]
SUBORDINATION................ The Class A notes are senior to the Class B
notes, which are senior to the residual
interests. More senior classes are entitled to
principal payments prior to the subordinate
classes or interests, which provides credit
enhancement for the senior classes. Losses
resulting from defaults on the underlying
contracts will be absorbed first, by the
residual interest holders, second, by the Class
B noteholders, and third, by the Class A
noteholders.
[THE NOTE INSURANCE
POLICY].................... [_____________________ will issue a financial
guaranty insurance policy for the benefit of
the holders of the Class A notes.
Under the note insurance policy, the note insurer
will be obligated to pay:
o on any payment date, any shortfall in the
amount of interest due to the Class A
noteholders,
o on any payment date, the amount, if any,
by which the outstanding principal
balance of the Class A notes, after
giving effect to all other distributions
on such payment date, exceeds the
outstanding aggregate discounted
principal balance of the pool and the
collateral value of the amount on deposit
in the pre-funding account, and
o on the final scheduled maturity date for
a Class of Class A notes, any shortfall
in the funds available to pay the
outstanding principal balance of that
class.]
THE CONTRACTS................ The principal source of payment for the notes
will be the payments received from the pool of
contracts. You should not rely on the sale of
the underlying leased equipment for payments on
your note.
The contracts have the following characteristics:
S-5
<PAGE>
o The contracts are small-ticket equipment
leases and commercial loans, with an
initial aggregate discounted principal
balance expected to be approximately
$__________ on the closing date.
o The discounted principal balance of a
contract at any time will be calculated
by discounting the remaining scheduled
payments and any final scheduled payment
on the contract at a discount rate equal
to ______%.
o The contracts are triple-net leases,
which means that the obligor is required
to pay all taxes, maintenance and
insurance associated with the leased
equipment.
o The contracts are noncancellable by the
obligors.
o A contract cannot be prepaid unless the
obligor pays at least the outstanding
discounted contract principal balance of
the contract and any other delinquent
scheduled payments due under the contract.
o All payments under the contracts are
absolute, unconditional obligations of the
obligors.
o The contracts provide that the payments
are not subject to set-off or reduction
without the lessor's consent.
PRE-FUNDING
Pre-funding Account.......... On the closing date, approximately $__________
will be deposited into a pre-funding account.
These funds will be used from time to time, on or
before ____________, 200_, to fund the acquisition
of subsequent contracts for addition to the pool.
To the extent that any amounts on deposit in the
pre-funding account are not used to purchase
subsequent contracts by ____________, 200_, the
trust will apply these amounts as a pro rata
prepayment of the principal balance of the notes
on the payment date immediately succeeding the end
of the pre-funding period.
SERVICING OF
THE CONTRACTS.............. ________________________ will act as servicer
and will be obligated to service and administer
the contracts.
S-6
<PAGE>
OPTIONAL REDEMPTION.......... The servicer may redeem the notes on any payment
date after the aggregate outstanding principal
balance of the notes is less than or equal to ___%
of the original aggregate principal balance of the
notes.
If a redemption occurs, you will receive a final
distribution equaling the entire unpaid principal
balance of your note, plus any accrued and unpaid
interest on your note.
FEDERAL INCOME
TAX CONSIDERATIONS......... Cadwalader, Wickersham & Taft, special tax
counsel to the trust, is of the opinion that,
for federal income tax purposes,
o the notes will be treated as debt, and
o the trust will not be treated as an
association, or publicly traded
partnership, taxable as a corporation.
By your acceptance of a note, you agree to treat
the notes as debt.
ERISA CONSIDERATIONS......... Subject to the considerations and conditions
described under "ERISA Considerations" in the
prospectus and in this prospectus supplement,
pension, profit-sharing or other employee benefit
plans, as well as individual retirement accounts
and types of Keogh Plans, may purchase the notes.
Investors should consult with their counsel
regarding the applicability of ERISA before
purchasing a note.
RATINGS...................... The trust will not issue the notes unless they
have been assigned the following ratings:
CLASS
----------- ----------- ----------- -----------
A-1
A-2
A-3
A-4
B
These ratings may be lowered, qualified or
withdrawn by the rating agencies.
S-7
<PAGE>
RISK FACTORS
Before making an investment decision, you should carefully consider the
following risks in addition to the risk factors discussed in the prospectus
which we believe describe the principal factors that make an investment in the
notes speculative or risky. In particular, payments on your notes will depend on
payments received on and other recoveries with respect to the equipment
contracts. Therefore, you should carefully consider the risk factors relating to
the loans. Unless otherwise noted, all statistical percentages are based upon
the contract pool that existed on a statistical calculation date of
_____________, 200_.
CONCENTRATIONS OF THE OBLIGORS AND THE EQUIPMENT UNDERLYING THE CONTRACTS IN
PARTICULAR GEOGRAPHIC JURISDICTIONS MAY RESULT IN LOSSES ON YOUR NOTES.
As of the statistical calculation date, the obligors and underlying equipment
with respect to approximately _____% and _____% of the contracts were located in
the states of ____________ and ______________, respectively. To the extent
adverse events or economic conditions are particularly severe in these
jurisdictions or in the event an obligor or group of obligors in these
jurisdictions were to experience financial difficulties due to the economic
conditions specific to these jurisdictions, the delinquency and loss experience
of the contract pool could be adversely impacted and you could experience delays
in receiving payments or suffer losses on your note.
PREPAYMENTS OF PRINCIPAL MAY ADVERSELY AFFECT THE YIELD ON YOUR NOTE.
Payments on the contracts may include several types of prepayments. These
prepayments include partial and full prepayments by the obligor, payments upon
the liquidation of defaulted contracts and payments by the originator or the
servicer on account of breaches of representations and warranties concerning the
receivables. These prepayments will be paid to the noteholders in reduction of
the principal balance of the notes. The risk of reinvesting these early payments
of the principal will be borne by you and we cannot assure you that you will be
able to reinvest them at a yield equaling or exceeding the yield on your note.
The yield to maturity on notes purchased at premiums or discounts to par will
be extremely sensitive to the rate of prepayments. You should consider, in the
case of notes purchased at a discount, the risk that a slower than anticipated
rate of prepayments on the contracts could result in an actual yield that is
less than the anticipated yield and, in the case of any notes purchased at a
premium, the risk that a faster than anticipated rate of prepayments on the
contracts could result in an actual yield that is less than the anticipated
yield.
In addition, if the funds on deposit in the pre-funding account are not fully
applied to the purchase of subsequent contracts during the pre-funding period,
the remaining funds will be used to make a principal prepayment on the notes
following the end of the pre-funding period. The purchase of subsequent
contracts is dependent on the ability of the originator to originate sufficient
subsequent contracts that meet the eligibility criteria described in this
prospectus supplement. The ability of the originator to originate subsequent
contracts may be affected by a variety of social and economic factors,
including:
o interest rates;
S-8
<PAGE>
o unemployment levels;
o the rate of inflation; and
o consumer perception of economic conditions generally.
If the originator does not originate sufficient subsequent contracts, there
will be a prepayment on the notes. The risk of reinvesting a prepayment of the
principal will be borne by you and there can be no assurance that you will be
able to reinvest them at a yield equaling or exceeding the yield on your note.
PAYMENTS ON THE NOTES ARE PRIMARILY FUNDED BY COLLECTIONS ON THE CONTRACT POOL;
IF CREDIT ENHANCEMENT IS EXHAUSTED FOR YOUR CLASS OF NOTES, LOSSES ON THE
CONTRACTS WILL LEAD TO LOSSES ON YOUR NOTES.
The principal source of funds for the repayment of the notes are the
collections on the contract pool. Thus, losses on the contract pool may cause
losses on your note. The structure of the transaction provides for a limited
level of credit enhancement for the notes by means of subordination. The
residual interests are in a first-loss position. Losses on the contract pool
will be allocated to the residual interests prior to any losses being allocated
to the notes. The Class B notes are in a second-loss position, which means that
investors in the Class B notes are likely to suffer losses if the residual
interests are exhausted.
In addition, high losses or delinquencies on the contract pool may trigger a
restricting event. If a restricting event occurs, principal payments on the
Class B notes will be suspended and reallocated to the Class A noteholders. This
allocation will continue until the restricting event is cured or the Class A
notes are retired. This allocation would change the expected weighted average
life of the notes and could adversely affect the yield on your note.
THE BANKRUPTCY OF THE ORIGINATOR COULD LEAD TO DELAYS IN PAYMENTS OR LOSSES ON
YOUR NOTES.
If the originator, or the third-party companies from which the originator
purchased the contracts, were to file for bankruptcy, the bankruptcy trustee
might seek to repudiate the contracts and/or claim an interest in the contract
pool. This attempt, even if unsuccessful, could result in delays in payments on
your note. If these attempts were successful, the recovery on the contracts
would be limited to the then current value of the contracts. Thus, the
noteholders would lose the right to future payments and could possibly incur
reinvestment losses on amounts recovered.
[BECAUSE THE RATINGS OF THE CLASS A NOTES ARE DEPENDENT UPON THE
CREDITWORTHINESS OF THE NOTE INSURER, A DOWNGRADE OF THE NOTE INSURER COULD
CAUSE A DOWNGRADE OF THE CLASS A NOTES.]
The ratings of the Class A notes will depend primarily on the
creditworthiness of the note insurer as the provider of the note insurance
policy relating to the Class A notes. Any reduction in the note insurer's
insurance financial strength or claims-paying ability ratings could result in a
reduction of the ratings on the Class A notes.]
S-9
<PAGE>
FORWARD-LOOKING STATEMENTS
In this prospectus supplement and the accompanying prospectus, we use certain
forward-looking statements. These forward-looking statements are found in the
material, including each of the tables, set forth under "Risk Factors" and
"Prepayment and Yield Considerations" in this prospectus supplement.
Forward-looking statements are also found elsewhere in this prospectus
supplement and prospectus and include words like "expects," "intends,"
"anticipates," "estimates" and other similar words. These statements are
intended to convey our projections or expectations as of the date of this
prospectus supplement. These statements are inherently subject to a variety of
risks and uncertainties. Actual results could differ materially from those we
anticipate due to changes in, among other things:
(1) economic conditions and industry competition,
(2) political and/or social conditions, and
(3) the law and government regulatory initiatives.
We will not update or revise any forward-looking statement to reflect changes
in our expectations or changes in the conditions or circumstances on which these
statements were originally based.
DEFINED TERMS
We define and use capitalized terms in this prospectus supplement and the
prospectus to assist you in understanding the terms of the offered notes and
this offering. We define the capitalized terms we used in this prospectus
supplement under the caption "Glossary of Terms" beginning on page S-[__] in
this prospectus supplement.
TRANSACTION OVERVIEW
THE TRANSACTION
Formation of the Trust and Issuance of the Residual Interests. The trust will
be formed pursuant to the terms of a Trust Agreement, dated as of _____________,
200_, between the owner trustee, the depositor and the transferors. Under the
Trust Agreement, the trust will also issue the residual interests to the
transferors, together evidencing the entire beneficial ownership interest in the
trust.
Sale of the Receivables. The receivables have been originated or purchased by
the originator pursuant to its underwriting guidelines, as described under "The
Originator and the Servicer" in this prospectus supplement. The originator will
sell the receivables to the transferors pursuant to the terms of a Receivables
Sale Agreement, dated as of _______________, 200_, among the originator and the
transferors. The Receivables Sale Agreement provides that one of the
transferors, ______________________, will acquire that portion of the
receivables which are characterized as "financial assets" under U.S. GAAP-which
consist of, among other things, the contracts, other than the contracts, if any,
which are "true" or "operating" leases-while the other transferor,
______________________, will acquire that portion of the receivables which are
not
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characterized as "financial assets" under U.S. GAAP-which consist of, among
other things, the contracts, if any, which are "true" or "operating" leases, the
ownership interest or security interest of the originator in each item of
equipment and any Residual Receipts. The transferors will sell the receivables
to the depositor pursuant to a Receivables Sale Agreement, dated as of
_____________, among the transferors and the depositor.
Servicing of the Contracts. The servicer will service the receivables
pursuant to the terms of a Sale and Servicing Agreement, dated as of
_______________, 200_, among the depositor, the servicer, the originator, the
transferors, the trust, the indenture trustee and the back-up servicer.
Sale of Contracts to the Trust. The depositor will transfer the receivables
to the trust pursuant to the Sale and Servicing Agreement.
Issuance of the Notes. Pursuant to the terms of an indenture, dated as of
_______________, 200_, between the trust, the servicer, the back-up servicer and
the indenture trustee, the trust will pledge the trust fund to the indenture
trustee, for the benefit of the holders of the notes and the note insurer, and
issue the notes.
[Issuance of the Note Insurance Policy. The note insurer will issue the note
insurance policy pursuant to the terms of an insurance and indemnity agreement,
dated as of _______________, 200_, among the note insurer, the trust, the
depositor, the transferors, the originator and the servicer.]
THE CONTRACT POOL
THE CONTRACTS
The contracts consist of small-ticket leases and commercial loans acquired by
the originator from third parties or originated directly by the originator or
its affiliates. The receivables consist of the contracts and certain interests
in the related equipment or other property. See "The Originator and the
Servicer" in this prospectus supplement.
The statistical information concerning the pool of contracts set forth in
this prospectus supplement is based upon the contract pool that existed on a
statistical calculation date of _______________, 200_. As of the statistical
calculation date, the contracts had an Aggregate Discounted Contract Principal
Balance of $_____________, which was calculated using a statistical discount
rate ____%. The Aggregate Discounted Contract Principal Balance of the actual
contract pool will be calculated using an actual discount rate of _____%, which
is equal to the sum of the servicing fee rate, the back-up servicing fee rate,
the indenture trustee fee rate and the Class B note rate. The Aggregate
Discounted Contract Principal Balance of the contracts in the actual contract
pool on the closing date is expected to be greater than the Aggregate Discounted
Contract Principal Balance of the contracts in the statistical contract pool as
set forth in this prospectus supplement. The additional contracts will represent
contracts acquired by the transferors on or prior to the closing date.
Between the statistical calculation date and the closing date, some
amortization of the pool is expected to occur. In addition, certain contracts
included in the pool as of the statistical calculation date may be determined
not to meet the eligibility requirements for the final contract
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pool, and may not be included in the final contract pool. While the statistical
distribution of the characteristics as of the closing date for the final
contract pool and calculated at the discount rate will vary somewhat from the
statistical distribution of those characteristics as of the statistical
calculation date and calculated at the statistical discount rate as presented in
this prospectus supplement, we do not expect that variance to be material.
In the event that the transferors do not, as of the closing date, have the
full amount of contracts which they expected, the pre-funding account will be
increased accordingly. However, the Pre-Funded Collateral Amount will in no
event exceed 25% of the Initial Aggregate Collateral Balance. Unless otherwise
noted, all statistical percentages in this prospectus supplement are measured by
the Aggregate Discounted Contract Principal Balance of the statistical contract
pool.
The contracts generally require the periodic, scheduled payment of rent or
other payments on a monthly basis, in arrears. In connection with all
calculations required to be made under the transaction documents with respect to
the determination of Discounted Contract Principal Balances, on any
determination date the Discounted Contract Principal Balance for each contract
will be calculated assuming:
(1) scheduled payments are due on the last day of each collection period;
(2) scheduled payments are discounted on a monthly basis using a 30-day month
and a 360-day year; and
(3) scheduled payments are discounted to the last day of the collection
period prior to the determination date.
The contracts have the characteristics specified in the Transfer Agreements
and the Sale and Servicing Agreement and described in this prospectus
supplement. The contracts eligible to be designated as substitute contracts or
subsequent contracts will conform to the characteristics specified in the
Transfer Agreements or subsequent Transfer Agreements, as applicable, and in
this prospectus supplement.
References in this prospectus supplement to percentages refer in each case to
the percentage of the Aggregate Discounted Contract Principal Balance of the
statistical contract pool as of the statistical calculation date.
As of the statistical calculation date, the contracts in the statistical
contract pool had the following characteristics:
o the contracts had original terms to maturity of __ to __ months, with a
weighted average original term to maturity of approximately __ months;
o the contracts had remaining terms to maturity of __ to __ months, with a
weighted average remaining term to maturity of approximately __ months;
o the Discounted Contract Principal Balances of the contracts ranged from
$________ to $__________;
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o the contracts relating to the largest obligor are equal to ____% of the
Aggregate Discounted Contract Principal Balance of the statistical
contract pool; and
o the average Discounted Contract Principal Balance is $_________.
THE EQUIPMENT SUBJECT TO THE CONTRACTS
The equipment subject to the contracts consists of equipment used in a wide
variety of businesses consistent with small-ticket equipment leasing. The
equipment and other property underlying the contracts may include, but is not
limited to, the following: equipment utilized in the offices and clinics of
dentists, medical doctors, chiropractors, optometrists, ophthalmologists,
veterinarians, and other professional service providers, restaurant equipment,
point of sale equipment, computer equipment, copier and facsimile equipment,
telecommunications equipment, automobile servicing equipment, materials handling
equipment and other general use equipment in the service sector.
SUBSEQUENT CONTRACTS
Subject to the conditions set forth below, prior to the end of the
pre-funding period, all or a portion of the balance of funds in the pre-funding
account may be released for the purchase by the trust of subsequent receivables
consisting of subsequent contracts and the related equipment.
Each subsequent contract will satisfy certain representations and warranties
set forth in the Sale and Servicing Agreement, including the following:
o No selection process materially adverse to the interest of the noteholders
[or the note insurer] was used in selecting the subsequent contracts;
o [The note insurer will have approved the acceptance by the trust of the
pledge of the subsequent contracts;]
o The indenture trustee will have released from the pre-funding account, an
amount up to ____% of the Aggregate Discounted Contract Principal Balance
of all subsequent contracts, calculated as of the date of acquisition, to
be pledged to the indenture trustee, on behalf of the trust, on the
acquisition date;
o None of the subsequent contracts then being pledged will have a final
scheduled payment date later than twelve months before the Class A-4
Maturity Date; and
o The pledge will not occur after the end of the pre-funding period.
SUBSTITUTIONS AND MODIFICATIONS
Under the Sale and Servicing Agreement, [with the consent of the note
insurer,] one or more substitute contracts and the related equipment may be
substituted for a contract and the related equipment that:
o becomes a Defaulted Contract, a Prepayment or an Early Termination
Contract or
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<PAGE>
o is required to be reacquired by the originator pursuant to the Sale and
Servicing Agreement.
Each substitute contract will be a contract which satisfies certain
representations and warranties set forth in this prospectus supplement and in
the Sale and Servicing Agreement as of the Cut-Off Date for that substitute
contract. In addition, the following conditions must be satisfied:
o With respect to contracts substituted for Defaulted Contracts, Prepayments
or Early Termination Contracts, on a cumulative basis from the initial
Cut-Off Date, the sum of the Discounted Contract Principal Balance of such
substitute contracts, as of the Cut-Off Date for the substitute contract,
would not exceed __% of the Initial Aggregate Collateral Balance;
o As of the Cut-Off Date for the substitute contract, the substitute
contracts then being pledged have an Aggregate Discounted Contract
Principal Balance that is not less than the Discounted Contract Principal
Balance of the contracts being replaced;
o As of the Cut-Off Date for the substitute contract, none of the substitute
contracts then being pledged have a final scheduled maturity date later
than _____ months before the Class A-4 Maturity Date;
o The servicer makes a good faith determination, in accordance with its
underwriting guidelines, that the credit quality of the substitute
contract is not worse than that of the contract being replaced; and
o No substitution will be permitted if, as a result of the substitution, the
sum of the scheduled payments and any Final Scheduled Payments on all
contracts, after giving effect to the substitutions, due in any collection
period thereafter would be less than the sum of the scheduled payments and
any Final Scheduled Payments which would otherwise be due in that
collection period, prior to giving effect to the substitution.
Under the Sale and Servicing Agreement, the servicer is permitted to allow an
obligor to prepay a contract in an amount not less than the Prepayment Amount.
In addition, in the event that an obligor requests an upgrade or trade-in of
equipment, the servicer may remove the equipment and related contract from the
pool, but only upon payment of an amount equal to the Reacquisition Amount.
The servicer may waive, modify or vary any term of a contract if the
servicer, in its reasonable and prudent judgment, determines that it will not be
materially adverse to the noteholders [or the note insurer]. However, the
servicer will covenant in the Sale and Servicing Agreement that,
o it will not forgive any payment of rent or principal,
o unless an obligor is in default, it will not permit any modification with
respect to a contract which would defer the payment of any scheduled
payment or Final Scheduled Payment or change the final maturity date on
any contract. However, no change in the final maturity date of any
contract will be permitted under any circumstances if the new
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maturity date for the contract is later than the maturity date of the
latest maturing contract then pledged to the trust, and
o the servicer may accept Prepayment in part or in full;
provided, however, that,
o in the event of Prepayment in full, the servicer may consent to the
Prepayment only in an amount not less than the Prepayment Amount, and
o in the event of a partial Prepayment, the servicer may consent to the
partial Prepayment only if:
(1) following the partial Prepayment, all delinquent scheduled payments
then due under the contract have been paid,
(2) the partial Prepayment is paid along with an amount equal to the
product of (x) one-twelfth, (y) the discount rate and (z) the
Discounted Contract Principal Balance of the contract prior to the
partial Prepayment and
(3) such partial Prepayment will not reduce the Discounted Contract
Principal Balance by more than the amount of the partial Prepayment.
In the case of a partial Prepayment, the servicer is required to
accurately recalculate the Discounted Contract Principal Balance of the
contract, and the allocation of scheduled payments to principal and
interest.
Under the Sale and Servicing Agreement, the servicer will manage, administer,
service and make collections on the contracts, in accordance with a servicing
standard which satisfies the terms of the Sale and Servicing Agreement, the
contracts, the servicer's current credit and collection policies and applicable
law. To the extent consistent with those terms, the Servicer will service and
administer in the same manner in which, and with the same care, skill, prudence
and diligence with which, it services and administers leases of similar credit
quality for itself or others, if any, giving due consideration to customary and
usual standards of practice of prudent institutional small-ticket equipment
finance lease servicers and, in each case, taking into account its other
obligations under the Sale and Servicing Agreement. The servicer will use
commercially reasonable best efforts consistent with the servicing standard and
its customary servicing procedures, to repossess or otherwise comparably convert
the ownership of any equipment that it has reasonably determined should be
repossessed or otherwise converted following a default under the contract and
remarket, either through sale or re-lease, the equipment and act as sales and
processing agent for equipment which it repossesses. The servicer will follow
the practices and procedures as are consistent with the servicing standard and
as it deems necessary or advisable and as is customary and usual in its
servicing of equipment leases and other actions by the servicer in order to
realize recoveries upon the contract, which may include reasonable efforts to
enforce any recourse obligations of obligors and repossessing and selling the
equipment at a public or private sale. The foregoing is subject to the provision
that, in any case in which the equipment has suffered damage, the servicer will
not be required to pay for any repair or towards the repossession of the
equipment unless it determines in its
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discretion that the repair and/or repossession will increase the proceeds and
recoveries on the equipment by an amount greater than the amount of the
expenses.
The following tables set forth certain statistical information relating to
the contract pool that existed on the statistical calculation date of
__________, 200_ and are calculated using a statistical discount rate of ____%.
Certain columns may not total 100% due to rounding.
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<PAGE>
DISTRIBUTION OF THE CONTRACTS BY
CURRENT DISCOUNTED CONTRACT PRINCIPAL BALANCE
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
RANGE OF CONTRACT CONTRACT
DISCOUNTED CONTRACT NUMBER OF PRINCIPAL PRINCIPAL
PRINCIPAL BALANCE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- -------------- --------------
$ $ $
%
----------- ---------- -------
Total...................... $ 100.00%
=========== ========== =======
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<PAGE>
DISTRIBUTION OF THE CONTRACTS BY
ORIGINAL EQUIPMENT COST
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
RANGE OF NUMBER OF PRINCIPAL PRINCIPAL
ORIGINAL EQUIPMENT COST CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
$ $ $
%
----------- ---------- -------
Total...................... $ 100.00%
=========== ========== =======
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<PAGE>
DISTRIBUTION OF THE CONTRACTS BY
TOP 10 INDUSTRIES
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
INDUSTRY CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
[Automotive dealers & service %
stations $
Auto repair, services, and
parking
Business services
Engineering & management
services
Health services
Industrial machinery and
__________
Legal services
Personal services
Printing and publishing
Services, n.e.c.]
Other
----------- ---------- -------
Total...................... $ 100.00%
=========== ========== =======
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<PAGE>
DISTRIBUTION OF THE CONTRACTS BY
EQUIPMENT TYPE
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
EQUIPMENT TYPE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
[100% Software $ %
Alarm/Security Systems
Automotive Repair Equipment
Cash Dispensing
Cash Registers
Cleaning/Janitorial Equipment
Communications Equipment
Construction Equipment
Copiers
Dental Equipment
Display Booth
Dry Cleaning
Fixtures
Furniture
General Computers
HVAC
Industrial Equipment
Medical Equipment
Mini Computers
Office Automation Equipment
Photo/Printing Equipment
Restaurant Equipment
Server Computer
Sound Systems
Vending Equipment
Workstation Computers]
Other
----------- ---------- -------
Total......................
=========== ========== =======
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<PAGE>
DISTRIBUTION OF THE CONTRACTS BY
OBLIGOR BILLING ADDRESS
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
Ohio
Oklahoma
Oregon
Pennsylvania
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<PAGE>
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
STATE CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
Rhode Island
South Carolina
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total......................
DISTRIBUTION OF THE CONTRACTS BY
REMAINING TERM TO MATURITY
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
RANGE OF REMAINING TERM (IN NUMBER OF PRINCIPAL PRINCIPAL
MONTHS) CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
----------- ---------- -------
Total......................
=========== ========== =======
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DISTRIBUTION OF THE CONTRACTS
BY ORIGINAL TERM TO MATURITY
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
RANGE OF ORIGINAL TERM (IN NUMBER OF PRINCIPAL PRINCIPAL
MONTHS) CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
----------- ---------- -------
Total......................
=========== ========== =======
DISTRIBUTION OF THE CONTRACTS
BY AGE OF CONTRACTS
PERCENTAGE
STATISTICAL OF STATISTICAL
DISCOUNTED DISCOUNTED
CONTRACT CONTRACT
NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF AGE OF CONTRACTS CONTRACTS BALANCE BALANCE
- ------------------------------- --------- ----------- --------------
GREATER LESS THAN OR
THAN EQUAL TO
- ------------- --------------
----------- ---------- -------
Total......................
=========== ========== =======
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<PAGE>
THE ORIGINATOR AND THE SERVICER
[DESCRIPTION OF ORIGINATOR AND ITS ORIGINATING PRACTICES]
[DESCRIPTION OF SERVICER AND ITS SERVICING STANDARDS]
[DESCRIPTION OF SERVICER'S DELINQUENCY EXPERIENCE]
FORMATION OF THE TRUST
The trust, _____________ Equipment Contract Trust 200_-_, is a statutory
business trust formed in accordance with the laws of the State of
________________, pursuant to the Trust Agreement, solely for the purpose of
effectuating the transactions described in this prospectus supplement. Prior to
formation, the trust will have had no assets or obligations and no operating
history. Upon formation, the trust will not engage in any business activity
other than acquiring, holding and pledging the property pledged to secure the
notes, issuing the notes and distributing payments on the notes. As described
under "Description of the Notes--Flow of Funds," a portion of the monthly
collections with respect to the contracts will be paid to the servicer as
servicing compensation and to [the note insurer,] the back-up servicer, and the
indenture trustee, as fees. All other expenses of the trust will be paid as
provided in the Trust Agreement.
THE OWNER TRUSTEE
_______________________________________________ is the owner trustee under
the Trust Agreement. _______________________________________________, is a
____________________________, the corporate trust offices of which are located
at _________________________________________________________________________.
The owner trustee's duties in connection with the trust are limited solely to
its express obligations under the Trust Agreement.
DESCRIPTION OF THE NOTES
The notes will be issued pursuant to the indenture to be entered into by the
servicer, the trust, the back-up servicer and the indenture trustee. The
servicer will provide a copy of the indenture to subsequent noteholders without
charge on written request addressed to it at ________________________________
_______________________________________________________________.
The following summary describes certain terms of the Transfer Agreements, the
Sale and Servicing Agreement and the indenture, does not purport to be complete,
and is subject to and qualified in its entirety by reference to the Transfer
Agreements, the Sale and Servicing Agreements and the indenture. Wherever
provisions of the Transfer Agreements, the Sale and Servicing Agreements and the
indenture are referred to, those provisions are incorporated in this prospectus
supplement by reference.
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<PAGE>
THE OFFERED NOTES
The obligations evidenced by the offered notes are recourse to the assets of
the trust only and are not recourse to the originator, the servicer, the owner
trustee, the indenture trustee, or any other person.
The trust will agree in the indenture and in the respective offered notes to
pay, in each case, at the times, from the sources and on the terms and
conditions set forth in the indenture and in the respective offered notes,
o to the holders of each Class A notes (a) an amount of principal equal to
the initial note principal balance of their class and (b) Class A Note
Interest for their class, and
o to the Class B noteholders (a) an amount of principal equal to the initial
Class B note principal balance and (b) Class B Note Interest.
The indenture trustee is required to make payments on the offered notes on
each payment date.
In the aggregate, the Class A notes and the Class B notes to be issued under
this prospectus supplement will equal the sum of (x) approximately ____% of the
initial Aggregate Discounted Contract Principal Balance of the contracts as of
the initial Cut-Off Date and (y) 100% of the initial amount on deposit in the
pre-funding account. Each class of offered notes will initially be issued in
book-entry form only through DTC in minimum denominations of $________ and
$________ increments above $________ up to the initial note principal balance of
each class.
[The Class A Insured Distribution Amount due to the Class A noteholders on
each payment date is insured by the note insurer pursuant to the note insurance
policy. See "The Note Insurance Policy" and "Description of the Note Insurer" in
this prospectus supplement.]
THE SECURITY FOR THE NOTES
The notes will be secured by:
o the contract pool and recoveries on account of the equipment securing the
contracts;
o any guaranties of an obligor's obligations under a contract, including any
guaranties of third-party originators;
o with respect to any contract, an original, executed counterpart of the
contract, any UCC financing statement filed in accordance with the
originator's policies and procedures, as described below, and other
original documents related to the contract, the application of the related
obligor, documentation evidencing the information with respect to the
contract input into the computerized electronic contract management system
maintained by the servicer for all contracts and other agreements similar
to the contracts, and any other information required by the servicer
pursuant to its customary policies and procedures;
o the insurance policies maintained by the obligors with respect to the
equipment and the proceeds of those insurance policies;
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o any rights against the originator including the right to instruct the
originator to exercise any unassignable rights of enforcement under the
contracts and any related guaranties;
o funds from time to time deposited in the collection account; and
o and any and all income and proceeds of the foregoing.
The servicer will be required to take the actions required to perfect the
trust's interest in the receivables except as discussed below with respect to
the equipment. If the originator, the transferors, the servicer, the collateral
agent or the indenture trustee, while in possession of an item of receivables,
sells or pledges and delivers the receivables to another party, in violation of
the Transfer Agreements, the indenture and the Sale and Servicing Agreement,
there is a risk that the purchaser could acquire an interest in the receivables
having priority over the trust's interest.
The originator, the transferors and the trust will file financing statements
in accordance with the UCC evidencing the pledge of the trust assets to the
indenture trustee as follows:
o a UCC-1 financing statement against the equipment, naming the obligor as
debtor and either (x) the originator as secured party or (y) the
third-party originator, as secured party, in which case the originator has
an assignment of such security interest;
o a UCC-1 financing statement with respect to the assignment of all
contracts and the related security interest in the equipment to the
transferors pursuant to the related Receivables Sale Agreement;
o a UCC-1 financing statement with respect to the pledge of all contracts
and the related security interest in the equipment to the indenture
trustee, on behalf of the trust, pursuant to the indenture; and
o UCC-1 financing statements in a majority of the 50 states against the
equipment, (x) naming the originator as debtor, [____________], as secured
party, and the indenture trustee, as assignee, and (y) naming
[____________], as debtor, and the indenture trustee, as secured party.
Except as described in the immediately preceding paragraph, because of the
administrative burden and expense that would be entailed in so doing, none of
the originator, the depositor, the transferors, or the servicer has filed or
will be required to file UCC financing statements against the obligor,
identifying the equipment being leased which had an original cost of less than
$[25,000] as collateral pledged to the indenture trustee, on behalf of the
trust. In the absence of these filings, any security interest in the related
equipment will not be perfected in favor of the indenture trustee and the
indenture trustee shall have no liability with respect to such lack of
perfection. [Upon request of the note insurer, the servicer will be required to
make such filings with respect to Defaulted Contracts.]
CONVEYANCE OF RECEIVABLES
The contracts have been originated or purchased by the originator or its
affiliates. On the closing date, the originator will transfer the initial
receivables under the Receivables Sale Agreement to two transferors which are
both special-purpose finance subsidiaries created by the
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originator. The transferors will transfer the initial receivables under the
Depositor Receivables Sale Agreement to the depositor. The depositor will pledge
its interests in the receivables to the indenture trustee, on behalf of the
trust, to secure the notes for the benefit of the noteholders [and the note
insurer].
The indenture provides that the transferors may, but will not be obligated
to, designate from time to time prior to the end of the pre-funding period,
subsequent receivables to be included as part of the trust fund securing the
notes. The pre-funding period is the period beginning on the closing date and
ending on the earliest of,
o the date on which an Event of Default or a Restricting Event occurs,
o the close of business on _____________, 200_, and
o the date on which the amount on deposit in the pre-funding account falls
below $________.
The originator, in its capacity as originator, will make certain
representations and warranties with respect to, among other things, the
contracts and the underlying equipment, which representations and warranties
will be collaterally assigned to the indenture trustee under the transaction
documents.
The collateral agent, on behalf of the indenture trustee, will have
possession of the contracts and the contract files, and the servicer will retain
copies of any other documents which relate to the receivables, any related
evidence of insurance and payment, any delinquency and any related reports as
maintained by the servicer in the ordinary course of business with respect to
each receivable. Prior to the transfer of the receivables to the transferors,
the originator will cause its electronic ledger to be marked to show that the
receivables have been transferred to the transferors and then pledged to the
trust. The transferors will then file UCC financing statements in favor of the
Indenture Trustee reflecting the pledge of the receivables in certain
jurisdictions, as required by the Transfer Agreements and the Sale and Servicing
Agreement.
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The originator will make certain warranties in the Sale and Servicing
Agreement with respect to the contracts, the benefits of which will be assigned
to the indenture trustee. These warranties relate to the quality and
characteristics of the contracts and the equipment.
Under the terms of the Sale and Servicing Agreement, following its discovery
or receipt of notice of a breach of a warranty that materially adversely affects
any receivable, which breach has not been cured or waived in all material
respects, the originator will be obligated to reacquire that receivable and
deposit the Reacquisition Amount in the collection account on or before the
earlier of (x) two weeks after discovery or receipt of notice of such breach or
(y) the end of the calendar month.
INDEMNIFICATION
The Sale and Servicing Agreement will provide that the originator will defend
and indemnify the trust, the indenture trustee, the owner trustee, [the note
insurer] and the noteholders against
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any and all losses, claims, damages and liabilities to the extent, but only to
the extent, that the same have been suffered by any such party by virtue of:
(x) a breach by the originator of its obligations under the Servicing
Agreement, other than breach of the originator's representations and
warranties, with respect to which the sole remedy is expressly limited to the
originator's reacquisition of the affected receivables and the remittance of
the Reacquisition Amount by the originator or
(y) in the case of (a) the indenture trustee, its performance of its
duties, except to the extent that the loss, claim, damage or liability
resulted from the indenture trustee's breach of the terms of the indenture,
negligence or willful misconduct or (b) the owner trustee, its performance of
its duties, except to the extent that the loss, claim, damage or liability
resulted from the owner trustee's breach of the terms of the Trust Agreement,
gross negligence or willful misconduct.
The Sale and Servicing Agreement will provide that the servicer will defend
and indemnify the trust, the owner trustee, [the note insurer] and the
noteholders against any and all costs, expenses, losses, damages, claims and
liabilities, arising out of or resulting from the use, repossession or operation
by the servicer or any affiliate of the servicer of any equipment, as well as
from the failure of the servicer to perform its duties under the Sale and
Servicing Agreement. The servicer's obligations to indemnify the trust, [the
note insurer,] and the noteholders for acts or omissions of the servicer will
survive the removal of the servicer but will not apply to any acts or omissions
of a successor servicer. This indemnification does not extend to indirect,
incidental, special or consequential damages.
SERVICER ADVANCES
In the event that any obligor fails to remit the full scheduled payment or
Final Scheduled Payment due from it with respect to a collection period by the
determination date related to the collection period, the servicer is required to
make a servicer advance from its own funds of an amount equal to the unpaid
portion of a scheduled payment or Final Scheduled Payment if the servicer, in
its sole discretion, determines that eventual recovery of the servicer advance
is likely from collections from or on behalf of the related obligor. The
Servicing Agreement provides for the reimbursement of the servicer for these
servicer advances from funds available for distribution in the collection
account on each subsequent payment date before the required payments to
noteholders have been made as set forth in "Flow of Funds" below in this
prospectus supplement. If a contract becomes a Delinquent Contract, and the
servicer determines that recovery of further servicer advances is unlikely, the
servicer will not be required to make a servicer advance or partial servicer
advance, but will be required to enforce its remedies, including acceleration,
under that contract. In addition, if at any time the originator or an affiliate
is no longer the servicer, servicer advances will be permitted but will not be
required. The Sale and Servicing Agreement will provide that, in the event that
the servicer determines that any servicer advances previously made are not
recoverable from the related obligor, or any Delinquent Contracts for which the
servicer has made a servicer advance then become Defaulted Contracts, the
indenture trustee will draw on the collection account to repay the servicer
advances as set forth in "Flow of Funds" below in this prospectus supplement.
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FLOW OF FUNDS
On each determination date, the servicer is required to deliver to the
indenture trustee, [the note insurer] and each rating agency a servicer's
certificate setting forth the information needed to make payments on the
upcoming payment date.
On each payment date, the indenture trustee will be required to apply the
Available Funds then on deposit in the collection account to make the following
payments in the following order of priority, to the extent funds are available
for the payments:
(1) to the servicer, an amount equal to any unreimbursed servicer advances,
to the extent not previously reimbursed, other than servicer advances to be made
on the payment date for the related collection period;
(2) to the servicer, an amount equal to the servicer fee then due, together
with any accrued and unpaid servicer fees from prior collection periods;
(3) to the servicer, the servicing charges, if any, deposited in the
collection account;
(4) to the back-up servicer, an amount equal to the back-up servicer fee then
due, together with any accrued and unpaid back-up servicer fees from prior
collection periods;
(5) [to the note insurer, an amount equal to the Premium Amount then due,
together with any accrued and unpaid Premium Amounts from prior collection
periods;]
(6) to the indenture trustee, the indenture trustee fees then due, together
with any indenture trustee fees from prior collection periods;
(7) to the indenture trustee, the Indenture Trustee Expenses then due,
together with any Indenture Trustee Expenses from prior collection periods, in
an amount not to exceed in the aggregate $______ over the life of the
transaction;
(8) to the Class A noteholders, the sum of the Class A Note Interest for each
class of Class A notes for that payment date, the amount being applied to each
of these classes pari passu based on the Class A Note Interest due on each of
these classes;
(9) as long as no Cumulative Loss Event has occurred, to the Class B
noteholders, the Class B Note Priority Interest for the related collection
period, to the extent the disbursement of the Class B Note Priority Interest
will not result in or cause:
(a) an Available Funds Shortfall or
(b) any unpaid Reimbursement Amount on the payment date;
(10) until the note principal balance of each class of Class A notes has been
reduced to zero, to the Class A noteholders, the sum of:
(a) the Class A Base Principal Distribution Amount for that payment date,
and
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(b) any Class A Overdue Principal,
the amount to be applied sequentially, with 100% of the amount being applied to
reduce the note principal balance of the outstanding class of Class A notes
having the lowest numerical designation to zero before applying any principal
payment to the next class;
(11) [to the note insurer, the unpaid Reimbursement Amount, if any;]
(12) if a Cumulative Loss Event has occurred, to the Class B noteholders, the
Class B Note Priority Interest for the related collection period;
(13) to the Class B noteholders, the Class B Note Junior Interest for the
related collection period;
(14) until the Class B note principal balance has been reduced to zero, to
the Class B noteholders, the sum of (a) the Class B Base Principal Distribution
Amount for the payment date, and (b) any Class B Overdue Principal, allocated,
first, to the Class B Collateralized Balance, and, second, to the Class B
Uncollateralized Balance; provided, however, that if a Restricting Event exists
on the payment date and the outstanding Class A note principal balance on the
payment date-after giving effect to all payments of principal to the Class A
noteholders made on the payment date pursuant to clause 10-exceeds zero, the
amount otherwise required to be paid to the Class B noteholders under this
clause 14, will instead be paid to the Class A noteholders pursuant to this
clause 14 during such time as a Restricting Event is continuing as an additional
reduction of the Class A note principal balance up to the amount necessary to
reduce the Class A note principal balance to zero, the amount being paid in the
sequential-pay fashion described in clause 10 above;
(15) to the indenture trustee, the Indenture Trustee Expenses then due,
together with any Indenture Trustee Expenses from prior collection periods, in
excess of the $______ limitation set forth in clause 7, in an amount not to
exceed in the aggregate $______ over the life of the transaction;
(16) to the servicer, any other amounts due the servicer as expressly
provided in the Sale and Servicing Agreement; and
(17) to the residual interest holders, any remaining Available Funds;
provided, however, that:
(A) if a Restricting Event does not exist on the payment date, but
if any payment of funds to the residual interest holders on the payment
date would result in the Residual Balance being less than _% of the
Initial Aggregate Collateral Balance, the amount will not be paid to
the residual interest holders but will instead be paid to the most
senior class of notes outstanding, and, in the case of the Class A
notes, such amount being paid in the sequential-pay fashion described
in clause 10 above, and
(B) if a Restricting Event exists on the payment date, the amount
otherwise required to be paid to the residual interest holders under
this clause 17 will instead be
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paid to the most senior class of notes outstanding, and, in the case of
the Class A notes, the amount being paid in the sequential-pay fashion
described in clause 10 above.
WITHHOLDING
The indenture trustee is required to comply with all applicable federal
income tax withholding requirements respecting payments to noteholders of
interest with respect to the offered notes. The consent of the noteholders is
not required for this withholding. In the event the noteholder is other than
DTC, then in the event that the indenture trustee does withhold or causes to be
withheld any amount from interest payments or advances of interest payments to
any noteholders under federal income tax withholding requirements, the indenture
trustee will indicate the amount withheld annually to those noteholders.
REPORTS TO NOTEHOLDERS
On each payment date, the indenture trustee will furnish or cause to be
furnished with each payment to noteholders, a statement prepared by the servicer
setting forth the following information:
(1) With respect to a statement to a Class A noteholder or a Class B
noteholder, the amount of the payment allocable to the payment of the Class A
Base Principal Distribution Amount or Class B Base Principal Distribution Amount
and Class A Overdue Principal or Class B Overdue Principal, as applicable;
(2) With respect to a statement to a Class A noteholder or a Class B
noteholder, the amount of the payment allocable to Class A Note Current Interest
or Class B Note Current Junior Interest or Class B Note Current Priority
Interest and Class A Overdue Interest or Class B Overdue Junior Interest or
Class B Overdue Priority Interest, as applicable, for the noteholder's class;
(3) The aggregate amount of fees and compensation received by the servicer
pursuant to the Sale and Servicing Agreement for the collection period;
(4) The outstanding aggregate principal balance of each class of notes and
the ratio of the outstanding aggregate principal balance of each class of notes
to the initial aggregate principal balance of that class, after taking into
account all payments made on the payment date;
(5) The Aggregate Discounted Contract Principal Balance and the ratio of the
Aggregate Discounted Contract Principal Balance to the Initial Aggregate
Collateral Balance, after taking into account all payments made on that payment
date;
(6) The total unreimbursed servicer advances with respect to the related
collection period;
(7) The amount of Defaulted Contract Recoveries for the related collection
period and the Aggregate Discounted Contract Principal Balances for all
contracts that became Defaulted Contracts during the related collection period,
calculated immediately prior to the time the contracts became Defaulted
Contracts;
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(8) The total number of contracts and the Aggregate Discounted Contract
Principal Balances of those contracts, together with the number and Aggregate
Discounted Contract Principal Balances of all contracts as to which the obligors
were one, two, three or four scheduled payments delinquent, and Delinquent
Contracts reconveyed; and
(9) During the pre-funding period only, the amount on deposit in the
pre-funding account and the capitalized interest account after giving effect to
the withdrawals from those accounts on the payment date.
In addition, by January 31 of each calendar year following any year during
which the notes are outstanding, commencing January 31, 200__, the indenture
trustee will furnish to each noteholder of record at any time during the
preceding calendar year, information as to the aggregate of amounts reported
pursuant to items (1) and (2) above for the calendar year to enable noteholders
to prepare their federal income tax returns.
OPTIONAL REDEMPTION
The indenture provides that, following the determination date on which the
aggregate outstanding note principal balance of the notes is less than __% of
the aggregate initial note principal balance of the notes, the servicer will
have the option to cause the early retirement of the notes. In the event of a
redemption, the entire outstanding Class A note principal balance and Class B
note principal balance, together with accrued interest thereon at the related
note rate, will be required to be paid to the Class A noteholders and the Class
B noteholders, respectively, on the payment date[, and all amounts owed to the
note insurer will be required to be paid to the note insurer, on the payment
date].
SERVICING
The servicer, as an independent contractor on behalf of the trust and for the
benefit of the noteholders [and the note insurer,] as their interests may
appear, will be responsible for managing, servicing and administering the
receivables and enforcing and making collections on the contracts and any
insurance policies and for the enforcing of any security interest in any item of
equipment, all as set forth in the Sale and Servicing Agreement. The servicer's
responsibilities will include collecting and posting of all payments, responding
to inquiries of obligors, investigating delinquencies, accounting for
collections, furnishing monthly and annual statements to the indenture trustee
[and the note insurer] with respect to distributions, making servicer advances,
providing appropriate federal income tax information to noteholders, collecting
and remitting sales and property taxes on behalf of taxing authorities and
maintaining the perfected security interest of the trust in the equipment and
the contracts.
The servicer has agreed to manage, administer and service the receivables and
to enforce and make collections on the receivables and any insurance policies,
exercising the degree of skill and care consistent with that which the servicer
customarily exercises with respect to similar property owned, managed or
serviced by it.
For its servicing of the contracts, the servicer will receive servicing
compensation including the monthly servicer fee for each collection period,
which is payable on the next succeeding
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payment date, and servicing charges consisting of certain fees paid by obligors,
including late payment fees.
The servicing compensation will compensate the servicer for customary
contract servicing activities to be performed by the servicer for the trust,
additional administrative services performed by the servicer on behalf of the
trust and expenses paid by the servicer on behalf of the trust.
THE SERVICER NOT TO RESIGN
The Servicing Agreement will provide that the servicer may not resign from
its obligations and duties as servicer under the Sale and Servicing Agreement,
except upon [consent of the note insurer or] a determination that the servicer's
performance of its duties is no longer permissible under applicable law.
EVENTS OF SERVICING TERMINATION
An "Event of Servicing Termination" under the Sale and Servicing Agreement
includes the following:
(1) a change of "control" of the servicer-"control" having the meaning
ascribed to it in the Rules and Regulations under the Securities Exchange Act of
1934, as amended [unless the note insurer has determined that such change in
control does not have a material adverse effect on the interests of the note
insurer];
(2) if the servicer fails to make:
(x) any servicer advance within two business days of the related
determination date, or
(y) any other payment or deposit required under the Sale and Servicing
Agreement within three business days of the date the payment or
deposit is required to be made, but not more than once in any
collection period;
(3) if the servicer fails to submit a servicer's certificate within two
business days following knowledge or notice of non-receipt;
(4) (x) if the servicer fails to observe or perform in any material respect
any other covenant or agreement in the Sale and Servicing Agreement or the notes
or
(y) if any representation or warranty of the servicer in the Sale and
Servicing Agreement is incorrect, and the failure or breach
materially and adversely affects the rights of the indenture
trustee, the note insurer or the noteholders and continues
unremedied for 30 days after the earlier to occur of
(A) written notice to the servicer by the indenture trustee or to
the indenture trustee or the servicer by any noteholder or the
note insurer or
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(B) the date on which any servicing officer or authorized officer
of the indenture trustee knows, or reasonably should have
known, of the failure or of the breach;
(5) upon the filing of an involuntary petition in bankruptcy or the decree or
order of a court, agency or supervisory authority having jurisdiction over the
servicer for the appointment of a conservator, receiver, trustee in bankruptcy
or liquidator in any bankruptcy, insolvency or similar proceedings, and the
continuance of any such petition, decree or order undismissed or unstayed and in
effect for a period of 60 consecutive days;
(6) upon the voluntary filing of a bankruptcy petition or assignment for the
benefit of creditors, the consent by the servicer to that appointment, the
admission in writing by the servicer of its inability to pay its debts as they
become due or the determination by a court that the servicer is generally not
paying its debts as they come due;
(7) in the event that the servicer assigns or attempts to assign its rights
and duties under the Sale and Servicing Agreement except as specifically
permitted in the Sale and Servicing Agreement;
(8) a final judgment or order shall be rendered against the servicer for
payment in excess of $_________ and continues for 90 days without a stay;
(9) [upon the occurrence of any other event of servicer default specified
in the insurance agreement;]
(10) ____________________________________ shall fail to have a U.S. GAAP
net worth, excluding goodwill, of at least $__________;
(11) (x) the average Delinquency Trigger Ratio for any payment date and
the two immediately preceding payment dates exceeds ___%, or
(y) the average Net Charge-Off Ratio for any payment date and the
immediately preceding two payment dates exceeds ___%; or
(12) [any other events concerning the performance of the contract pool
required by the note insurer.]
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
If an Event of Servicing Termination has occurred and is continuing, either:
(A) the indenture trustee (1) will, at the direction of the note insurer, or
(2) may with the consent of the note insurer or
(B) the majority of the holders of the notes may [with the consent of the
note insurer], terminate all, but not less than all, of the servicer's rights
and obligations under the Servicing Agreement.
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Upon the termination, a successor servicer shall be appointed by the note
insurer or, if none has been so appointed, the back-up servicer will succeed to
all the responsibilities, duties and liabilities of the servicer under the Sale
and Servicing Agreement. However, that the back-up servicer will not:
o assume any obligation to reacquire receivables by reason of
misrepresentations or breaches of warranties,
o be required to make any servicer advance if the servicer advance would be
prohibited by applicable law or if the back-up servicer determines that
the servicer advance would not be reimbursed, or
o be liable for acts, omissions or breaches of representations or warranties
by the servicer occurring prior to transfer of the servicing functions.
Regardless of the termination, the servicer will be entitled to payment of
amounts payable to it prior to the termination for services rendered prior to
the termination. The back-up servicer also may appoint, or petition a court of
competent jurisdiction for the appointment of, a successor servicer acceptable
to the note insurer in accordance with the procedures set forth in the Sale and
Servicing Agreement.
EVENTS OF DEFAULT
Upon the occurrence of an Event of Default, the indenture trustee, upon the
direction of the Controlling Party, will declare the unpaid principal amount of
all the notes to be due and payable together with all accrued and unpaid
interest on the notes without presentment, demand, protest or other notice of
any kind, all of which are waived by the trust. An "Event of Default" includes
the following events:
(1) failure to distribute or cause to be distributed to the indenture
trustee, for the benefit of the noteholders, all or part of any payment of
interest required to be made on each payment date under the terms of such notes
or the indenture when due and payable; or
(2) failure to distribute or cause to be distributed:
(x) to the indenture trustee, for the benefit of the noteholders, on
any payment date an amount equal to the principal due on the
outstanding notes as of that payment date to the extent that
sufficient Available Funds are on deposit in the collection account
or
(y) on the Class A Maturity Date or Class B Maturity Date, as the case
may be, any remaining principal owed on the outstanding Class A
notes or Class B notes, as the case may be; or
(3) default in the performance, or breach, of any other covenant of the trust
in the indenture, and continuance of such default or breach for a period of 30
days after the earliest of:
o any officer of the trust first acquiring the knowledge thereof,
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o the indenture trustee's giving written notice thereof to the trust, or
o [the note insurer or] the holders of a majority of the then aggregate
outstanding note principal balance of the notes giving written notice
thereof to the trust and the indenture trustee; or
(4) any representation or warranty of the trust made in the indenture or any
other writing provided to the holders of the notes proves to be incorrect in any
material respect as of the time when the same has been made; provided, however,
that the breach of any representation or warranty made by the trust will be
deemed to be "material" only if it negatively affects [the note insurer or] the
noteholders, the enforceability of the indenture or the notes; or
(5) insolvency or bankruptcy events relating to the trust; or
(6) [an event of default under the insurance agreement].
[If payments on the Class A notes are accelerated, the accelerated payments
will not be covered by the note insurer under the note insurance policy and
Insured Payments on the Class A notes will remain due and payable by the note
insurer in accordance with the original terms of the note insurance policy
regardless of the acceleration of the Class A notes.]
AMENDMENT
The transaction documents may be amended by the respective parties to them at
any time, without consent of the noteholders, [but with the prior written
consent of the note insurer,] to cure any ambiguity, upon receipt of an opinion
of counsel to the servicer that the amendment will not adversely affect in any
respect the interests of any noteholder.
The transaction documents may also be amended from time to time by the
respective parties to them and the majority of the holders of the notes, [with
the prior written consent of the note insurer,] for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the transaction documents or of modifying in any manner the rights of the
noteholders. However, this amendment may not:
(a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on the receivables or payments which are
required to be made on any note without the consent of the holder of the note
and written confirmation from each rating agency that the amendment will not
result in the reduction or removal of the rating then assigned to the notes or
(b) reduce the percentage of noteholders required to consent to any
amendment, without unanimous consent of the noteholders and written confirmation
from each rating agency that the amendment will not result in the reduction or
removal of the rating then assigned to the notes.
The indenture trustee is required under the indenture to furnish the
noteholders and the rating agencies with written notice of the substance of any
amendment to the indenture promptly upon execution of the amendment.
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THE INDENTURE TRUSTEE AND THE BACK-UP SERVICER
The indenture trustee and the back-up servicer, ___________________________,
a [banking corporation], has a trust office at ________________________. The
indenture trustee's duties in connection with the notes are limited solely to
its express obligations under the indenture and the Sale and Servicing
Agreement.
The indenture trustee may resign, subject to the conditions set forth below,
at any time upon written notice to the transferors, [the note insurer] and the
servicer, in which event the servicer will be obligated to appoint a successor
indenture trustee. If no successor indenture trustee is appointed and accepted
the appointment within 30 days after the giving of a notice of resignation, the
resigning indenture trustee may petition a court of competent jurisdiction for
the appointment of a successor indenture trustee. Any successor indenture
trustee [will be acceptable to the note insurer and] will meet the financial and
other standards for qualifying as a successor indenture trustee under the
indenture. The servicer may, [with the consent of the note insurer,] and will,
at the direction of [the note insurer, or] the noteholders of any class
evidencing more than 25% of the percentage interests of such class may, [subject
to consent of the note insurer], also remove the indenture trustee if the
indenture trustee ceases to be eligible to continue as the indenture trustee
under the indenture and fails to resign after written request for resignation,
or is legally unable to act, or if the indenture trustee is adjudicated to be
insolvent. [In these circumstances, the servicer or the noteholders will also be
obligated to appoint a successor indenture trustee which is acceptable to the
note insurer. The note insurer will also have the right to remove the indenture
trustee for "cause".] Any resignation or removal of the indenture trustee and
appointment of a successor indenture trustee will not become effective until
acceptance of the appointment by the successor indenture trustee.
DUTIES AND IMMUNITIES OF THE INDENTURE TRUSTEE
The indenture trustee will make no representations as to the validity or
sufficiency of the Servicing Agreement, the notes, other than the authentication
of the notes, or of any receivable or related document. In addition, the
indenture trustee will not be accountable for the use or application by the
originator or the transferors of any funds paid to the transferors in
consideration of the sale of any notes. If no Event of Servicing Termination has
occurred, the indenture trustee will be required to perform only those duties
specifically required of it under the Sale and Servicing Agreement. However,
upon receipt of the various resolutions, certificates, statements, opinions,
reports, documents, orders or other instruments required to be furnished to it,
the indenture trustee will be required to examine them to determine whether they
conform to the requirements of the Sale and Servicing Agreement.
No recourse is available based on any provision of the Sale and Servicing
Agreement, the notes or any receivable or assignment of a receivable against
__________________________, in its individual capacity. ________________________
will not have any personal obligation, liability or duty whatsoever to any
noteholder or any other person with respect to these claims and the claim will
be asserted solely against the trust assets or any indemnitor, except for any
liability as is determined to have resulted from the indenture trustee's own
negligence or willful misconduct.
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The indenture trustee will be entitled to receive, pursuant to the priority
set forth in the indenture, a reasonable indenture trustee fee as compensation
for its services as indenture trustee, and reimbursement for the Indenture
Trustee Expenses.
DUTIES OF THE BACK-UP SERVICER
The back-up servicer will make no representations as to the validity or
sufficiency of the Sale and Servicing Agreement or of any receivable or related
document. Under the Sale and Servicing Agreement, the back-up servicer agrees to
reconcile the monthly servicer reports. In addition, following the resignation
or removal of the servicer, the back-up servicer will assume the duties of the
servicer as the successor servicer under the Sale and Servicing Agreement. The
back-up servicer will be required to exercise the degree of skill and care in
performing these functions that it customarily exercises with respect to similar
property owned or serviced by the back-up servicer.
The back-up servicer will be entitled to receive a monthly back-up servicer
fee equal to the product of (x) one-twelfth of the back-up servicing fee rate,
and (y) the Aggregate Discounted Contract Principal Balance of all contracts as
of the beginning of the previous collection period, payable out of the
collection account, as compensation for acting as back-up servicer.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on, and the weighted average life of, the
offered notes will be directly related to the rate of payments on the underlying
contracts. If purchased at a price other than par, the yield to maturity will
also be affected by the rate of the principal payments. Payments on the
contracts may be in the form of scheduled payments, prepayments, early
terminations or liquidations due to default, casualty, repurchases for breach
and the like. These payments will result in payments to noteholders of amounts
which would otherwise have been paid over the remaining term of the contracts.
In general, the rate of these payments may be influenced by a number of factors,
including general economic conditions.
The contracts generally do not provide for the right of the obligor to
prepay. Under the Sale and Servicing Agreement, the servicer will be permitted
to allow such Prepayments in full or in part, provided that no Prepayment of a
contract will be allowed in an amount less than the Prepayment Amount.
The expected final payment date for the Class A-1 notes is __________, 200_,
for the Class A-2 notes is __________, 200_, for the Class A-3 notes is
__________, 200_, for the Class A-4 notes is __________, 200_ and for the Class
B notes is __________, 200_. These dates are the dates on which the note
principal balance of the related class of notes would be reduced to zero,
assuming, among other things:
(x) Prepayments with respect to the contracts are received at a rate of _%
CPR and
(y) the modeling assumptions apply.
The weighted average life of the offered notes could be shorter than would be
the case if payments actually made on the contracts conformed to the foregoing
assumptions. The final
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payment dates with respect to the offered notes could occur significantly
earlier than such final scheduled payment dates due to defaults, and because the
originator is obligated to reacquire contracts in the event of breaches of
representations and warranties.
"Weighted average life" refers to the average amount of time from the date of
issuance of a note until each dollar of principal of such note will be repaid to
the investor. The weighted average lives of the offered notes will be influenced
by the rate at which payments on the contracts are made. Payments on contracts
may be in the form of scheduled payments or prepayments. For this purpose, the
term "prepayment" includes prepayments and liquidations due to defaults or other
dispositions of the contracts. The weighted average lives of the offered notes
will also be influenced by delays associated with realizing on Defaulted
Contracts. The prepayment model used in this prospectus supplement, the CPR,
represents an assumed annualized rate of prepayment relative to the then
outstanding balance on a pool of contracts. The CPR assumes that a fraction of
the outstanding contract pool is prepaid on each payment date, which implies
that each contract in the contract pool is equally likely to prepay. This
fraction, expressed as a percentage, is annualized to arrive at the CPR for the
contract pool. The CPR measures prepayments based on the outstanding principal
on the previous payment date. The CPR further assumes that all contracts are the
same size and make scheduled payments at the same rate and that each contract
will be either paid as scheduled or prepaid in full.
WEIGHTED AVERAGE LIVES OF THE OFFERED NOTES
The tables below were prepared assuming, among other things, that the
following modeling assumptions apply:
(1) the closing date for the notes occurs on __________, 200_,
(2) payments on the notes are made on the __ day of each month regardless of
the day on which the payment date actually occurs, commencing in __________,
200_ in accordance with the priorities described in this prospectus supplement,
(3) no delinquencies or defaults in the payment of scheduled payments on the
contracts are experienced and the payments are timely received,
(4) no contract is reacquired for breach of a representation and warranty or
otherwise,
(5) the actual discount rate is _____% per annum,
(6) Prepayments with respect to the contracts are received on the last day of
each calendar month, commencing on __________, 200_,
(7) no Restricting Event occurs,
(8) the Class A-1 note rate is ______% per annum, the Class A-2 note rate is
_____% per annum, the Class A-3 note rate is _____% per annum, the Class A-4
note rate is _____% per annum and the Class B note rate is _____% per annum,
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<PAGE>
(9) the contract pool consists of a pool of contracts with an Aggregate
Discounted Contract Principal Balance equal to approximately $__________
available on the closing date that make their first payment in __________, 200_,
and
(10) the contract pool consists of a pre-funded pool of contracts with an
Aggregate Discounted Contract Principal Balance equal to approximately
$__________ available on __________, 200_, that make their first payment in
__________, 200_.
Since the tables were prepared on the basis of the modeling assumptions,
there are discrepancies between the characteristics of the actual contracts and
the characteristics of the contracts assumed in preparing the tables. These
discrepancies may have an effect upon the percentages of the note principal
balances outstanding and weighted average lives of the offered notes set forth
in the tables. In addition, since the actual contracts in the trust have
characteristics which differ from those assumed in preparing the tables set
forth below, the related weighted average life may be longer or shorter than as
indicated in the tables.
The following tables set forth the percentages of the initial principal
amount of the Class A-1 notes, the Class A-2 notes, the Class A-3 notes, the
Class A-4 notes and the Class B notes that would be outstanding after each of
the dates shown, assuming a CPR of _%, _%, _%, _%, _% and _%, respectively.
PERCENTAGE OF INITIAL CERTIFICATE
PRINCIPAL BALANCE OUTSTANDING
CLASS A-1 CERTIFICATES
Prepayment Speed (CPR)
Payment Date 0% 2% 4% 5% 6% 8%
- ------------ -- -- -- -- -- --
Closing Date
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
Weighted Average Life
(years)
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE
PRINCIPAL BALANCE OUTSTANDING
CLASS A-2 CERTIFICATES
Prepayment Speed (CPR)
Payment Date 0% 2% 4% 5% 6% 8%
- ------------ -- -- -- -- -- --
Closing Date
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
Weighted Average Life
(years)
PERCENTAGE OF INITIAL CERTIFICATE
PRINCIPAL BALANCE OUTSTANDING
CLASS A-3 CERTIFICATES
Prepayment Speed (CPR)
Payment Date 0% 2% 4% 5% 6% 8%
- ------------ -- -- -- -- -- --
Closing Date
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
Weighted Average Life
(years)
PERCENTAGE OF INITIAL CERTIFICATE
PRINCIPAL BALANCE OUTSTANDING
CLASS A-4 CERTIFICATES
Prepayment Speed (CPR)
Payment Date 0% 2% 4% 5% 6% 8%
- ------------ -- -- -- -- -- --
Closing Date
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
Weighted Average Life
(years)
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE
PRINCIPAL BALANCE OUTSTANDING
CLASS B CERTIFICATES
Prepayment Speed (CPR)
Payment Date 0% 2% 4% 5% 6% 8%
- ------------ -- -- -- -- -- --
Closing Date
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
_______________, 200_
Weighted Average Life
(years)
The contracts will not have the characteristics assumed above, and there can
be no assurance that the contracts will prepay at any of the rates shown in the
tables or at any other particular rate or will prepay proportionately or the
weighted average lives of the offered notes will be as calculated above. Because
the rate of distributions of principal of the offered notes will be a result of
the actual payments, including prepayments, of the contracts, which will include
contracts that have remaining terms to stated maturity shorter or longer than
those assumed, the weighted average lives of the offered notes will differ from
those set forth above, even if all of the contracts prepay at the indicated
constant prepayment rates.
The effective yield to noteholders will depend upon, among other things, the
price at which the offered notes are purchased, and the amount of and rate at
which principal, including both scheduled and unscheduled payments of principal,
is paid to the noteholders.
Due to the subordination provisions applicable to the offered notes, it is
likely that the note principal balance of the notes will amortize more rapidly
than will the initial Aggregate Discounted Contract Principal Balance of the
contract pool. See "Summary of Terms--Subordination Provisions" and "Description
of Notes--Flow of Funds" in this prospectus supplement.
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<PAGE>
[THE NOTE INSURANCE POLICY]
[The following summary of the terms of the note insurance policy does not
purport to be complete and is qualified in its entirety by reference to the note
insurance policy. A form of the note insurance policy may be obtained, upon
request, from the transferors.
Simultaneously with the issuance of the notes, the note insurer will deliver
the note insurance policy to the indenture trustee for the benefit of the Class
A noteholders. Under the note insurance policy, the note insurer irrevocably and
unconditionally guarantees payment to the indenture trustee for the benefit of
the Class A noteholders, of:
(1) the Class A Insured Distribution Amount on each payment date and
(2) the amount of any payment of Class A Note Interest on the note principal
balance of any class of Class A notes which is subsequently avoided in whole or
in part as a preference payment. The Class A Insured Distribution Amount will be
calculated in accordance with the original terms of the Class A notes when
issued and without regard to any amendment or modification of the Class A notes
or the indenture except amendments or modifications to which the note insurer
has given its prior written consent. Payments under the Class A notes which
become due on an accelerated basis as a result of the occurrence of an Event of
Default, an election by the trust to pay principal on an accelerated basis, or
any other cause, do not constitute a "Class A Insured Distribution Amount",
unless the note insurer elects, in its sole discretion, to pay such principal
due upon acceleration, together with accrued interest to the date of
acceleration.
Payment of claims on the note insurance policy will be made by the note
insurer following receipt by the note insurer of the appropriate notice for
payment on the later of (a) 12:00 noon, New York City time, [on the _______
business day following receipt of the notice for payment,] and (b) 12:00 noon,
New York City time, [on the relevant payment date].
If any payment of an amount guaranteed by the note insurer pursuant to the
note insurance policy is avoided as a preference under applicable bankruptcy,
insolvency, receivership or similar law, the note insurer will cause the payment
to be made on the later of:
o the date when due to be paid pursuant to the order referred to below or
o the first to occur of
(1) the ______ business day following receipt by the note insurer from
the indenture trustee of
(A) a certified copy of the order of the court or other governmental
body which exercised jurisdiction to the effect that a Class A
noteholder is required to return principal or interest paid with
respect to a Class A note during the term of the note insurance
policy because the payments were avoidable as preference payments
under applicable bankruptcy law,
(B) a certificate of the Class A noteholder(s) that the order has
been entered and is not subject to any stay, and
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<PAGE>
(C) an assignment duly executed and delivered by the Class A
noteholder(s), in a form as is reasonably required by the note
insurer and provided to the Class A noteholder(s) by the note
insurer, irrevocably assigning to the note insurer all rights and
claims of the Class A noteholder(s) relating to or arising under the
Class A notes against the debtor which made the preference payment
or otherwise with respect to the preference payment, or
(2) the date of receipt by the note insurer from the indenture trustee of
the items referred to in clauses (A), (B) and (C) above if, at least
____ business days prior to the date of receipt, the note insurer shall
have received written notice from the indenture trustee that such items
were to be delivered on that date and that date was specified in the
written notice.
The payment will be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order and not to the
indenture trustee or any Class A noteholder directly. However, if a Class A
noteholder has previously paid the amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order, the payment
will be disbursed to the indenture trustee for distribution to the Class A
noteholder upon proof of the payment reasonably satisfactory to the note
insurer.
The terms "receipt" and "received," with respect to the note insurance
policy, means actual delivery to the note insurer and to its fiscal agent, if
any, prior to 12:00 p.m., New York City time, on a business day. Delivery either
on a day that is not a business day or after 12:00 p.m., New York City time,
will be deemed to be receipt on the next succeeding business day. If any notice
or certificate given under the note insurance policy is not in proper form or is
not properly completed, executed or delivered, it will be deemed not to have
been received, and the note insurer or the fiscal agent will promptly so advise
the indenture trustee and the indenture trustee may submit an amended notice.
Under the note insurance policy, "business day" means any day other than a
Saturday or Sunday or a day on which banking institutions in the City of New
York, New York or the State of New York, are authorized or obligated by law or
executive order to be closed. The note insurer's obligations under the note
insurance policy to make Insured Payments will be discharged to the extent funds
are transferred to the indenture trustee as provided in the note insurance
policy, whether or not those funds are properly applied by the indenture
trustee.
The note insurer will be subrogated to the rights of each Class A noteholder
to receive payments of principal and interest, as applicable, with respect to
distributions on the Class A notes to the extent of any payment by the note
insurer under the note insurance policy. To the extent the note insurer makes an
insured payment under the note insurance policy, either directly or indirectly,
as by paying through the indenture trustee, to the Class A noteholders, the note
insurer will be subrogated to the rights of the Class A noteholders, with
respect to the insured payment and will be deemed to the extent of the payments
so made to be a registered Class A noteholder for purposes of payment.
To the fullest extent permitted by applicable law, the note insurer agrees
under the note insurance policy not to assert, and waives, for the benefit of
each Class A noteholder, all its rights, whether by counterclaim, setoff or
otherwise, and defense, including, without limitation,
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<PAGE>
the defense of fraud, whether acquired by subrogation, assignment or otherwise,
to the extent that those rights and defenses may be available to the note
insurer to avoid payment of its obligations under the note insurance policy in
accordance with the express provisions of the note insurance policy.
Claims under the note insurance policy constitute direct, unsecured and
unsubordinated obligations of the note insurer ranking not less than pari passu
with other unsecured and unsubordinated indebtedness of the note insurer for
borrowed money. Claims against the note insurer under the note insurance policy
and claims against the note insurer under each other financial guaranty
insurance policy issued by the insurer constitute pari passu claims against the
general assets of the note insurer. The terms of the note insurance policy
cannot be modified or altered by any other agreement or instrument, or by the
merger, consolidation or dissolution of the trust. The note insurance policy may
not be cancelled or revoked prior to payment in full of the Class A notes. The
note insurance policy is not covered by the property/casualty insurance security
fund specified in Article 76 of the New York Insurance Law. The note insurance
policy is governed by the laws of the State of New York.
Under the terms of the indenture, unless a note insurer default exists, the
note insurer will be deemed to be the Class A noteholder for all purposes, other
than with respect to payment on the notes. The note insurer will be entitled to
exercise all rights of the Class A noteholders under the indenture, without the
consent of the noteholders, and the Class A noteholders may exercise those
rights only with the prior written consent of the note insurer. In addition, the
note insurer will, as a third party beneficiary to the indenture and the
Transfer Agreements, have, among others, the following rights:
o the right to give notices of breach or to terminate the rights and
obligations of the servicer under the indenture in the event of an Event
of Default by the servicer and to institute proceedings against the
servicer;
o the right to consent to or direct any waivers of defaults by the servicer;
o the right to remove the indenture trustee pursuant to the indenture;
o the right to direct the actions of the indenture trustee during the
continuation of a servicer default;
o the right to require the originator to reacquire contracts for breach of
representation and warranty or defect in documentation;
o the right to direct foreclosures upon the failure of the servicer to do so
in accordance with the indenture;
o the right to direct all matters relating to a bankruptcy or other
insolvency proceeding involving the transferors; and
o the right to direct the indenture trustee to investigate certain matters.
The note insurer's consent will be required prior to, among other things,
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<PAGE>
o the removal of the indenture trustee or the servicer,
o the appointment of any successor indenture trustee or servicer, or
o any amendment to the indenture.
The transferors, the originator, the servicer, the depositor, the trust and
the note insurer will enter into the insurance agreement pursuant to which the
servicer will agree to reimburse, with interest, the note insurer for amounts
paid pursuant to claims under the note insurance policy. The servicer will
further agree to pay the note insurer all reasonable charges and expenses which
the note insurer may pay or incur relative to any amounts paid under the note
insurance policy or otherwise in connection with the transaction and to
indemnify the note insurer against certain liabilities. Except to the extent
provided in the insurance agreement, amounts owing under the insurance agreement
will be payable solely from the trust fund. An "event of default" under the
insurance agreement will constitute an event of default under the indenture and
allow the note insurer, among other things, to direct the indenture trustee to
terminate the servicer. An "event of default" under the insurance agreement
includes:
(1) the originator's, the transferors' or the servicer's failure to pay when
due any amount owed under the insurance agreement or certain other documents,
(2) the inaccuracy or incompleteness in any material respect of any
representation or warranty of the originator, the trust, the transferors or the
servicer in the insurance agreement, the indenture or certain other documents,
(3) the originator's, the transferors' or the servicer's failure to perform
or to comply with any covenant or agreement in the insurance agreement, the
indenture and certain other documents,
(4) a finding or ruling by a governmental authority or agency that the
insurance agreement, the indenture or certain other documents are not binding on
the originator, the trust, the transferors or the servicer,
(5) the originator's, the trust's, the transferors' or the servicer's failure
to pay its debts in general or the occurrence of certain events of insolvency or
bankruptcy with respect to the transferors or the servicer, and
(6) the occurrence of certain "performance test violations" designed to
measure the performance of the contracts.]
THE NOTE INSURER
[DESCRIPTION OF THE NOTE INSURER]
FEDERAL INCOME TAX CONSIDERATIONS
Set forth below is a summary of certain United States federal income tax
considerations relevant to the beneficial owner of a note that holds the note as
a capital asset and, unless
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<PAGE>
otherwise indicated below, is a U. S. Person. This summary does not address
special tax rules that may apply to certain types of investors, such as banks,
insurance companies and securities dealers, and investors that hold notes as
part of an integrated investment. This summary supplements the discussion
contained in the accompanying prospectus under the heading "Federal Income Tax
Considerations," and supersedes that discussion to the extent that it is
inconsistent therewith. The authorities on which this discussion is based are
subject to change or differing interpretations, and that change or
interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Code, as well as regulations promulgated by the
U.S. Department of the Treasury. Investors should consult their own tax advisors
in determining the federal, state, local and any other tax consequences to them
of the purchase, ownership and disposition of the notes.
CLASSIFICATION OF INVESTMENT ARRANGEMENT
In the opinion of Cadwalader, Wickersham & Taft, special counsel to the
depositor, the issuer will not be treated as an association or a publicly traded
partnership taxable as a corporation or a taxable mortgage pool for federal
income tax purposes, but rather the issuer will be ignored and treated as a mere
security device when there is a single beneficial owner of the issuer, or will
be treated as a domestic partnership when there are two or more beneficial
owners of the issuer.
TAXATION OF HOLDERS
Characterization of the Notes. There are no regulations, published rulings or
judicial decisions addressing the characterization for federal income tax
purposes of securities with terms that are substantially the same as those of
the notes. A basic premise of United States federal income tax law is that the
economic substance of a transaction generally will determine the United States
federal income tax consequences of the transaction. The determination of whether
the economic substance of a loan secured by an interest in property is instead a
sale of a beneficial ownership interest in the property has been made by the
Internal Revenue Service and the courts on the basis of numerous factors
designed to determine whether the issuer has relinquished, and the investor has
obtained, substantial incidents of ownership in the property. Among those
factors, the primary factors examined are whether the investor has the
opportunity to gain if the property increases in value, and has the risk of loss
if the property decreases in value. Based on an assessment of these factors, in
the opinion of Cadwalader, Wickersham & Taft, special counsel to the depositor,
the notes will be treated as indebtedness for federal income tax purposes and
not as an ownership interest in the pledged notes or the receivables or an
equity interest in the issuer.
Interest and Original Issue Discount. Interest on the notes will be treated
as income to beneficial owners as those amounts are paid or accrue in accordance
with the holder's method of accounting. It is anticipated that the notes will
not be issued with original issue discount for federal income tax purposes. Any
premium or de minimis original issue discount with respect to the notes will be
determined in the same manner as described under "Federal Income Tax
Considerations" in the accompanying prospectus. The prepayment assumption that
will be used for accruing original issue discount, for determining if original
issue discount is de minimis or for amortizing premium for federal income tax
purposes is 100% of the prepayment assumption, in
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<PAGE>
the case of [Class A-1 notes and % CPR, in the case of the Class A-2, Class A-3
and Class A-4 Notes and % CPR, in the case of the Class B Notes].
Sale, Exchange, Retirement or Other Disposition. Upon the sale, exchange,
retirement or other disposition of a note, a beneficial owner who holds the note
as a capital asset generally will recognize capital gain or loss equal to the
difference, if any, between the amount realized (adjusted for accrued stated
interest) on the sale or other disposition of the owner's note and the owner's
cost for that note, increased by any original issue discount or accrued market
discount reported as income or decreased by any amortized bond premium.
Long-term capital gains of non-corporate investors, generally, gains on notes
held for more than one year, would be subject to a lower maximum tax rate than
ordinary income or short-term capital gains of those holders. Corporations are
subject to the same tax rate on ordinary income and capital gains.
Taxation of Certain Foreign Investors. Interest, including original issue
discount, payable to beneficial owners of notes who are nonresident aliens,
foreign corporations, or other Non-U.S. Persons, i.e., any person who is not a
U.S. Person, will be considered "portfolio interest" and, therefore, generally
will not be subject to 30% United States withholding tax, provided that this
Non-U.S. Person: (1) is not a "10-percent shareholder" within the meaning of
Code Section 871(h)(3)(B) or a controlled foreign corporation described in Code
Section 881(c)(3)(C) with respect to the depositor or the issuer and (2)
provides the Owner Trustee, or the person who would otherwise be required to
withhold tax from those distributions under Code Section 1441 or 1442, with an
appropriate statement, signed under penalties of perjury, identifying the
beneficial owner and stating, among other things, that the beneficial owner of
the note is a Non-U.S. Person. If that statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest on the
note is effectively connected with the conduct of a trade or business within the
United States by that Non-U.S. Person. In the latter case, the Non-U.S. Person
will be subject to United States federal income tax at regular rates. Investors
who are Non-U.S. Persons should consult their own tax advisors regarding the
specific tax consequences to them of owning a note.
The IRS recently issued final regulations which provide alternative methods
of satisfying the beneficial ownership certification requirement described
above. These new regulations will be effective January 1, 2001. Current
withholding certificates will remain valid until the earlier of December 31,
2000 or the date of expiration of the certificate under the rules as currently
in effect. These new regulations will require, in the case of notes held by a
foreign partnership, that:
(a) the certification described above be provided by the partners rather than
by the foreign partnership; and
(b) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships. Non-U.S.
Persons should consult their own tax advisors concerning the application of the
certification requirements in these new regulations.
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<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments made on the notes and proceeds from the sale of notes to or through
certain brokers may be subject to a "backup" withholding tax of 31% of
"reportable payments," including interest accruals, original issue discount,
and, under certain circumstances, payments in respect of principal amount,
unless, in general, the beneficial owner complies with certain procedures or is
an exempt recipient. Any amounts so withheld from payments on the notes would be
refunded by the Internal Revenue Service or allowed as a credit against the
beneficial owner's federal income tax. The new regulations will change certain
of the rules relating to certain presumptions currently available relating to
information reporting and backup withholding. Non-U.S. Persons are urged to
contact their own tax advisors regarding the application to them of backup
withholding and information reporting.
Reports of interest, original issue discount and certain information needed
to compute accrued market discount will be made annually to the Internal Revenue
Service and to beneficial owners that are not excepted from the reporting
requirements.
See "Federal Income Tax Considerations--Trusts Treated as Partnerships--Tax
Characterization of the Trust as a Partnership" in the accompanying prospects.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing, or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to the plan. ERISA also
imposes certain duties on persons who are fiduciaries of plans subject to ERISA
and prohibits certain transactions between a plan and parties in interest with
respect to those plans. Under ERISA, any person who exercises any authority or
control respecting the management or disposition of the assets of a plan is
considered to be a fiduciary of that plan, subject to certain exceptions not
relevant here. A violation of these "prohibited transaction" rules may generate
excise tax and other liabilities under ERISA and the Code for those persons.
In addition to the matters described below, purchasers of offered notes that
are insurance companies should consult with their counsel with respect to the
United States Supreme Court case interpreting the fiduciary responsibility rules
of ERISA, John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings
Bank, 114 S.Ct. 517 (1993). In John Hancock, the Supreme Court ruled that assets
held in an insurance company's general account may be deemed to be "plan assets"
for ERISA purposes under certain circumstances. Prospective purchasers should
determine whether the decision affects their ability to make purchases of the
offered notes.
Certain transactions involving the trust might be deemed to constitute
prohibited transactions under ERISA and the Code if assets of the trust were
deemed to be "plan assets" of an employee benefit plan subject to ERISA or the
Code, or an "individual retirement account" or "IRA", or any entity whose
underlying assets are deemed to be assets of an employee benefit plan or an IRA
by reason of such employee benefit plan's or such IRA's investment in such
entity. Under a regulation issued by the United States Department of Labor, the
assets of the trust would be treated as plan assets of a benefit plan for the
purposes of ERISA and the Code only if the benefit
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<PAGE>
plan acquires an "equity interest" in the trust and none of the exceptions
contained in this plan assets regulation is 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. The notes should be treated as indebtedness without
substantial equity features for purposes of the plan assets regulation. This
determination is based in part upon the traditional debt features of the notes,
including the reasonable expectation of purchasers of notes that the notes will
be repaid when due, as well as the absence of conversion rights, warrants and
other typical equity features. The debt treatment of the notes for ERISA
purposes could change if the trust incurred losses. However, without regard to
whether the notes are treated as an equity interest for such purposes, the
acquisition or holding of the notes by or on behalf of a benefit plan could be
considered to give rise to a prohibited transaction if the trust or any of its
affiliates is or becomes, a party in interest or disqualified person with
respect to such benefit plan. In such case, certain exemptions from the
prohibited transaction rules could be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a note.
Included among these exemptions are: Prohibited Transaction Class Exemption or
"PTCE" 90-1, regarding investments by insurance company pooled separate
accounts; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 96-23, regarding transactions by in-house asset managers; and
PTCE 84-14, regarding transactions by "qualified professional asset managers."
Each investor using the assets of a benefit plan which acquires the notes, or to
whom the notes are transferred, will be deemed to have represented that the
acquisition and continued holding of the notes will be covered by an appropriate
Department of Labor class exemption.
Employee plans that are government plans-as defined in Section 3(32) of
ERISA-and certain church plans-as defined in Section 3(33) of ERISA-are not
subject to ERISA; however, such plans may be subject to comparable state law
restrictions.
Any benefit plan fiduciary considering the purchase of a note should consult
with its counsel with respect to the potential applicability of ERISA and the
Code to such investment. Moreover, each benefit plan fiduciary should determine
whether, under the general fiduciary standards of investment prudence and
diversification, an investment in the notes is appropriate for the benefit plan,
taking into account the overall investment policy of the benefit plan and the
composition of the benefit plan's investment portfolio.
LEGAL INVESTMENT
The Class A-1 notes will be eligible securities for purchase by money market
funds under the Investment Company Act of 1940.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the depositor has agreed to cause the issuer to sell to each of the underwriters
listed below, and each of the underwriters has agreed to purchase, the principal
amount of each class of the notes set forth opposite its name below. Under the
terms and conditions of the underwriting agreement, each of the underwriters is
obligated to take and pay for all of the notes if any are taken.
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<PAGE>
<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS B
UNDERWRITERS NOTES NOTES NOTES NOTES NOTES
- ------------ --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
PaineWebber Incorporated.............. $ $ $ $ $
[--------------------].................
Total..................................
</TABLE>
The depositor has been advised by the underwriters that they propose
initially to offer the notes to the public at the prices set forth below, and to
selling group members at those prices less a selling concession not in excess of
the percentage set forth below for each class of notes. The underwriters may
allow, and the selling group members may also allow, a subsequent concession not
in excess of the percentage set forth below for each class of notes. After the
initial public offering, the public offering price and such concessions may be
changed.
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT CONCESSION REALLOWANCE
-------- ------------ ---------- -----------
Class A-1 Notes % % % %
Class A-2 Notes
Class A-3 Notes
Class A-4 Notes
Class B Notes
The depositor does not intend to apply for listing of the notes on a national
securities exchange, but has been advised by the underwriters that they may make
a market in the notes. The underwriters are not obligated, however, to make a
market in the notes and may discontinue market making at any time without
notice. We cannot assure you as to the liquidity of the trading market for the
notes.
The depositor, the transferor and the servicer have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, each underwriter and
its affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the depositor, the transferor and the
servicer.
After the initial distribution of the notes by the underwriters, this
prospectus supplement may be used by the underwriters or its successors, in
connection with offers and sales relating to market making transactions in the
notes. The underwriters may act as principal or agent in these transactions. The
transactions will be at prices related to prevailing market prices at the time
of sale. Each underwriter is a member of the New York Stock Exchange, Inc.
The underwriter is an affiliate of the depositor.
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ADDITIONAL INFORMATION
PaineWebber Asset Acceptance Corporation has filed with the SEC a
registration statement (Registration No. 333-_____) under the Securities Act of
1933, as amended, with respect to the notes offered under this prospectus
supplement. This prospectus supplement and the accompanying prospectus, which
form a part of the registration statement, omit certain information contained in
the registration statement under the rules and regulations of the SEC. You may
read and copy the registration statement at the Public Reference Room at the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the SEC's
regional offices at Seven World Trade Center, 13th Floor, New York, New York,
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Rooms. In addition, the SEC maintains a site
on the World Wide Web containing reports, proxy materials, information
statements and other items. The address is http://www.sec.gov.
EXPERTS
The consolidated balance sheets of _________________________________, the
note insurer, and subsidiaries as of December 31, ____ and ____ and the related
consolidated statements of income, changes in shareholder's equity, and cash
flows for each of the three years in the period ended December 31, ____,
incorporated by reference in this prospectus supplement, have been incorporated
in this prospectus supplement in reliance on the report of _____________________
___________, independent accountants, given on the authority of that firm as
experts in accounting and auditing.
LEGAL MATTERS
The validity of the offered notes and certain federal income tax matters will
be passed upon by Cadwalader, Wickersham & Taft, New York, New York. [Certain
legal matters will be passed upon for the insurer by __________, __________ to
the insurer.]
RATINGS
As a condition to the issuance of the Class A notes, the Class A-1 notes must
be rated "____" by __________________________________ and "___" by
_____________________________, and the Class A-2 notes, the Class A-3 notes and
the Class A-4 notes must be rated "___" by __________________________________
and "___" by ______________________________. As a condition to the issuance of
the Class B notes, the Class B notes must be rated at least "___" by __________
________________________________.
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time. The ratings assigned to
the offered notes address the likelihood of the receipt by noteholders of all
distributions to which such noteholders are entitled. The ratings assigned to
the offered notes do not represent any assessment of the likelihood that
principal prepayments might differ from those originally anticipated or address
the possibility that noteholders might suffer a lower than anticipated yield.
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GLOSSARY OF TERMS
As used in this prospectus supplement, the following terms have the following
meanings:
ADVANCE PAYMENT: With respect to a contract and a collection period, any
scheduled payment, Final Scheduled Payment, Purchase Option Payment or portion
of either made by or on behalf of an obligor and received by the servicer during
the collection period, which scheduled payment, Final Scheduled Payment,
Purchase Option Payment or portion of them does not become due until a
subsequent collection period. However, Advance Payments do not include
Prepayment Amounts.
AGGREGATE DISCOUNTED CONTRACT PRINCIPAL BALANCE: Means, at any time of
determination and with respect to any contracts, any amount equal to the sum of
the Discounted Contract Principal Balances of the contracts.
AVAILABLE DISTRIBUTION AMOUNT: With respect to a payment date, the excess of:
(a) the Available Funds with respect to the related collection period,
over
(b) the Trust Operating Expenses.
AVAILABLE FUNDS: With respect to a payment date, all amounts held in the
collection account on the related determination date, after taking into account
all deposits required to be made on that determination date, other than any
Advance Payment.
AVAILABLE FUNDS SHORTFALL: An event which occurs on a payment date if either:
(a) amounts are then or would otherwise be payable under the note
insurance policy or
(b) the Class A Insured Distribution Amount for such payment date exceeds
the Available Distribution Amount for that payment date.
BASE PRINCIPAL AMOUNT: With respect to any payment date, an amount equal to
the excess of:
(a) the sum of:
(1) the Aggregate Discounted Contract Principal Balance of the
contracts, as of the close of business on the last day of the second
preceding collection period, and
(2) the Pre-Funded Collateral Amount, as of the close of business on
the last day of the second preceding collection period, over
(b) the sum of
(1) the Aggregate Discounted Contract Principal Balance of the
contracts, as of the close of business on the last day of the
immediately preceding collection period,
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(2) the Pre-Funded Collateral Amount, as of the close of business on
the last day of the immediately preceding collection period,
(3) the aggregate Prepayment Amounts received by the servicer during
the related collection period,
(4) any Defaulted Contract Amounts relating to the related
collection period and
(5) the amount of any funds released from the pre-funding account as
a prepayment of principal on the offered notes, divided by ____%.
CLASS A ACCELERATED PERCENTAGE: _____%.
CLASS A ADDITIONAL PRINCIPAL DISTRIBUTION AMOUNT: Means:
(a) with respect to any payment date prior to the Class A Termination
Date, any Unscheduled Payments with respect to the related collection period;
and
(b) with respect to the Class A Termination Date, the amount described in
clause (a) above, to the extent necessary to reduce the note principal
balance of each class of Class A notes to zero.
CLASS A BASE PRINCIPAL DISTRIBUTION AMOUNT: Means (a) with respect to any
payment date prior to the Class A Termination Date, the sum of:
(x) the product of (1) the Class A Percentage and (2) the Base
Principal Amount for such payment date,
(y) the Class A Additional Principal Distribution Amount, and
(z) the product of (1) the Class A Accelerated Percentage and (2) the
amount of any funds released from the pre-funding account as a prepayment
of principal; and
(b) with respect to the Class A Termination Date, the amount described in
clause (a) above, to the extent necessary to reduce the note principal
balance of each class of Class A notes to zero.
CLASS A DEFAULT INTEREST: Means, for any payment date and each class of Class
A notes, the product of:
(x) the sum of clauses (1) and (2) of the definition of Class A Overdue
Interest with respect to such class,
(y) (1) for the Class A-1 notes, the actual number of days elapsed in the
Interest Accrual Period divided by 360 days and (2) for each other class of
Class A notes, one-twelfth, and
(z) __%.
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CLASS A INSURED DISTRIBUTION AMOUNT: Means, with respect to any payment date,
the sum of the Class A Insured Distribution Amounts for each class of Class A
notes. The "Class A Insured Distribution Amount" for each class of Class A notes
is:
(a) with respect to any payment date-other than any payment date which is
the Class A Maturity Date for the class-the sum of (1) Class A Note Interest
for the class less the amount of any Class A Default Interest for the class,
and (2) the class's pro rata portion of the excess, if any, of (A) the note
principal balance of the Class A notes over (B) the sum of the Aggregate
Discounted Contract Principal Balance of the contracts and the Pre-Funded
Collateral Amount, and
(b) with respect to the payment date which is the Class A Maturity Date
for the class, the sum of (1) Class A Note Interest for the class less the
amount of any Class A Default Interest for the class and (2) the
then-outstanding note principal balance for the class.
CLASS A MATURITY DATE: Means the final stated maturity date for each class of
Class A notes, as set forth below,
o for the Class A-1 notes, ___________, 200_,
o for the Class A-2 notes, ___________, 200_,
o for the Class A-3 notes, ___________, 200_, and
o for the Class A-4 notes, ___________, 200_.
CLASS A NOTE CURRENT INTEREST: With respect to any payment date and each
class of Class A notes, the interest accrued during the related Interest Accrual
Period, equal to the product of:
(x) (1) for the Class A-1 notes, the actual number of days elapsed in the
Interest Accrual Period divided by 360 days and (2) for each other class of
Class A notes, one-twelfth,
(y) the note rate for that class of Class A notes and
(z) the aggregate note principal balance of that class of Class A notes
outstanding on the immediately preceding payment date, after taking into
account all distributions made on such payment date.
CLASS A NOTE INTEREST: Means, for any payment date and any class of Class A
notes, the sum of the Class A Current Note Interest for that class of Class A
notes and the Class A Overdue Note Interest for that class of Class A notes.
CLASS A OVERDUE INTEREST: With respect to any payment date and each class of
Class A notes, the difference between (x) the sum of:
(1) the excess, if any, of that portion of any Class A Note Interest due
on the immediately preceding payment date for that class of Class A notes
over that portion of the Class A Note Interest paid on such immediately
preceding payment date for that class of Class A notes,
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(2) without duplication of the amount described in clause (1), the amount
of the Class A Overdue Interest due and unpaid as of the immediately
preceding payment date attributable to that class of Class A notes, and
(3) the product of (x) the sum of clauses (1) and (2), (y) (1) for the
Class A-1 notes, the actual number of days elapsed in the Interest Accrual
Period divided by 360 days and (2) for each other class of Class A notes,
one-twelfth, and
(z) the note rate for that class of Class A notes, and
(y) any Class A Overdue Interest attributable to that class of Class A
notes paid on that payment date.
CLASS A OVERDUE PRINCIPAL: With respect to any payment date, the difference,
if any, equal to (a) the aggregate of the Class A Base Principal Distribution
Amounts due on all prior payment dates and (b) the aggregate amount of the
principal, from whatever source, actually distributed to Class A noteholders on
all prior payment dates.
CLASS A PERCENTAGE: ____%.
CLASS A TERMINATION DATE: The payment date on which the note principal
balance of each class of Class A notes is reduced to zero.
CLASS B ACCELERATED PERCENTAGE: ____%.
CLASS B ADDITIONAL PRINCIPAL DISTRIBUTION AMOUNT: Means:
(a) with respect to any payment date prior to the Class A Termination
Date, zero;
(b) with respect to the Class A Termination Date, the excess, if any, of
(x) any Unscheduled Payments with respect to the related collection period,
over (y) the amount of such sum necessary to reduce the note principal
balance of each class of Class A notes to zero; and
(c) with respect to any period following the Class A Termination Date, the
amount described in clause (b)(x) above, to the extent necessary to reduce
the Class B note principal balance to zero.
CLASS B BASE PRINCIPAL DISTRIBUTION AMOUNT: Means:
(a) with respect to any payment date prior to the Class A Termination
Date, the sum of (x) the product of (1) the Class B Percentage and (2) the
Base Principal Amount for that payment date, (y) the Class B Additional
Principal Distribution Amount and (z) the product of (1) the Class B
Accelerated Percentage and (2) the amount of any funds released from the
pre-funding account as a prepayment of principal; and
(b) with respect to the Class A Termination Date, the amount described in
clause (a) above plus the portion of the Class A Base Principal Distribution
Amount, not applied as a reduction of the note principal balance of the Class
A notes, on that date.
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CLASS B COLLATERALIZED BALANCE: The positive difference, if any, of the Class
B note principal balance over the Class B Uncollateralized Balance.
CLASS B MATURITY DATE: Means the final stated maturity date for each class of
Class B notes, which is ___________, 200_.
CLASS B NOTE CURRENT JUNIOR INTEREST: With respect to any payment date, the
interest accrued during the related Interest Accrual Period, equal to the
product of:
(x) one-twelfth of the Class B note rate and
(y) the aggregate Class B Uncollateralized Balance outstanding on the
immediately preceding payment date.
CLASS B NOTE CURRENT PRIORITY INTEREST: With respect to any payment date, the
interest accrued during the related Interest Accrual Period, equal to the
product of:
(x) one-twelfth of the Class B note rate and
(y) the aggregate Class B Collateralized Balance outstanding on the
immediately preceding payment date.
CLASS B NOTE INTEREST: Means, for any payment date and any class of Class B
notes, the sum of __________ and the _________.
CLASS B NOTE JUNIOR INTEREST: With respect to any payment date, the Class B
Note Current Junior Interest and the Class B Overdue Junior Interest.
CLASS B NOTE PRIORITY INTEREST: With respect to any payment date, the Class B
Note Current Priority Interest and the Class B Overdue Priority Interest.
CLASS B OVERDUE JUNIOR INTEREST: With respect to any payment date, the
difference between (x) the sum of:
(1) the excess, if any, of any Class B Note Junior Interest due on the
immediately preceding payment date over the Class B Note Junior Interest paid
on the immediately preceding payment date,
(2) without duplication of the amount described in clause (1), the amount
of the Class B Overdue Junior Interest due and unpaid as of the immediately
preceding payment date and
(3) the product of (x) the sum of clauses (1) and (2), (y) one-twelfth and
(z) the sum of the Class B note rate plus 1%, and (y) any Class B Overdue
Junior Interest paid on that payment date.
CLASS B OVERDUE PRINCIPAL: With respect to any payment date, the difference,
if any, equal to:
(a) the aggregate of the Class B Base Principal Distribution Amounts due
on all prior payment dates and
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(b) the aggregate amount of the principal, from whatever source, actually
distributed to Class B noteholders on all prior payment dates.
CLASS B OVERDUE PRIORITY INTEREST: With respect to any payment date, the
difference between (x) the sum of:
(1) the excess, if any, of any Class B Note Priority Interest due on the
immediately preceding payment date over the Class B Note Priority Interest
paid on such immediately preceding payment date,
(2) without duplication of the amount described in clause (1), the amount
of the Class B Overdue Priority Interest due and unpaid as of the immediately
preceding payment date and
(3) the product of (x) the sum of clauses (1) and (2), (y) one-twelfth and
(z) the sum of the Class B note rate plus 1%, and
(y) any Class B Overdue Priority Interest paid on that payment date.
CLASS B PERCENTAGE: ___%.
CLASS B TERMINATION DATE: The payment date on which the Class B note
principal balance is reduced to zero.
CLASS B UNCOLLATERALIZED BALANCE: The positive difference, if any, of:
(x) the sum of (a) the Class A note principal balance and (b) the Class B
note principal balance, over
(y) the sum of (a) the Aggregate Discounted Contract Principal Balance of
all of the contracts and (b) the Pre-Funding Collateral Amount.
CONDITIONAL PREPAYMENT RATE: Means an assumed annualized rate of prepayment
relative to the then outstanding balance on a pool of contracts.
CONTROLLING PARTY: [Means the note insurer, but if the note insurer has
defaulted on its obligations under the note insurance policy and the default is
continuing,] the Controlling Party will mean the majority of the holders of the
notes.
CUMULATIVE LOSS EVENT: Means that the sum of the Defaulted Contract Amounts,
as of the first payment date for which the contract is classified as a Defaulted
Contract, of all contracts which have become Defaulted Contracts, on a
cumulative basis since the closing date, less any Defaulted Contract Recoveries,
exceeds an amount equal to ____% of the Initial Aggregate Collateral Balance.
CUT-OFF DATE: Means:
(x) with respect to the initial contracts, the close of business on
___________, 200_, and
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(y) with respect to any subsequent contracts or substitute contracts, the
close of business on the last day of the month preceding the month in which
the contract was transferred to the transferors.
DEFAULTED CONTRACT: A contract becomes a "Defaulted Contract" at the earliest
of the date on which:
o the servicer has determined in its sole discretion, in accordance with the
servicing standard and its customary servicing procedures, that such
contract is not collectible,
o all or part of a scheduled payment thereunder is more than 120 days
delinquent,
o the servicer elected not to make a servicer advance or for which the
servicer has determined that a prior servicer advance is not recoverable
or
o a bankruptcy proceeding has been instituted by or against the obligor, and
the obligor has failed to make a scheduled payment or Final Scheduled
Payment.
DEFAULTED CONTRACT AMOUNTS: Means, with respect to any payment date, the sum
of:
(x) the present value of all of the remaining scheduled payments and any
Final Scheduled Payment due or to become due under each contract which became
a Defaulted Contract during the related collection period, discounted monthly
at the actual discount rate and
(y) any scheduled payments previously due and not paid by the obligor.
DEFAULTED CONTRACT RECOVERIES: All proceeds of the sale or re-lease of
equipment related to Defaulted Contracts and any amounts collected as judgments
against an obligor or others related to the failure of the obligor to pay any
required amounts under the related contract or to return the equipment, in each
case as reduced by (x) any unreimbursed servicer advances with respect to the
contract and (y) any reasonably incurred out-of-pocket expenses incurred by the
servicer in enforcing the contract or in liquidating such equipment.
DELINQUENCY TRIGGER EVENT: Exists on any payment date on which the average of
the Delinquency Trigger Ratios for such payment date and the two immediately
preceding payment dates exceeds _%. Once a Delinquency Trigger Event occurs,
then the condition will be deemed to continue until the payment date which is
the third consecutive payment date for which the average of the Delinquency
Trigger Ratio for such payment date and the two immediately preceding payment
dates is less than _%.
DELINQUENCY TRIGGER RATIO: With respect to any payment date, the quotient,
expressed as a percentage of:
(a) the Aggregate Discounted Contract Principal Balance of all contracts
as to which all or a portion of a scheduled payment remained unpaid for more
than 60 days from its due date, determined as of the end of the immediately
preceding calendar month, divided by
(b) the Aggregate Discounted Contract Principal Balance of all contracts
as of the last day of the immediately preceding calendar month.
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DELINQUENT CONTRACT: As of any determination date, any contract, other than a
contract which became a Defaulted Contract prior to the determination date, with
respect to which all or a portion of any scheduled payment was not received by
the servicer as of 30 days from its due date.
DEPOSITOR RECEIVABLES SALE AGREEMENT: Means the Receivables Sale Agreement,
dated as of _______________, 200__, among the transferors and the depositor.
DISCOUNTED CONTRACT PRINCIPAL BALANCE: With respect to any contract, on any
determination date, the sum of the present value of all of the remaining
scheduled payments and any Final Scheduled Payment becoming due under the
contract after the end of the prior collection period, discounted monthly at the
actual discount rate in the manner described below. However, except to the
extent expressly provided in the Sale and Servicing Agreement, the Discounted
Contract Principal Balance of any Defaulted Contract, Early Termination
Contract, Expired Contract or contract reacquired by the originator pursuant to
the Sale and Servicing Agreement, will be equal to zero.
In connection with all calculations required to be made pursuant to the
transaction documents with respect to the determination of Discounted Contract
Principal Balances, for any date of determination the "Discounted Contract
Principal Balance" for each contract will be calculated assuming:
o scheduled payments are due on the last day of each collection
period;
o scheduled payments are discounted on a monthly basis using a 30-day month
and a 360-day year; and
o scheduled payments are discounted to the last day of the collection period
prior to the determination date.
EARLY TERMINATION CONTRACT: Any contract that has terminated pursuant to the
terms of the contract prior to its scheduled expiration date, other than a
Defaulted Contract.
EXPIRED CONTRACT: Any contract that has terminated on its scheduled
expiration date.
EVENT OF DEFAULT: Has the meaning given in "Description of the Notes--Events
of Default" in this prospectus supplement.
EVENT OF SERVICING TERMINATION: Has the meaning given in "Description of the
Notes--Events of Servicing Termination" in this prospectus supplement.
FINAL SCHEDULED PAYMENT: With respect to any contract, any payment set forth
in the contract other than the regular scheduled payment which is required to be
paid by the related obligor at the maturity of the contract.
INDENTURE TRUSTEE EXPENSES: Means the sum of the reimbursement to the
indenture trustee for its reasonable expenses in its capacity as indenture
trustee. These expenses include, without limitation, amounts payable to the
indenture trustee, in its capacity as back-up servicer, in respect of a transfer
of servicing from the servicer to the back-up servicer, and indemnification for
loss,
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liability or expense incurred without negligence or bad faith on its part,
arising out of performance of its duties in connection with the transfer of
servicing.
INITIAL AGGREGATE COLLATERAL BALANCE: The sum of (x) the Aggregate Discounted
Contract Principal Balance of the contracts as of the Cut-Off Date, and (y) the
Pre-Funded Collateral Amount on the closing date.
INITIAL UNPAID AMOUNT: With respect to a contract, the excess of (x) the
aggregate amount of all scheduled payments due prior to the Cut-Off Date over
(y) the aggregate of all scheduled payments made prior to the Cut-Off Date with
respect to the contract.
INTEREST ACCRUAL PERIOD: With respect to any payment date, the period from
and including the prior payment date to but excluding that payment date and with
respect to the initial payment date,
(x) for the Class A-1 notes, the period from and including the closing
date up to but excluding that payment date, and
(y) for each other class of notes, the period from and including
__________, 200_ up to but excluding that payment date.
NET CHARGE-OFF EVENT: Exists on any payment date on which the weighted
average of the Net Charge-Off Ratio for such payment date and the two
immediately preceding payment dates exceeds ___%. Once a Net Charge-Off Event
occurs, then the condition will be deemed to continue until the payment date
which is the fourth consecutive payment date for which the weighted average of
the Net Charge-Off Ratio for such payment dates and the two immediately
preceding payment dates is less than ___%.
NET CHARGE-OFF RATIO: With respect to any payment date, twelve times the
quotient, expressed as a percentage, of:
(a) the sum of the Discounted Contract Principal Balance of all contracts
that become Defaulted Contracts during the immediately preceding calendar
month-regardless of whether a substitute contract was provided for them-less
all recoveries received during the immediately preceding calendar month,
including, but not limited to, liquidation proceeds, divided by
(b) the Aggregate Discounted Contract Principal Balance of all contracts
as of the end of the immediately preceding calendar month.
For the purposes of the calculation of the Net Charge-Off Ratio, the Discounted
Contract Principal Balance of any contract which is a Defaulted Contract will
not be zero, but will instead be calculated as provided in the definition of
Discounted Contract Principal Balance without reference to the last proviso in
that definition.
"NON-U.S. PERSON" is a person who is not a U.S. Person.
PRE-FUNDED COLLATERAL AMOUNT: As of any date of determination, is the amount
on deposit in the pre-funding account, divided by ____%.
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[PREMIUM AMOUNT: With respect to any payment date, the product of:
(a) one-twelfth,
(b) the Premium Rate and
(c) the outstanding Class A note principal balance as of the end of the
immediately preceding collection period.]
[PREMIUM RATE: Has the meaning given in the Premium Letter, dated as of
___________, 200_, between the originator and the note insurer.]
PREPAYMENT: With respect to a collection period and a contract other than a
Defaulted Contract, the amount received by the servicer during such collection
period from or on behalf of an obligor with respect to the contract in excess of
the sum of (x) any scheduled payment and any Final Scheduled Payment due during
the collection period, plus (y) the aggregate of any overdue Scheduled Payments,
Initial Unpaid Amounts and unpaid Servicing Charges for the contract, so long as
the amount is designated by the obligor as a prepayment and the servicer has
consented to the prepayment. Neither Residual Receipts nor Defaulted Contract
Recoveries are Prepayments.
PREPAYMENT AMOUNT: With respect to a payment date and a contract, an amount,
without duplication, equal to the sum of:
o the Discounted Contract Principal Balance as of the beginning of the
immediately preceding collection period, without any deduction for any
security deposit paid by an obligor, unless the security deposit has been
deposited in the collection account under the indenture,
o the product of (x) the Discounted Contract Principal Balance of the
contract as of the beginning of the immediately preceding collection
period and (y) one-twelfth of the actual discount rate, and
o any scheduled payments theretofore due and not paid by an obligor.
PURCHASE OPTION PAYMENT: With respect to a contract, any payment set forth in
the contract payable by the obligor, including any security deposit applied in
respect of that payment, upon the exercise of a purchase option for the
equipment relating to the contract at the end of the term of the contract,
whether or not the obligor actually exercises the purchase option, or with
respect to any contract which does not set forth a purchase option, any payment
made by an obligor to purchase the equipment relating to the contract at the end
of the term of the contract.
REACQUISITION AMOUNT: With respect to a payment date and a contract, the
sum, without duplication, of,
o the Discounted Contract Principal Balance as of the beginning of the
immediately preceding collection period, without any deduction for any
security deposit paid by an obligor, unless such security deposit has been
deposited in the collection account pursuant to the indenture,
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o the product of (x) Discounted Contract Principal Balance of the contract
as of the beginning of the immediately preceding collection period and (y)
one-twelfth of the actual discount rate, and
o any scheduled payments previously due and not paid by an obligor.
RECEIVABLES SALE AGREEMENT: Means the receivables sale agreement, dated as of
_______________, 200_, among the originator and the transferors.
[REIMBURSEMENT AMOUNT: As of any payment date, the sum of:
(x)(a) all insured payments under the note insurance policy previously
received by the indenture trustee from the note insurer and not previously
repaid to the note insurer pursuant to the indenture plus (b) interest
accrued on each of the insured payments, at the late payment rate specified
in the insurance agreement, not previously repaid to the note insurer from
the date the indenture trustee received the related insured payment to, but
not including, that payment date and
(y)(a) any amounts then due and owing to the note insurer under the
insurance agreement plus (b) interest on the amounts at the late payment rate
specified in the insurance agreement.]
RESIDUAL BALANCE: As of any payment date, the difference, if any, between:
(a) the sum of (x) the Aggregate Discounted Contract Principal Balance of
all contracts as of the end of the immediately preceding collection period
and (y) the amount on deposit in the pre-funding account, and
(b) the sum of (x) the outstanding Class A note principal balance and (y)
the outstanding Class B note principal balance, each, without taking into
account any previous distributions on them attributable to Residual Receipts,
after taking into account any distributions on the payment date.
RESIDUAL RECEIPTS: All Purchase Option Payments or other proceeds of the
sale, re-lease or re-marketing of the underlying equipment, to the extent such
proceeds exceed any scheduled payments and any Final Scheduled Payments
remaining unpaid, but limited to the originator's booked residual value for the
contract.
RESTRICTING EVENT: An event which will occur on a payment date on which,
o an Event of Servicing Termination has occurred under the Sale and
Servicing Agreement and is not cured within the grace period set forth in
the Sale and Servicing Agreement,
o [the note insurer makes an insured payment under the note insurance
policy,]
o a Net Charge-Off Event exists,
o a Delinquency Trigger Event exists,
o a Subordination Deficiency Event exists, or
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o a Cumulative Loss Event exists.
SALE AND SERVICING AGREEMENT: Means the Sale and Servicing Agreement, dated
as of ____________, 200__, among the depositor, the trust, the originator, the
transferors, the servicers and the indenture trustee.
SUBORDINATION DEFICIENCY EVENT: Exists on any payment date on which:
(x) the excess of (1) the sum of (A) the Aggregate Discounted Contract
Principal Balance of the contracts as of the end of the immediately preceding
collection period and (B) the Pre-Funded Collateral Amount as of the end of
the immediately preceding collection period, over (2) the outstanding Class A
note principal balance on the payment date, after taking into account
distributions which would have been made on the payment date, is less than
(y) __% of the Initial Aggregate Collateral Balance.
TRANSFER AGREEMENTS: Means the Depositor Receivables Sale Agreement and the
Receivables Sale Agreement.
TRUST AGREEMENT: Means the trust agreement relating to the establishment of
the trust described in this prospectus supplement, dated as of ________________,
200__, between the owner trustee, the depositor and the transferors.
TRUST OPERATING EXPENSES: With respect to any payment date, an amount equal
to the amounts owing to the servicer, the back-up servicer, the note insurer and
the indenture trustee pursuant to the indenture and payable out of Available
Funds in priority to the Class A Note Interest then owing to the Class A
noteholders.
UNSCHEDULED PAYMENTS: With respect to any payment date, any Prepayment
Amount, Residual Receipts and Reacquisition Amounts received on account of a
contract during the preceding calendar month and Defaulted Contract Amounts on
contracts which became Defaulted Contracts during the preceding calendar month.
"U.S. PERSON" means a citizen or resident of the United States, a
corporation, partnership (except as provided in applicable Treasury regulations)
or other entity created or organized in or under the laws of the United States,
any state or the District of Columbia, including an entity treated as a
corporation or partnership for U.S. federal income tax purposes, an estate that
is subject to U.S. federal income tax regardless of the source of its income or
a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more of those U.S.
Persons have the authority to control all substantial decisions of the trust
(or, to the extent provided in applicable Treasury regulations, certain trusts
in existence on August 20, 1996, which are eligible to elect to be treated as
U.S. Persons).
S-64
<PAGE>
=========================================== ===================================
YOU SHOULD RELY ON THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED
PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED.
------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Summary.................................S-1
Risk Factors............................S-8
Forward-Looking Statements.............S-10
Defined Terms..........................S-10
Transaction Overview...................S-10
The Contract Pool......................S-11 $___________ (APPROXIMATE)
The Originator And The Servicer........S-24
[Description Of Originator And Its _______ EQUIPMENT CONTRACT
Originating Practices]...............S-24 TRUST 200_-_
[Description Of Servicer And Its ISSUER
Servicing Standards].................S-24
[Description Of Servicer's EQUIPMENT CONTRACT-BACKED NOTES,
Delinquency Experience]..............S-24 SERIES 200_-_
Formation of the Trust.................S-24 _________________________
Description of the Notes...............S-24 SERVICER
The Indenture Trustee and the
Back-up Servicer.....................S-37 PAINEWEBBER ASSET
Prepayment and Yield Considerations....S-38 ACCEPTANCE CORPORATION
[The Note Insurance Policy]............S-43 DEPOSITOR
The Note Insurer.......................S-46
[Description of the Note Insurer]......S-46
Federal Income Tax Considerations......S-46 $___________
ERISA Considerations...................S-49 CLASS A-1 NOTES
Legal Investment.......................S-50 $___________
Underwriting...........................S-50 CLASS A-2 NOTES
Additional Information.................S-52 $___________
Experts................................S-52 CLASS A-3 NOTES
Legal Matters..........................S-52 $___________
Ratings................................S-52 CLASS A-4 NOTES
Glossary of Terms......................S-53 $___________
CLASS B NOTES
PROSPECTUS
Summary of Terms.......................
Risk Factors...........................
Defined Terms.......................... -----------------------------------
The Trust Funds........................ PROSPECTUS SUPPLEMENT
The Issuers............................ -----------------------------------
The Receivables........................
Pool Factors...........................
Use of Proceeds........................
The Depositor.......................... PAINEWEBBER INCORPORATED
The Trustee............................
Description of the Securities..........
Description of the Trust Agreements....
Certain Legal Aspects of the
Receivables.......................... _________, 200_
Federal Income Tax Considerations......
ERISA Considerations...................
Methods of Distribution ...............
Incorporation of Information by
Reference............................
Legal Matters..........................
Financial Information..................
Additional Information.................
Ratings................................
Glossary of Terms......................
DEALERS WILL BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS OF THESE SECURITIES
AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION,
ALL DEALERS SELLING THESE SECURITIES
WILL DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS UNTIL ____________, 200_.
=========================================== ===================================
<PAGE>
The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement 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 is not permitted.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS SUPPLEMENT DATED __________, 200_
(TO PROSPECTUS DATED ___________, 200_)
$______________ (APPROXIMATE)
____________________ TRUST 200_-_
(ISSUER)
____________________ ASSET-BACKED CERTIFICATES, SERIES 200_-_
$__________ ______% CLASS A CERTIFICATES
____________________
(ORIGINATOR AND SERVICER)
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
(DEPOSITOR)
THE TRUST FUND--
o The trust fund consists primarily of a pool of receivables consisting of
[auto loans] [recreational vehicle loans] [auto leases] [structured
settlements] and security interests in the underlying assets.
THE OFFERED CERTIFICATES--
o The trust will issue 1 class of certificates.
CREDIT ENHANCEMENT--
o [The Class A certificates will be unconditionally and irrevocably
guaranteed as to the distribution of scheduled interest and to specified
distributions of principal pursuant to the terms of a financial guaranty
insurance policy to be issued by _______________]
[____ LOGO]
____________________ Trust 200_-_ is issuing certificates in 1 class
UNDERWRITING PROCEEDS TO THE
PRICE TO THE PUBLIC DISCOUNT DEPOSITOR
------------------- ------------ ---------------
% % $
The proceeds to depositor are less expenses, estimated at $[ ]. See
"Underwriting" in this prospectus supplement.
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-___ OF
THIS PROSPECTUS SUPPLEMENT AND PAGE ___ IN THE PROSPECTUS.
The certificates will not represent obligations of the depositor, originator,
the issuer or any other person or entity. No governmental agency will insure the
certificates or the collateral securing the certificates.
You should consult with your own advisors to determine if the offered
certificates are appropriate investments for you and to determine the applicable
legal, tax, regulatory and accounting treatment of the offered certificates.
- --------------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE OFFERED
CERTIFICATES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAINEWEBBER INCORPORATED
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information about the offered certificates for the series 200_-_
in two separate documents that progressively include more detail:
(1) the accompanying prospectus dated ___________, 200_. The accompanying
prospectus provides general information, some of which may not apply to the
offered certificates for the series 200_-_.
(2) this prospectus supplement. This prospectus supplement describes the
specific terms of the certificates for the series 200_-_. Sales of the
offered certificates may not be completed unless you have received both this
prospectus supplement and the prospectus. You are urged to read both this
prospectus supplement and the prospectus in full.
IF THE TERMS OF THE OFFERED CERTIFICATES VARY BETWEEN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, THEN YOU SHOULD RELY ON THE
INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
Cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials are included to assist in locating
further related discussions. The following table of contents and the table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
S-2
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY......................................................................S-5
RISK FACTORS................................................................S-12
Limited Liquidity May Adversely Affect Market Value Of Securities......S-12
Prepayments On The Receivables Will Cause Prepayments On The
Certificates Resulting In Reinvestment Risk To You...................S-12
Prepayments On The Receivables May Affect Your Yield On Your
Certificates.........................................................S-12
Potential Prepayments On Certificates Due To Failure To Transfer A
Sufficient Number Of Additional Receivables To The Trust.............S-12
Risk Of Potential Prepayments on Certificates Due To Failure
To Obtain Release Of Existing Lien...................................S-13
You May Experience A Loss On Your Certificates Because The Issuer
Has Limited Asset....................................................S-13
[Originator Has A Limited Operating History............................S-14
[The Originator's Internet-Based Origination Programs May Give
Rise To Risks That Are Not Customary.................................S-15
[You May Experience A Loss In Connection With An Event Of Default......S-15
[Potential Losses On Your Certificates Due To Geographic
Concentration Of Receivables.........................................S-15
FORWARD LOOKING STATEMENTS..................................................S-16
DEFINED TERMS...............................................................S-16
THE TRUST...................................................................S-16
General................................................................S-16
The Trustee............................................................S-17
THE TRUST FUND..............................................................S-17
THE RECEIVABLES POOL........................................................S-17
Eligibility Criteria...................................................S-17
Subsequent Receivables.................................................S-18
Pool Composition.......................................................S-19
THE TRANSFEROR..............................................................S-23
THE DEPOSITOR...............................................................S-24
THE ORIGINATOR And The Servicer.............................................S-24
General................................................................S-24
Origination Process and Credit Evaluation Procedures...................S-24
Contract Processing, Purchase, Servicing and Administration............S-24
Delinquency Control and Collection Strategy............................S-24
Delinquency and Loss Experience........................................S-24
WEIGHTED AVERAGE LIFE OF THE SECURITIES.....................................S-25
DESCRIPTION OF CERTIFICATES.................................................S-28
General................................................................S-28
Distributions..........................................................S-29
The Accounts...........................................................S-29
Collections............................................................S-30
Flow of Funds..........................................................S-30
Withholding............................................................S-31
[THE INSURER]...............................................................S-31
General................................................................S-31
Reinsurance............................................................S-32
Rating of Claims-Paying Ability........................................S-32
Capitalization.........................................................S-32
Insurance Regulation...................................................S-33
[THE POLICY]................................................................S-34
[Other Provisions of the Policy].......................................S-36
S-3
<PAGE>
THE POOLING AND SERVICING AGREEMENT AND THE TRANSFER AGREEMENTS.............S-37
Conveyance of Receivables..............................................S-37
Servicing..............................................................S-37
Certain Reports........................................................S-40
Termination............................................................S-41
Amendment..............................................................S-41
FEDERAL INCOME TAX CONSIDERATIONS...........................................S-42
Tax Status of the Trust................................................S-42
Taxation of Certificateholders.........................................S-42
Discount and Premium...................................................S-44
Sale of a Class A Certificate..........................................S-45
Foreign Class A Certificateholders.....................................S-45
Backup Withholding.....................................................S-45
ERISA CONSIDERATIONS........................................................S-45
LEGAL INVESTMENT............................................................S-48
UNDERWRITING................................................................S-49
ADDITIONAL INFORMATION......................................................S-50
EXPERTS.....................................................................S-50
LEGAL MATTERS...............................................................S-50
RATINGS.....................................................................S-50
GLOSSARY OF TERMS...........................................................S-52
S-4
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES
NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN
INVESTMENT DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE
OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE
ACCOMPANYING PROSPECTUS.
RELEVANT PARTIES
ISSUER.................................... [__________] Trust 200_-_.
DEPOSITOR................................. PaineWebber Asset Acceptance
Corporation will assign the
receivables to the issuer.
PaineWebber Asset Acceptance
Corporation is a Delaware
corporation. The depositor's
principal executive offices are
located at 1285 Avenue of the
Americas, New York, New York 10019,
telephone number (212) 713-2000.
ORIGINATORS AND
SUB-SERVICERS.......................... ___________ originates the
receivables consisting of [auto
loan] [recreational vehicle loan]
[auto lease] [structured settlement]
and will sell and contribute the
receivables to the transferor and
will act as sub-servicer of the
receivables. _______ is a _________
[company], whose executive offices
are located at _____________.
SERVICER.................................. ______________ will service the
receivables assigned to the issuer.
The servicer is a _________ with its
principal place of business in
__________. The servicer is a wholly
owned subsidiary of __________, a
________ corporation. The
servicer's address is ____________,
telephone number (___) _____._____.
TRUSTEE AND BACKUP SERVICER............... _______________ will serve as the
trustee and backup servicer under
the pooling and servicing agreement.
The trustee and backup servicer's
address is ____________, telephone
number (___) ____.____.
RELEVANT DATES
CUT-OFF DATE.............................. ________, 200_.
CLOSING DATE.............................. On or about ________, 200_.
DISTRIBUTION DATES........................ The __________ day of each month or
if the __________ day is not a
business day, the next succeeding
business day, commencing __________.
S-5
<PAGE>
CERTIFICATES OFFERED...................... The certificates consist of a senior
class offered by this prospectus
supplement, the ______% ___________
Class A, and ___________ classes of
subordinate certificates not offered
by this prospectus supplement. Each
certificate will represent a
fractional undivided interest in the
trust. The Class A certificates
will be issued in fully registered
form in minimum denominations of
$1,000,000 and integral multiples of
$1,000 in excess thereof. However,
one Class A certificate may be
issued in another denomination
representing any remaining portion
of the initial Class A certificate
balance. The Class A certificates
will evidence in the aggregate an
undivided ownership interest of
____% of the trust, with the
subordinate certificates
representing the remainder. The
Class A certificates are senior in
priority of distributions of
principal and interest due on the
subordinate certificates, to the
extent described in this prospectus
supplement.
CLASS A PASS-THROUGH RATE................. __________% per annum, calculated on
the basis of a 360-day year
consisting of twelve 30-day months.
DISTRIBUTIONS OF INTEREST................. On each distribution date, the
trustee will be required to pass
through and distribute pro rata with
respect to the Class A certificates
to the holders of record of the
Class A certificates as of the last
day of the immediately preceding
calendar month, interest
distributable with respect to the
Class A certificates. The amount of
interest distributable on the Class
A certificates will be an amount
equal to one-twelfth of the product
of the Class A pass-through rate and
the Class A certificate balance as
of the record date to the extent
that sufficient funds are on deposit
in the collection account. The
pass-through rate for the Class A
certificates is ____% per annum.
See "Description of The
Certificates--Flow of Funds" in this
prospectus supplement.
DISTRIBUTIONS OF PRINCIPAL................ On each distribution date, the
trustee will be required to
distribute pro rata to the Class A
certificateholders and the
subordinate certificateholders as of
the related record date as a
distribution of principal:
o that portion of all collections
on receivables, other than
liquidated receivables and
receivables that were purchased
or repurchased from the trust
under the pooling and servicing
agreement allocable to
principal, including all full
and partial principal
prepayments;
S-6
<PAGE>
o the principal balance of all
receivables, other than
purchased receivables, that
became liquidated receivables
during the related collection
period;
o (A) the portion of the purchase
amount allocable to principal of
all receivables that became
purchased receivables as of the
immediately preceding record
date, and (B) [in the sole
discretion of the insurer, the]
principal balance as of the
immediately preceding record
date of all receivables that
were required to be purchased as
of the immediately preceding
record date but were not
purchased; and
o the aggregate amount of cram
down losses that occurred during
the related collection period.
These amounts will be computed in
accordance with the simple interest
method.
A collection period with respect to
a distribution date will be the
calendar month immediately preceding
the month in which the distribution
date occurs, or, in the case of the
initial distribution date, the
period from the cut-off date through
the last day of the calendar month
preceding the month in which the
initial distribution date occurs.
See "Description of The
Certificates--Flow of Funds" in this
prospectus supplement.
Distributions of interest and
principal on the subordinate
certificates will be subordinated in
priority of distribution to interest
and principal due on the Class A
certificates. The subordinate
certificateholders will not receive
any distributions of interest or
principal with respect to a
collection period until the full
amount of interest and principal on
the Class A certificates relating to
the collection period has been
distributed from the collection
account.
THE TRUST................................. The trust will be a trust
established under the laws of the
State of _______________. The
activities of the trust are limited
by the terms of the pooling and
servicing agreement to:
o purchasing, owning and managing
the receivables;
o issuing and making distributions
on the certificates; and
S-7
<PAGE>
o other related activities.
The trust property includes:
o receivables consisting of
[automobiles] [recreational
vehicles] [structured
settlements];
o monies due under the receivables
on or after the cut-off date;
o security interests in the
[automobiles] [recreational
vehicles] [structured
settlements] or other property
securing the receivables;
o amounts as from time to time may
be held in one or more accounts
established and maintained by
the servicer under the pooling
and servicing agreement and the
related proceeds;
o [the financial guaranty
insurance policy;]
o any proceeds from claims on
certain insurance policies;
o certain rights under the pooling
and servicing agreement, under
the transfer agreements; and
o all proceeds related to property
in the trust.
THE RECEIVABLES AND THE OTHER TRUST FUND
PROPERTIES............................. The primary assets of the issuer
will be the receivables consisting
of [auto loans] [recreational
vehicle loans] [auto leases]
[structured settlements]. The
receivables will be sold and
contributed by the originator to the
transferor, and assigned by the
transferor to the depositor, by the
depositor to the issuer, and then by
the issuer to the trustee for the
benefit of the certificateholders on
the day of closing and from time to
time on subsequent transfer dates on
or before __________, 200_.
THE RECEIVABLES POOL...................... As of the beginning of business on
__________, 200_, the [___________]
in the pool have:
(1) an aggregate principal balance
of $___________;
(2) a weighted average annual
percentage rate of approximately
_____%;
S-8
<PAGE>
(3) a weighted average remaining
term to stated maturity of
approximately ___________
months; and
(4) a remaining term to stated
maturity of not more than __
months and not less than __
months.
OTHER TRUST FUND PROPERTIES............... In addition to the receivables, the
trust fund will also include:
(1) all moneys received with respect
to the initial receivables after
the initial cut-off date and the
subsequent receivables after the
applicable subsequent cut-off
dates;
(2) the security interests in the
[automobiles] [recreational
vehicles] [structured
settlements] financed by the
receivables;
(3) any proceeds from claims under
insurance policies covering the
underlying assets of the
receivables or the related
obligors;
(4) all instruments and documents
relating to the receivables;
(5) a security interest in amounts
on deposit in certain bank
accounts; and
(6) all rights of the issuer under
the pooling and servicing
agreement.
PRE-FUNDING
PRE-FUNDING ACCOUNT....................... On the day of closing, the
transferor will deposit
approximately $___________ of the
proceeds of the certificates into
a pre-funding account held by the
trustee. The issuer will use funds
on deposit in this account to
acquire additional receivables from
the transferor from time to time on
or before __________, 200_.
The receivables acquired by the
issuer during the period between the
day of the closing and __________,
200_ will also have been originated
by ___________.
The characteristics of the
subsequently-acquired receivables
will not differ materially from the
receivables acquired by the issuer
on the day of the closing.
S-9
<PAGE>
[INSURER.................................. [__________] is a financial guaranty
insurance company incorporated under
the laws of the State of [________].
See "The Policy" and "The Insurer"
in this prospectus supplement.]
[THE POLICY............................... On the closing date, the insurer
will issue the financial guaranty
insurance policy to the trustee for
the benefit of the Class A
certificateholders under which the
insurer will unconditionally and
irrevocably guarantee to the Class
A certificateholders payment of the
guaranteed distributions for each
distribution date. See "The Policy"
and "Description Of The
Certificates--Flow of Funds" in this
prospectus supplement.]
TRANSFER AGREEMENT........................ The purchase agreement and
assignment, dated as of [_________],
under which the originators will
sell the receivables to the seller,
and the unaffiliated seller's
agreement, dated as of [__________],
under which the seller will sell the
receivables to the depositor.
REPURCHASE AND
PURCHASE OBLIGATIONS................... [__________] will be obligated to
repurchase a receivable if the
interests of the trust, the
certificateholders [or the insurer]
in the receivable or the value of
the receivable is materially
adversely affected by a breach of
any representation or warranty made
with respect to the receivable or by
a breach of certain of the
servicer's servicing obligations
under the pooling and servicing
agreement or certain other covenants
with respect to the servicer, if
either breach has not been cured by
the deposit date of the first full
calendar month following the
discovery by or notice to [________]
of the breach.
SERVICING FEE............................. Each month the servicer will receive
a fee for servicing the receivables
plus a supplemental servicing fee.
See "The Pooling And Servicing
Agreement and the Transfer of
Agreements--Servicing" in this
prospectus supplement.
OPTIONAL PURCHASE......................... The servicer may purchase all of the
receivables as of the last day of
any month in which the aggregate
principal balance as a percentage of
the original aggregate principal
balance is 10% or less. [The
servicer's right to exercise this
option will be subject to the prior
approval of the insurer.] The
purchase price will be equal to the
aggregate purchase amounts and will
be distributed to certificateholders
on the following distribution date.
See
S-10
<PAGE>
"The Pooling And Servicing
Agreement and the Transfer
Agreements".
FEDERAL INCOME
TAX CONSIDERATIONS..................... In the opinion of Cadwalader,
Wickersham & Taft, special tax
counsel to the depositor, the trust
will be classified as a grantor
trust and not as an association
taxable as a corporation for federal
income tax purposes. The
certificateholders must report their
respective allocable shares of all
income earned on the trust assets,
other than any amounts treated as
"stripped coupons" and may deduct
their respective allocable shares of
reasonable servicing fees. See
"Federal Income Tax Considerations--
Tax Status of the Trust" in this
prospectus supplement. Prospective
investors should note that no
rulings have been or will be sought
from the IRS with respect to any of
the federal income tax consequences
discussed in this prospectus
supplement, and no assurance can be
given that the IRS will not take
contrary positions. See "Federal
Income Tax Considerations" in this
prospectus supplement.
ERISA CONSIDERATIONS...................... As described in this prospectus
supplement, the Class A certificates
may be purchased by employee benefit
plans that are subject to ERISA or
entities using assets of the plans.
Any benefit plan fiduciary
considering purchase of the Class A
certificates should, among other
things, consult with its counsel in
determining whether all required
conditions have been satisfied. See
"ERISA Considerations" in this
prospectus supplement.
RATINGS................................... As a condition to the issuance of
the Class A certificates, the Class
A certificates will be rated at
least "_______" by __________ on the
basis of the issuance of the
financial guaranty insurance policy
by the insurer. We cannot assure
you that a rating will not be
lowered or withdrawn by a rating
agency based on a change in
circumstances deemed by the rating
agency to adversely affect the Class
A certificates. A rating is not a
recommendation to purchase, hold or
sell the Class A certificates, in as
much as the rating does not comment
as to market price or suitability
for a particular investor. See
"Ratings" in this prospectus
supplement.
S-11
<PAGE>
RISK FACTORS
BEFORE MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISKS WHICH WE BELIEVE DESCRIBE THE PRINCIPAL FACTORS THAT MAKE AN
INVESTMENT IN THE CERTIFICATES SPECULATIVE OR RISKY. IN PARTICULAR, PAYMENTS ON
YOUR CERTIFICATES WILL DEPEND ON PAYMENTS RECEIVED ON AND OTHER RECOVERIES WITH
RESPECT TO THE RECEIVABLES. THEREFORE, YOU SHOULD CAREFULLY CONSIDER THE RISK
FACTORS RELATING TO THE RECEIVABLES.
LIMITED LIQUIDITY MAY ADVERSELY AFFECT MARKET VALUE OF SECURITIES
A secondary market for the certificates may not develop or, if it does
develop, it may not provide you with liquidity of investment or continue while
your certificates are outstanding. Lack of liquidity could result in a
substantial decrease in the market value of your certificates. See "Risk
Factors--Limited Liquidity of Securities May Adversely Affect the Market Value
of Your Securities" in the accompanying prospectus.
PREPAYMENTS ON THE RECEIVABLES WILL CAUSE PREPAYMENTS ON THE CERTIFICATES
RESULTING IN REINVESTMENT RISK TO YOU
The receivables may be prepaid, in full or in part, voluntarily or as a
result of:
o prepayments on the defaults;
o casualties to the related receivables; or
o other reasons.
Since the rate of distribution of principal of the certificates depends in
part on the rate of payment, including prepayments, of the principal balance of
the [____________], final distribution of the certificates could occur
significantly earlier than the final scheduled distribution date for each class
of certificates. You will bear the risk that you may have to reinvest the
principal on your certificates earlier than you expected at a rate of interest
that is less than the rate of interest on your certificates.
PREPAYMENTS ON THE RECEIVABLES MAY AFFECT YOUR YIELD ON YOUR CERTIFICATES
If you purchase your certificates at a premium, prepayments on the
receivables may reduce your yield. The ratings on the certificates do not
address the possibility that prepayment rates may affect your yield on your
certificates.
POTENTIAL PREPAYMENTS ON CERTIFICATES DUE TO FAILURE TO TRANSFER A SUFFICIENT
NUMBER OF ADDITIONAL RECEIVABLES TO THE TRUST
If all of the funds on deposit in the pre-funding account are not used to
purchase additional receivables during the pre-funding period, any remaining
amount on deposit in loans to the trust will be used to make principal
distributions on the certificates. See "Description of the
Certificates--Distributions" in this prospectus supplement. The originator has
identified an
S-12
<PAGE>
existing pool of receivables that the originator believes will satisfy the
established criteria for receivables that will be assigned to the issuer on
subsequent transfer dates. See "The Receivables Pool--Subsequent Receivables" in
this prospectus supplement. However, we cannot assure you that the identified
receivables will in fact satisfy that criteria and that there will be a
sufficient number of eligible receivables to assign to the issuer.
For example, any receivable that is more than _____ days delinquent or that
has not had at least _____ scheduled payments made prior to the end of the
pre-funding period will not be eligible for assignment to the issuer. The
ability of the transferor to assign a sufficient number of additional
receivables to the issuer.
RISK OF POTENTIAL PREPAYMENTS ON CERTIFICATES DUE TO FAILURE TO OBTAIN RELEASE
OF EXISTING LIEN
The receivables that the originator has identified for possible transfer to
the to issuer on subsequent transfer dates are subject to a lien securing
amounts on subsequent receivables advanced under a warehouse credit line that
the originator uses to finance receivables it owns. Although the originator
anticipates that amounts on deposit in the pre-funding account will be
sufficient to repay the related warehouse debt and release the lien on
additional receivables, we cannot assure you that those amounts will be
sufficient or that the originator will have other sources of cash that could be
used to repay the warehouse debt. If the related warehouse debt were not repaid
and the lien released, the transferor would be unable to assign additional
receivables to the issuer.
YOU MAY EXPERIENCE A LOSS ON YOUR CERTIFICATES BECAUSE THE ISSUER HAS LIMITED
ASSETS
The issuer's primary assets or source of funds for distributions on the
certificates are:
o the receivables;
o the pre-funding account;
o [the reserve limited assets account;]
o [the yield supplement account;]
o the capitalized interest account; and
o [the insurance policy issued by ___________.]
For repayment, you must rely upon payments on the receivables, amounts on
deposit in the pre-funding account[, the yield supplement account, the
capitalized interest account and amounts, if any, in the reserve account].
o The pre-funding account and the capitalized interest account will only be
maintained until the first distribution date after the pre-funding period.
S-13
<PAGE>
o The money in the pre-funding account will only be used to purchase
additional receivables and is not available to cover losses on the
receivables.
o The capitalized interest account covers obligations of the issuer relating
to the portion of the issuer's assets not invested in receivables and is
not designed to provide protection against losses on the receivables.
o [Although the policy will be available to cover shortfalls in
distributions each month, if ___________ defaults in its obligations under
the policy, the certificateholders must rely solely on:
o amounts received with respect to the receivables without the benefit of
the policy
o amounts, if any, on deposit in the reserve account; and
o the amount released from the yield supplement account on each distribution
date.
If this happens, the trustee may be unable to realize on the collateral
securing the receivables and the proceeds to be distributed to
certificateholders on a current basis may be reduced.]
[ORIGINATOR HAS A LIMITED OPERATING HISTORY
All of the receivables were originated by ___________ in accordance with its
credit underwriting criteria. The originator was formed in ___________ and
commenced its operations as an originator of [auto loans] [recreational vehicle
loans] [auto leases] [structured settlements] only in __________. Since that
time it has experienced rapid growth in its portfolio of [auto loans]
[recreational vehicle loans] [auto leases] [structured settlements]. The
originator therefore has limited historical performance data with respect to the
majority of the [auto loans] [recreational vehicle loans] [auto leases]
[structured settlements] it currently services. Although the originator has
calculated and presented in this prospectus supplement its delinquency and net
loss experience with respect to its entire portfolio of serviced [auto loans]
[recreational vehicle loans] [auto leases] [structured settlements], we cannot
assure you that the information presented will reflect actual experience with
respect to the receivables. In addition, we cannot assure you that the future
delinquency or loan loss experience of the servicer with respect to the
receivables will be better or worse than that set forth in the table headed
"Delinquency and Loss Experience" in this prospectus supplement. The originator
is at an early stage of operations, is subject to the risks inherent in the
establishment of a new business and must, among other things, continue to
attract and retain qualified credit and collection personnel and support its
[auto loans] [recreational vehicle loans] [auto leases] [structured settlements]
business. See "The Originator and the Servicer" in this prospectus supplement.]
S-14
<PAGE>
[THE ORIGINATOR'S INTERNET-BASED ORIGINATION PROGRAMS MAY GIVE RISE TO RISKS
THAT ARE NOT CUSTOMARY
The originator generally uses the internet and the mail to communicate with
obligors during the process of underwriting and originating [auto loans]
[recreational vehicle loans] [auto leases] [structured settlements]. For a
discussion of the underwriting and origination process, see "The Originator and
The Servicer" in this prospectus supplement. The underwriting and origination
processes and loan documentation used by the originator are novel and were
developed to capitalize on the potential benefits of conducting its business
over the internet and through the mail. These processes and the related loan
documentation may entail risks that would not exist in a customary [auto loans]
[recreational vehicle loans] [auto leases] [structured settlements] origination
program and may give rise to challenges based on consumer protection or other
laws based on issues that are currently untested in the courts. We cannot assure
you that these risks could not adversely affect the collectability or
enforceability of the contracts or the security interests in the underlying
assets.
[YOU MAY EXPERIENCE A LOSS IN CONNECTION WITH AN EVENT OF DEFAULT
Unless an insurer default has occurred and is continuing, neither the trustee
nor the certificateholders may declare an event of default under the pooling and
servicing agreement. So long as an insurer event of default has not occurred and
is not continuing, an event of default will occur only upon delivery by the
insurer to the trustee of notice of the occurrence of events of default under
the insurance agreement. If a default occurs under the pooling and servicing
agreement, so long as an insurer default has not occurred and is not continuing,
the insurer will have the right, but not the obligation, to cause the sale, in
whole or in part, of the receivables and the other assets of the trust, which
will result in a prepayment, in whole or in part, of the certificates in advance
of their maturity dates. Following the occurrence of an event of default, the
trustee will continue to submit claims under the insurance policy as necessary
to enable the issuer to continue to make distributions on the certificates in
accordance with the terms of the pooling and servicing agreement on each
distribution date. Following the occurrence of an event of default, however, the
insurer may elect, in its sole discretion, to pay all or any portion of the
outstanding amount of the certificates, plus accrued interest on the
certificates. You may not be able to reinvest the principal repaid to you
earlier than expected at a rate of return that is at least equal to the rate of
return on your certificates.]
[POTENTIAL LOSSES ON YOUR CERTIFICATES DUE TO GEOGRAPHIC CONCENTRATION OF
RECEIVABLES
Economic conditions in the states where the obligors under the receivables
reside affect the delinquency, loan loss and repossession experience of the
issuer with respect to the receivables. Based on the principal balance of the
original pool of receivables as of __________, 200_, ______% of the receivables
were originated in ___________, _____% in ___________, and _____% in
___________. No other states have concentrations in excess of ____%.
Accordingly, adverse economic conditions or other factors affecting ________,
_______ or ________ could have an especially significant impact on the
delinquency, loan loss or repossession experience of the issuer and may
adversely affect the timing and amount of distribution of principal and interest
on your certificates.]
S-15
<PAGE>
FORWARD-LOOKING STATEMENTS
In this prospectus supplement and the accompanying prospectus, we use certain
forward-looking statements. These forward-looking statements are found in the
material, including each of the tables, set forth under "Risk Factors" and
"Weighted Average Life Of The Securities" in this prospectus supplement.
Forward-looking statements are also found elsewhere in this prospectus
supplement and prospectus and include words like "expects," "intends,"
"anticipates," "estimates" and other similar words. These statements are
intended to convey our projections or expectations as of the date of this
prospectus supplement. These statements are inherently subject to a variety of
risks and uncertainties. Actual results could differ materially from those we
anticipate due to changes in, among other things:
(1) economic conditions and industry competition,
(2) political and/or social conditions, and
(3) the law and government regulatory initiatives.
We will not update or revise any forward-looking statement to reflect changes
in our expectations or changes in the conditions or circumstances on which these
statements were originally based.
DEFINED TERMS
We define and use capitalized terms in this prospectus supplement and the
prospectus to assist you in understanding the terms of the offered certificates
and this offering. We define the capitalized terms we used in this prospectus
supplement under the caption "Glossary of Terms" beginning on page S-[__] in
this prospectus supplement.
THE TRUST
GENERAL
The issuer, ___________ Trust 200_-_ is a business trust formed under the
laws of the State of ___________ under a trust agreement. After its formation,
the issuer will not engage in any activity other than:
o acquiring, holding and managing the trust fund;
o issuing the certificates;
o making distributions on the certificates issued by it; and
o engaging in other activities that are necessary, suitable or convenient to
accomplish those objectives.
S-16
<PAGE>
The trust's principal offices are in ___________, in care of ___________, as
trustee, at the address listed below under "--The Trustee" in this prospectus
supplement.
THE TRUSTEE
___________ is the trustee under the pooling and servicing agreement. The
trustee is a ___________ and its principal offices are located at ___________.
THE TRUST FUND
The trust fund will include, among other things, the following property of
the issuer:
(1) the Receivables;
(2) all payments due on or received under the Initial Receivables after the
beginning of business on the Initial Cut-off Date and under the
Subsequent Receivables after the Subsequent Cut-off Dates;
(3) any amounts as from time to time may be held in the collection account,
the Certificate Distribution Account, [the Yield Supplement Account,] the
Pre-Funding Account and the Capitalized Interest Account;
(4) an assignment of the security interests of the originator in the assets
underlying the Receivables;
(5) an assignment of the right to receive proceeds from claims on certain
physical damage, credit life and disability insurance policies covering
the assets underlying the Receivables or the obligors;
(6) the receivable file related to each Receivable; and
(7) certain other rights under the trust agreements.
The trust fund will also include an assignment of the transferor's rights
against the originator and the depositor's rights against the transferor and the
originator under the pooling and servicing agreement upon the occurrence of
certain breaches of representations and warranties.
THE RECEIVABLES POOL
ELIGIBILITY CRITERIA
The Receivables were originated by the originator in the ordinary course of
its business. The pool of Receivables will consist of the Initial Receivables
purchased by the issuer as of the Initial Cut-off Date and the Subsequent
Receivables purchased by the issuer as of the related Subsequent Cut-off Dates.
The Initial Receivables have been selected, and the Subsequent Receivables will
be selected, from the portfolio of the originator for inclusion in the pool of
Receivables by several criteria, including the following:
S-17
<PAGE>
o each Receivable has an annual percentage rate of at least ___________%,
o each Receivable as of the related cut-off date, was not more than ____
days past due;
o each Receivable has a scheduled maturity not later than ____ months before
__________, 20__;
o each Receivable had an original term to stated maturity of not more than
____ months; and
o each Receivable has had at least _____ scheduled payments received by the
servicer prior to the related cut-off date.
No selection criteria or procedures believed by the originator or the
transferor to be adverse to [the insurer or] the certificateholders were used in
selecting the receivables.
SUBSEQUENT RECEIVABLES
During the Pre-Funding Period, the transferor is obligated to purchase from
the originator and to assign to the depositor the Subsequent Receivables. The
Subsequent Receivables will then be assigned to the issuer, on each subsequent
transfer date. The aggregate principal balance of the Subsequent Receivables is
anticipated by the originator to equal approximately $__________. In connection
with each assignment of Subsequent Receivables, the issuer will be required to
pay to the depositor a cash purchase price equal to __% of the outstanding
principal balance of the Subsequent Receivables as of their Subsequent Cut-off
Dates [less required deposits to the reserve account]. The depositor will pay
the cash purchase price to the transferor and the transferor in turn will pay it
to the originator. At this agreed upon purchase price, the Initial Pre-Funded
Amount will be sufficient to purchase the entire $___________ aggregate
principal balance of Subsequent Receivables that the originator anticipates will
be transferred to the transferor. The purchase price will be withdrawn from the
Pre-Funding Account and paid to the depositor for further payment to the
transferor and the originator.
Any assignment of Subsequent Receivables is subject to the following
conditions, among others:
o each Subsequent Receivable and the underlying assets satisfies the
eligibility criteria specified under "Eligibility Criteria" above as of
the related Subsequent Cut-off Date;
o [the insurer, so long as no Insurer Default has occurred and is not
continuing, will have approved in its absolute and sole discretion the
assignment of the Subsequent Receivables to the issuer;]
o neither the originator nor the transferor will have selected the
Subsequent Receivables in a manner that it believes is adverse to the
interests of [the insurer or] the certificateholders;
S-18
<PAGE>
o the originator has delivered certain opinions of counsel with respect to
the validity of the conveyance of the Subsequent Receivables;
o the Rating Agencies will have confirmed that the ratings on the
certificates have not been withdrawn or reduced as a result of the
assignment of the Subsequent Receivables to the issuer; and
o no event of default under the pooling and servicing agreement has occurred
and is continuing.
In addition, the obligation of the issuer to purchase the Subsequent
Receivables on a subsequent transfer date is subject to the condition that the
Receivables assigned to the issuer, including the Subsequent Receivables to be
conveyed to the trust on the subsequent transfer date meet the following
criteria:
o each Subsequent Receivable assigned to the issuer will have an annual
percentage rate of _______% or higher;
o each Subsequent Receivable assigned to the issuer will have a remaining
term to stated maturity of not more than __ months; and
o not more than __% of the pool balance will have obligors whose mailing
addresses are in any one state other than [_________] unless an opinion of
counsel acceptable to the Rating Agencies [and the insurer] with respect
to the security interest in the related [____________] is furnished by the
transferor on or prior to the subsequent transfer date.
Except for the criteria described in the preceding paragraphs, there are no
required characteristics for the Subsequent Receivables. Therefore, following
the transfer of Subsequent Receivables to the trust, the aggregate
characteristics of the entire pool of Receivables included in the trust,
including the composition of the Receivables, the distribution by annual
percentage rate, the geographic distribution and the distribution by remaining
term described in the following tables, will vary from those of the Initial
Receivables.
POOL COMPOSITION
Set forth in the following tables is information concerning the composition,
distribution by geographic location, distribution by remaining Principal
Balance, distribution by APR, distribution by original term to stated maturity,
distribution by remaining term to stated maturity and distribution by loan
purpose of the Initial Receivables to be assigned to the issuer as of the
Initial Cut-off Date.
S-19
<PAGE>
COMPOSITION OF THE INITIAL RECEIVABLES POOL
AS OF THE INITIAL CUT-OFF DATE
Aggregate Principal Balance............................. $
Number of Receivables...................................
Average Principal Balance............................... $
(Range).................................................
Average Original Amount Financed........................ $
(Range).................................................
Weighted Average APR....................................
(Range).................................................
Weighted Average Original Term to Stated Maturity.......
(Range).................................................
Weighted Average Remaining Term to Stated Maturity......
(Range).................................................
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE INITIAL RECEIVABLES AS OF
THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF REMAINING PRINCIPAL BALANCES NUMBER OF RECEIVABLES BALANCE BALANCE (1)
- ------------------------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C>
$ $
</TABLE>
- ---------------------------
(1) Percentages may not add to 100.00% due to rounding.
S-20
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES POOL AS OF THE
INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
STATE (1) RECEIVABLES BALANCE BALANCE (2)
- ------------------------------------------------ ----------- ------------------- -------------------
<S> <C> <C> <C>
Alabama......................................... $ %
Arizona.........................................
Arkansas........................................
California......................................
Colorado........................................
Connecticut.....................................
District of Columbia............................
Florida.........................................
Georgia.........................................
Idaho...........................................
Indiana.........................................
Iowa............................................
Kansas..........................................
Kentucky........................................
Maine...........................................
Maryland........................................
Massachusetts...................................
Michigan........................................
Minnesota.......................................
Missouri........................................
Montana.........................................
Nebraska........................................
New Jersey......................................
New Mexico......................................
New York........................................
North Carolina..................................
Ohio............................................
Oklahoma........................................
Oregon..........................................
Rhode Island....................................
South Carolina..................................
Tennessee.......................................
Texas...........................................
Utah............................................
Virginia........................................
Washington......................................
West Virginia...................................
Wisconsin.......................................
Total...........................................
</TABLE>
S-21
<PAGE>
- ---------------------------
(1) Based on mailing addresses of the obligors as of the date of origination.
(2) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE INITIAL RECEIVABLES AS OF
THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF ANNUAL PERCENTAGE RATES NUMBER OF RECEIVABLES BALANCE BALANCE (2)
-------------------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C>
$ %
</TABLE>
- ---------------------------
(1) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION BY ORIGINAL TERM TO STATED MATURITY OF THE INITIAL RECEIVABLES AS
OF THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF ANNUAL PERCENTAGE RATES NUMBER OF RECEIVABLES BALANCE BALANCE (2)
-------------------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C>
$ %
</TABLE>
- ---------------------------
(1) Percentages may not add to 100.00% due to rounding.
S-22
<PAGE>
DISTRIBUTION BY REMAINING TERM TO STATED MATURITY OF THE
INITIAL RECEIVABLES AS OF THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
RANGE OF REMAINING TERMS (1) NUMBER OF RECEIVABLES BALANCE BALANCE (2)
---------------------------- --------------------- ------------------- --------------------
<S> <C> <C> <C>
$ %
</TABLE>
- ---------------------------
(1) Defined as the number of months from the Initial Cut-off Date to stated
maturity.
(2) Percentages may not add to 100.00% due to rounding.
[DISTRIBUTION BY LOAN PURPOSE AS OF THE INITIAL CUT-OFF DATE
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
LOAN PURPOSE RECEIVABLES BALANCE BALANCE (2)
------------ ----------- ------------------- -------------------
<S> <C> <C> <C>
[____________] Purchase......................... $ %
[____________] Purchase.........................
Refinance of Existing Loan......................
Lease Buyout....................................
Total...........................................
</TABLE>
- ---------------------------
(1) Percentages may not add to 100.00% due to rounding.]
THE TRANSFEROR
_________________, will be organized as a _____________ on or before the
closing date and is wholly-owned by _____________. The transferor will be
organized for limited purposes, which include selling and assigning receivables
sold to it by the originator to the depositor and any activities incidental to
and necessary or convenient for the accomplishment of that purpose. The
principal executive offices of the transferor are located at
_________________________, __________, ________, _______, and its telephone
number is (___) ____-_____.
S-23
<PAGE>
THE DEPOSITOR
PaineWebber Asset Acceptance Corporation, a Delaware corporation, is a
wholly-owned limited purpose finance subsidiary of PaineWebber Group Inc. The
principal executive offices of the depositor are located at 1285 Avenue of the
Americas, New York, New York 10019.
THE ORIGINATOR AND THE SERVICER
______________, a _____________, was formed in ______. Its executive offices
are located at _____________, and its telephone number is (___) ___-____.
GENERAL
[DESCRIBE ORIGINATOR'S BUSINESS GENERALLY]
ORIGINATION PROCESS AND CREDIT EVALUATION PROCEDURES
[DESCRIBE FOR SPECIFIC ORIGINATOR]
CONTRACT PROCESSING, PURCHASE, SERVICING AND ADMINISTRATION
[DESCRIBE FOR SPECIFIC ORIGINATOR]
DELINQUENCY CONTROL AND COLLECTION STRATEGY
[DESCRIBE FOR SPECIFIC OBLIGOR]
DELINQUENCY AND LOSS EXPERIENCE
[DESCRIBE FOR SPECIFIC OBLIGOR]
DELINQUENCY EXPERIENCE
___ MONTHS YEAR ENDED
ENDED _______ DECEMBER 31,
- ------------------------------------------ ------------- ------------
Number of Loans Outstanding
Delinquencies as a Percentage of Loans (1)
31-60 Days
61-90 Days
Over 90 Days
- ---------------------------
(1) Calculated as the number of delinquencies during the period divided by the
number of loans outstanding at the end of the period.
S-24
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
(DOLLAR AMOUNTS IN THOUSANDS)
___ MONTHS YEAR ENDED
ENDED _______ DECEMBER 31,
- ------------------------------------------ ------------- ------------
Average Number of Loans Outstanding (1)
Average Principal Amount Outstanding (1)
Number of Repossessions
Number of Repossessions as a Percent of
Average
Number of Loans Outstanding
(Annualized)
Principal Amount of Repossessions as a
Percent of Average Principal Amount
Outstanding (Annualized)
Net Losses for the Period Ended
Net Losses as a Percent of Average
Principal Amount
Outstanding (Annualized) (2)
- ---------------------------
(1) Averages are calculated based on beginning and end-of-period balances.
(2) "Net Losses" are equal to the aggregate balance for all contracts which are
determined to be uncollectible in the period less any recoveries on
contracts in the period or any prior periods excluding expenses associated
with collection, repossession and disposition of the [__________].
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Information regarding certain maturity and prepayment considerations with
respect to the certificates is set forth under "Risk Factors--Maturity and
Prepayment Considerations" and "The Receivables--Maturity and Prepayment
Considerations" in the prospectus. As the rate of distribution of principal of
the Class A certificates depends primarily on the rate of payment including
prepayments of the principal balance of the Receivables, final distribution to
the Class A certificates could occur significantly earlier than the applicable
Final Scheduled Distribution Date for that class. Reinvestment risk associated
with early payment of the certificates will be borne exclusively by the
certificateholders. It is expected that final distribution of each class of
certificates will occur on or prior to the Final Scheduled Distribution Date.
However, if sufficient funds are not available to pay the Class A certificates
in full on or prior to the applicable Final Scheduled Distribution Date, final
distribution would occur later than that date.
Prepayments on [auto loan] [recreational vehicle loan] [auto lease]
[structured settlement] receivables can be measured relative to a prepayment
standard or model. The model used in this prospectus supplement, the ABS,
represents an assumed rate of prepayment each month relative to the original
number of receivables in a pool of receivables. ABS further assumes that all the
S-25
<PAGE>
receivables are the same size and amortize at the same rate and that each
receivable in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of receivables originally containing
10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month.
ABS does not purport to be a historical description of prepayment experience or
a prediction of the anticipated rate of prepayment of any pool of receivables,
including the Receivables.
The following tables have been prepared on the basis of the characteristics
of the Receivables. The tables assume that:
(1) the Receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases;
(2) each scheduled monthly payment on the Receivables is made on the last day
of each month and each month has 30 days;
(3) distributions on the certificates are made on each distribution date;
(4) [the Yield Supplement Amount is deposited into the Collection Account
each period;]
(5) the amount deposited into the Pre-Funding Account on the closing date is
applied in its entirety to the purchase of Receivables transferred to the
issuer during the Pre-Funding Period and to make related deposits to the
[Reserve Account, the Yield Supplement Account and the] Capitalized
Interest Account; and
(6) the transferor exercises its option to purchase the Receivables.
The tables also assume that the Receivables have been aggregated into
hypothetical pools with all of the Receivables within each pool having the
following characteristics and that the level scheduled monthly payment for each
of the pools will be set up so that each pool will be fully amortized by the end
of its remaining term to maturity. The scheduled monthly payment for each of the
pools which is based on its aggregate principal balance, APR, original number of
scheduled payments and remaining number of scheduled payments as of the related
Cut-off Date.
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL ORIGINAL TERM TO MATURITY REMAINING AMORTIZATION TERM
POOL BALANCE APR (IN MONTHS) (IN MONTHS) CUT-OFF DATE
---- --------- --- ------------------------- --------------------------- ------------
<S> <C> <C> <C> <C> <C>
1 $ %
2
3
4
</TABLE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the tables. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivable will prepay at the
same
S-26
<PAGE>
level of ABS. Moreover, the diverse terms of Receivables within each of the four
hypothetical pools could produce slower or faster principal distributions than
indicated in the tables at the various constant percentages of ABS specified,
even if the original and remaining terms to maturity of the Receivables are as
assumed. Any difference between the assumptions and the actual characteristics
and performance of the Receivables, or actual prepayment experience, will affect
the percentages of initial balances outstanding over time and the weighted
average lives of each class of certificates.
The following tables have been prepared based on the assumptions described
above, including the assumptions regarding the characteristics and performance
of the Receivables which will differ from the actual characteristics and
performance of the Receivables, and should be read in conjunction with those
assumptions.
<TABLE>
PERCENT OF INITIAL CLASS A CERTIFICATE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
<CAPTION>
DISTRIBUTION DATE 0.00% 1.00% 1.30% 1.50% 1.70% 2.00%
----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Closing Date...........................
December ___________...................
January ___________....................
February ___________...................
March ___________......................
April ___________......................
May ___________........................
June ___________.......................
July ___________.......................
August ___________.....................
September ___________..................
October ___________....................
November ___________...................
December ___________...................
January ___________....................
February ___________...................
March ___________......................
April ___________......................
May ___________........................
June ___________.......................
July ___________.......................
August ___________.....................
September ___________..................
October ___________....................
November ___________...................
December ___________...................
January ___________....................
February ___________...................
March ___________......................
April ___________......................
May ___________........................
S-27
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTION DATE 0.00% 1.00% 1.30% 1.50% 1.70% 2.00%
----------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
June ___________.......................
July ___________.......................
August ___________.....................
September ___________..................
October ___________....................
November ___________...................
December ___________...................
January ___________....................
February ___________...................
March ___________......................
April ___________......................
May ___________........................
June ___________.......................
July ___________.......................
August ___________.....................
Weighted Average Life (years)(1)
Weighted Average Life (years)(1) (2)
</TABLE>
- ---------------------------
(1) The weighted average life of a certificate is determined by (a) multiplying
the amount of each principal distribution of the certificate by the number
of years from the date of the issuance of that certificate to the related
distribution date, (b) adding the results and (c) dividing the sum by the
related initial principal amount of that certificate.
(2) This calculation assumes that the transferor does not exercise its option to
purchase the Receivables.
DESCRIPTION OF CERTIFICATES
GENERAL
The certificates will consist of the Class A certificates and the subordinate
certificates. The certificates will be issued by ____________________ Trust
200_, a trust to be organized under the laws of __________. Only the Class A
certificates are offered by this prospectus supplement.
Persons in whose name a certificate is registered in the register maintained
by the trustee are the holders of the certificates. For so long as the Class A
certificates are in book-entry form with DTC, the only holder of the Class A
certificates will be Cede & Co. All references in this prospectus supplement to
the holders of Class A certificates will mean and include the rights of Class A
interest holders, as those rights may be exercised through DTC and its
participating organizations, except as otherwise specified in the pooling and
servicing agreement.
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The obligations evidenced by the certificates are recourse to the assets of
the trust only and are not recourse to the depositor, the seller, the
originators, the servicer, the trustee, or any other person, except that the
Policy is a recourse obligation of the insurer.
The percentage interest owned by a Class A certificateholder will be
expressed, for voting and certain other purposes under the pooling and servicing
agreement, as the percentage obtained by dividing the denomination representing
the percentage interest of the Class A certificate by the Class A Principal
Distributable Amount. So long as no Insurer Default has occurred and is
continuing, except as otherwise specifically provided in the pooling and
servicing agreement, whenever the action, consent or approval of a Class A
certificateholder is required under the pooling and servicing agreement, this
action, consent or approval will be deemed to have been taken or given on behalf
of, and will be binding upon, all Class A certificateholders if the insurer
agrees to take this action or give its consent or approval.
DISTRIBUTIONS
The first distribution date for distributions to the Class A
certificateholders will be __________. In general, the Class A
certificateholders will be entitled to receive, on each distribution date, the
Class A Principal Distributable Amount and the Class A Interest Distributable
Amount. Distributions of principal and interest on the Class A certificates will
be made by the trustee directly to Class A certificateholders in whose names the
Class A certificates are registered at the close of business on the record date
in accordance with the procedures set forth in the pooling and servicing
agreement. These distributions will be made by check mailed to the address of
the certificateholder as it appears on the register maintained by the trustee
or, upon the request of any certificateholder meeting the requirements set forth
in the pooling and servicing agreement, by wire transfer of immediately
available funds. On the Final Scheduled Distribution Date, the Class A Principal
Distribution Amount will equal the Class A Certificate Balance as of the Final
Scheduled Distribution Date. The final distribution on any Class A certificate,
however, will be made only upon presentation and surrender of the Class A
certificate at the office or agency specified in the notice of final
distribution to certificateholders.
THE ACCOUNTS
The servicer will establish the Collection Account in the name of the trustee
on behalf of the certificateholders and the insurer. Certain payments made on or
with respect to the Receivables will be deposited daily in the Collection
Account by the sub-servicers. On a specified date each month and prior to the
distribution date, all collections relating to the prior Collection Period will
be withdrawn from the Collection Account and deposited with the trustee for
distribution on the related distribution date.
The servicer will deposit all payments on Receivables received and all
proceeds of Receivables collected during each Collection Period into the
Collection Account no later than the ________ business day after receipt.
__________ will remit the aggregate purchase amount of any Receivables required
to be repurchased by it from the trust to the trustee on or before the
__________ business day immediately preceding the related distribution date.
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The Collection Account will be initially established and maintained with the
trustee so long as
o the trustee's short-term unsecured debt obligations have a rating of by
_____ and _____ by _____; or
o the Collection Account is maintained in the trust department of the
trustee.
COLLECTIONS
For purposes of the pooling and servicing agreement, collections on a
Receivable which are not late fees, prepayment charges, or other administrative
fees and expenses collected during a Collection Period are required to be
applied first to the scheduled distribution. To the extent that the collections
on a Receivable during a Collection Period exceed the scheduled payment on the
Receivable, the collections are required to be applied to prepay the Receivable
in full. If the collections are insufficient to prepay the Receivable in full,
any partial prepayment of principal during a Collection Period will be
immediately applied to reduce the principal balance of the [auto loan]
[recreational vehicle loan] [auto leave] [structured settlement] Receivable
during the Collection Period. However, for purposes of the pooling and servicing
agreement, scheduled payments for [auto loan] [recreational vehicle loan] [auto
leave] [structured settlement] Receivables are required to be allocated to
principal and interest according to the actuarial method.
FLOW OF FUNDS
On each distribution date, the trustee will, based on the information
contained in the servicer's certificate delivered on the related determination
date, distribute the following amounts and in the following order of priority:
o first, from the Distribution Amount, to the servicer, the servicing fee
for the related Collection Period, any supplemental servicing fees for the
related Collection Period, and certain other amounts relating to mistaken
deposits, postings or checks returned for insufficient funds to the extent
the servicer has not reimbursed itself in respect of these amounts;
o second, from the Distribution Amount, to a relevant local bank, trustee,
custodian, backup servicer or a collateral agent, including the trustee if
acting in an additional capacity, any accrued and unpaid fees, in each
case, to the extent the person has not previously received the amount from
the servicer;
o third, from the amount available to the Class A certificateholders, the
sum of (x) the Class A Interest Distributable Amount for that distribution
date and (y) the Class A Interest Carryover Shortfall, if any, for that
distribution date;
o fourth, from the Amount Available to the Class A certificateholders, the
sum of (x) the Class A Principal Distributable Amount for that
distribution date and (y) the Class A Principal Carryover Shortfall, if
any, for that distribution date;
S-30
<PAGE>
o fifth, from the distribution amount, to the insurer, to the extent of any
amounts owing to the insurer, whether with respect to premiums or
otherwise, and not paid, whether or not the originators are also obligated
to pay those amounts;
o sixth, the remaining available funds will be first deposited in certain
collateral accounts maintained for the benefit of the insurer and
thereafter any further excess amounts will be distributed to the
subordinate certificateholders.
WITHHOLDING
The trustee is required to comply with all federal income tax withholding
requirements respecting distributions to Class A certificateholders of interest
or original issue discount with respect to the Class A certificates that the
trustee reasonably believes are applicable under the Code. The consent of the
Class A certificateholders will not be required for this withholding. In the
event that the trustee does withhold or causes to be withheld any amount from
interest or original issue discount distributions or related advances to any
Class A certificateholders under federal income tax withholding requirements,
the trustee is required to indicate the amount withheld in its monthly report to
the Class A certificateholders.
[THE INSURER]
[The following information has been obtained from _______________, the
insurer, and has not been verified by the issuer, the depositor, the transferor,
__________ or the underwriters. No representation or warranty is made by the
issuer, the depositor, the transferor, ____________ or the underwriters.
GENERAL
________________ is a _______________ incorporated in ____ under the laws of
the State of ___________. _____________ is licensed to engage in the financial
guaranty insurance business in _____ states, the District of Columbia and Puerto
Rico.
________________ and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled distributions of an issuer's
securities--thereby enhancing the credit rating of those securities--in
consideration for the payment of a premium to the insurer. ________________ and
its subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments.
________________ insures both newly issued securities sold in the primary market
and outstanding securities sold in the secondary market that satisfy
________________'s underwriting criteria.
[ADDITIONAL INSURER CORPORATE INFORMATION]
S-31
<PAGE>
The principal executive offices of ________________ are located at
_________________________________, and its telephone number at that location is
______________.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by ________________ or any of
its domestic or [_______] operating insurance company subsidiaries are generally
reinsured among those companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, ________________ reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. This reinsurance is utilized by
________________ as a risk management device and to comply with certain
statutory and rating agency requirements; it does not alter or limit
________________'s obligations under any financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
________________'s insurance financial strength is rated "______" by ______.
________________'s insurer financial strength is rated "______" by _______.
_____________________'s claims-paying ability is rated "______" by _____________
and ________________. These ratings reflect only the views of the respective
rating agencies, are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by the rating agencies.
CAPITALIZATION
The following table sets forth the capitalization of _____________ and its
wholly owned subsidiaries on the basis of generally accepted accounting
principles as of _____________, 200_:
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<PAGE>
___________, 200_
- --------------------------------------------------- -----------------
(UNAUDITED)
(IN THOUSANDS)
Deferred Premium Revenue (net of prepaid
reinsurance premiums)....................... $
Surplus Notes.................................
Minority Interest.............................
Shareholder's Equity:
Common Stock................................
Additional Paid-in Capital..................
Accumulated Other Comprehensive...............
Income (net of deferred income taxes).........
Accumulated Earnings..........................
Total Shareholder's Equity....................
Total Deferred Premium Revenue, Surplus
Notes, Minority Interest and Shareholder's
Equity......................................
For further information concerning ________________, see the Consolidated
Financial Statements of ________________ and __________, and the accompanying
notes, incorporated by reference in this prospectus supplement.
________________'s financial statements are included as Exhibits to the Annual
Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the SEC by
___________ and may be reviewed at the EDGAR Website maintained by the SEC and
at ___________' website, ____________.com. Copies of the statutory quarterly and
annual statements filed with the State of __________________by ________________
are available upon request to the State of __________________.
INSURANCE REGULATION
_____________ is licensed and subject to regulation as a financial guaranty
insurance corporation under the laws of the State of _______, its state of
domicile. In addition, _____________ and its insurance subsidiaries are subject
to regulation by insurance laws of the various other jurisdictions in which they
are licensed to do business. [As a financial guaranty insurance corporation
licensed to do business in the State of _______, ____________ is subject to
Article 69 of the New York Insurance Law which, among other things, limits the
business of that insurer to financial guaranty insurance and related lines,
requires that the insurer maintain a minimum surplus to policyholders,
establishes contingency, loss and unearned premium reserve requirements for the
insurer, and limits the size of individual transactions and the volume of
transactions that may be underwritten by the insurer. Other provisions of the
New York Insurance Law, applicable to non-life insurance companies such as
__________, regulate, among other things, permitted investments, payment of
dividends, transactions with affiliates, mergers, consolidations, acquisitions
or sales of assets and incurrence of liability for borrowings.]]
S-33
<PAGE>
[THE POLICY]
[The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy.
Simultaneously with the issuance of the certificates, the insurer will
deliver the Policy to the trustee for the benefit of each certificateholder.
Under the Policy, the insurer will unconditionally and irrevocably guarantee to
the trustee for the benefit of each certificateholder the full and complete
payment of:
o Scheduled Payments on the certificates and
o the amount of any Scheduled Payment which subsequently is avoided in whole
or in part as a preference payment under applicable law.
In the event the trustee fails to make a claim under the Policy,
certificateholders do not have the right to make a claim directly under the
Policy, but may sue to compel the trustee to do so.
Scheduled Payments do not include payments which become due on an accelerated
basis as a result of
o a default by the issuer,
o an election by the issuer to pay principal on an accelerated basis,
o the occurrence of an event of default under the pooling and servicing
agreement or
o any other cause, unless the insurer elects, in its sole discretion, to pay
in whole or in part the principal due upon acceleration, together with any
accrued interest to the date of acceleration.
In the event the insurer does not so elect, the Policy will continue to
guarantee Scheduled Payments due on the certificates in accordance with their
original terms. Scheduled Payments will not include unless, in each case, the
insurer elects, in its sole discretion, to pay the amount in whole or in part:
o any portion of the Certificateholders' Interest Distributable Amount due
to certificateholders because the appropriate notice and certificate for
payment in proper form was not timely received by the insurer, or
o any portion of the Certificateholders' Interest Distributable Amount due
to certificateholders representing interest on any Certificateholders'
Interest Carryover Shortfall accrued from and including the date of
distribution of the amount of the Certificateholders' Interest Carryover
Shortfall under to the Policy.
Scheduled Payments will not include any amounts due in respect of the
certificates attributable to any increase in interest rate, penalty or other sum
payable by the issuer by reason of any default or event of default in respect of
the certificates or by reason of any deterioration of
S-34
<PAGE>
the creditworthiness of the issuer nor shall coverage be provided under the
Policy in respect of any taxes, withholding or other charge imposed with respect
to any certificateholder by any governmental authority due in connection with
the payment of any Scheduled Payment to a certificateholder.
Payment of claims on the Policy made in respect of Scheduled Payments will be
made by the insurer following receipt by the insurer of the appropriate notice
for payment on the later to occur of:
o 12:00 noon, New York City time, on the [___ business day following
receipt] of the notice for payment, and
o 12:00 noon, New York City time, on the date on which the payment was due
on the certificates.
If payment of any amount avoided as a preference under applicable bankruptcy,
insolvency, receivership or similar law is required to be made under the Policy,
the insurer will cause the payment to be made on the later of:
o the date when due to be paid pursuant to the order of the court or other
governmental body and the first to occur of:
o the fourth business day following receipt by the insurer from the trustee
of (A) a certified copy of the order of the court or other governmental
body that exercised jurisdiction to the effect that certificateholders are
required to return Scheduled Payments made with respect to the
certificates during the term of the Policy because the payments were
avoidable as preference payments under applicable bankruptcy law, (B) a
certificate of the trustee that the court order has been entered and is
not subject to any stay and (C) an assignment executed and delivered by
the certificateholder, in a form as is reasonably required by the insurer
and provided to the certificateholder by the insurer, irrevocably
assigning to the insurer all rights and claims of the certificateholder
relating to or arising under the certificates against the issuer or
otherwise with respect to the preference payment, and
o the date of receipt by the insurer from the trustee of the items referred
to in clauses (A), (B) and (C) above if, at least ___ business days prior
to the date of receipt, the insurer has received written notice from the
trustee that the items were to be delivered on that date and that date was
specified in the notice. The payment will be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the
court order and not to the trustee or any certificateholder directly,
unless a certificateholder has previously paid that amount to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy named
in the order, in which case the payment will be
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<PAGE>
disbursed to the trustee for distribution to the certificateholder upon
proof of the payment reasonably satisfactory to the insurer.
In connection with the foregoing, the insurer will have the rights provided
under the pooling and servicing agreement including, without limitation, the
right, in the absence of an Insurer Default, to direct all matters relating to
any preference claim and subrogation to the rights of the trustee and each
certificateholder in the conduct of any proceeding with respect to a preference
claim.]
[OTHER PROVISIONS OF THE POLICY]
[The terms "receipt" and "received" with respect to the Policy will mean
actual delivery to the Insurer and to its fiscal agent, if any, prior to 12:00
noon, New York City time, on a business day; delivery either on a day that is
not a business day or after 12:00 noon, New York City time, will be deemed to be
received on the next succeeding business day. If any notice or certificate given
under a Policy by the trustee is not in proper form or is not properly
completed, executed or delivered, it will be deemed not to have been received,
and the insurer or its fiscal agent will promptly so advise the trustee and the
trustee may submit an amended notice.
[Under the Policy, "business day" means any day other than a Saturday,
Sunday, legal holiday or other day on which commercial banking institutions in,
or are authorized or obligated by law, executive order or governmental decree to
be closed.]
The Insurer's obligations under the Policy in respect of Scheduled Payments
will be discharged to the extent funds are transferred to the trustee as
provided in the Policy whether or not the funds are properly applied by the
trustee.
The insurer will be subrogated to the rights of each certificateholder to
receive payments of principal and interest to the extent of any payment by the
insurer under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than pari passu with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the Policy and each other financial guaranty insurance
policy issued by the insurer constitute pari passu claims against the general
assets of the insurer. The terms of the Policy cannot be modified or altered by
any other agreement or instrument, or by the merger, consolidation or
dissolution of the issuer. The Policy may not be canceled or revoked prior to
distribution in full of all Scheduled Payments. The Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. The Policy is governed by the laws of New York.
It is a condition to issuance that the certificates be rated ______ by ______
and ______ by _______'s. The ratings by the Rating Agencies of the certificates
will be based primarily on the issuance of the Policy. A rating is not a
recommendation to purchase, hold or sell certificates. In the event that the
rating initially assigned to any of the certificates is subsequently lowered or
withdrawn for any reason, including by reason of a downgrading of the
claims-paying ability of the insurer, no person or entity will be obligated to
provide any additional credit enhancement
S-36
<PAGE>
with respect to the certificates. Any reduction or withdrawal of the rating may
have an adverse effect on the liquidity and market price of the certificates.]
THE POOLING AND SERVICING AGREEMENT AND THE TRANSFER AGREEMENTS
The following summary describes certain terms of the pooling and servicing
agreement and the transfer agreements, does not purport to be complete and is
subject to and qualified in its entirety by reference to the agreements.
Wherever provisions of the agreements are referred to, the provisions are by
this prospectus supplement incorporated by reference.
CONVEYANCE OF RECEIVABLES
The Receivables were sold by the originators to the seller and sold by the
seller to the depositor. At the time of issuance of the Class A certificates,
the depositor will sell and assign to the trustee, without recourse, the
depositor's entire interest in the Receivables, including its security interests
in the underlying assets. Each Receivable will be identified in a schedule to
the pooling and servicing agreement. The trustee will, concurrently with the
sale and assignment, execute, authenticate and issue the certificates.
In the pooling and servicing agreement, the depositor will appoint the
trustee as the depositor's attorney-in-fact with all power independently to
enforce all of the depositor's rights against the originator for breach of the
representations and warranties made under the transfer agreements. This includes
the originator's obligation to repurchase any Receivable from the trust if the
breach of a representation or warranty relating to a Receivable materially and
adversely affects the value of the Receivable or the interests of the trust, the
certificateholders or the insurer in the Receivable unless the breach will have
been cured by the deposit date of the first full calendar month following the
discovery by or notice to the originator of the breach.
The originator will deliver to the trustee a receivable file with respect to
each Receivable containing the original contract for each Receivable and the
original certificate of title or certificate of lien.
SERVICING
The Receivables will be serviced by the servicer under the pooling and
servicing agreement. However, ____________ will act as sub-servicer with respect
to the Receivables it originates and __________ will act as sub-servicer with
respect to the Receivables it originates.
Each sub-servicer will be required to make reasonable efforts to collect all
payments due with respect to the Receivables and will continue the collection
procedures as each generally follows with respect to all comparable Receivables
that it services for itself or others, in a manner consistent with the pooling
and servicing agreement. If a sub-servicer determines that eventual payment in
full of a Receivable is unlikely, each will follow its normal collection
practices and procedures, including the repossession and disposition of the
underlying assets securing the Receivable at a public or private sale, or the
taking of any other action permitted by applicable law.
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<PAGE>
Servicing Compensation. The servicer is entitled under the pooling and
servicing agreement on each distribution date to the Servicing Fee for the
related monthly period. The servicer may retain the Servicing Fee from
collections on the Receivables. See "Description of the Trust
Agreements--Servicing Compensation" in the prospectus.
Appointment of Subservicer. The servicer may at any time appoint a
subservicer to perform all or any portion of its obligations as servicer upon
the prior written consent of the Controlling Party. However, the servicer may
refer delinquent accounts to an outside collection agency for further collection
and possible repossession of the related Receivable without the consent of the
Controlling Party. The servicer will remain obligated and liable to the trustee,
the insurer and the certificateholders for the servicing and administering of
the Receivables in accordance with the provisions of the receivables without
diminution of its obligation and liability by virtue of the appointment of a
subservicer and to the same extent and under the same terms and conditions as if
the servicer alone were servicing and administering the Receivables. The fees
and expenses of the subservicer will be as agreed between the servicer and its
subservicer from time to time and none of the trustee, the insurer, the
certificateholders will have any responsibility for those fees and expenses.
Evidence as to Compliance. The pooling and servicing agreement will provide
that a firm of independent public accountants will furnish to the trustee, the
backup servicer, [the insurer,] the depositor, the certificateholders and each
rating agency, for the first two calendar months after the closing date and if
exceptions or errors that are required by generally accepted auditing standards
to be reported exist, for each month thereafter until reports for two
consecutive months indicate no exceptions or errors that are required by
generally accepted auditing standards to be reported, a report of its audit of
the Servicer's financial statements including its examination of the servicer's
and each sub-servicer's financial statements and policies and procedures as of
that date. The accountant's report will also be submitted on or before
__________ of each year with respect to the twelve months ended the immediately
preceding __________, beginning __________.
The pooling and servicing agreement will also provide for delivery to the
trustee [and the insurer], on or before __________ of each year, commencing
__________, of a certificate signed by an officer of the servicer stating that
the servicer has fulfilled its obligations under the pooling and servicing
agreement throughout the preceding twelve months, or, for the initial report,
for a shorter period as will have elapsed from the date of issuance of the
certificates, or, if there has been a default in the fulfillment of the
obligation, describing the default.
Copies of the statements and certificates may be obtained by the Class A
certificateholders by a request in writing addressed to the trustee.
Monthly Statement. Under the pooling and servicing agreement, the servicer
will perform certain monitoring and reporting functions for the trustee and the
insurer, including the preparation and delivery on the determination date to the
trustee and the insurer of a statement setting forth the amounts on deposit in
the Collection Account and the sources of the amounts and the amounts to be paid
to certificateholders and certain other information.
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<PAGE>
Retention and Termination of Servicer. Under the pooling and servicing
agreement, the servicer will act as servicer for an initial term commencing on
the closing date and ending on __________, which term will be extendible by the
insurer for successive quarterly terms ending on each successive March 31, June
30, September 30 and December 31 until the termination of the trust.
Removal of the Servicer. The pooling and servicing agreement will provide
that the servicer may not resign from its obligations and duties as servicer
under the pooling and servicing agreement, except upon a determination that the
servicer's performance of its duties is no longer permissible under applicable
law. This resignation will not become effective until the backup servicer or
another successor servicer acceptable to the insurer has assumed the servicer's
servicing obligations and duties under the servicing agreement. The servicer can
only be removed under a servicer termination event. A servicer termination event
under the pooling and servicing agreement will include:
o the servicer's failure to deliver to the trustee in accordance with the
pooling and servicing agreement any proceeds or payments required for
distribution to the certificateholders which failure continues unremedied
for a period of __________ business days, after written notice is received
by the servicer from the trustee, [the insurer, unless an Insurer Default
will have occurred and be continuing] or after discovery of the failure by
a responsible officer of the servicer;
o the servicer's failure to deliver the servicer's certificate to the
trustee or to the insurer on the date on which the certificate is
required, under the pooling and servicing agreement, to be delivered, or
failure on the part of the servicer to observe certain of its covenants
and agreements set forth in the pooling and servicing agreement;
o failure to satisfy certain other material covenants or agreements set
forth in the pooling and servicing agreement, which covenants and
agreements remain uncured for a period of days after notice of the failure
to satisfy those covenants or agreements;
o certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings with respect to the servicer
indicating its insolvency, reorganization under bankruptcy proceedings, or
inability to pay its obligations which condition remains in effect for a
period of 60 consecutive days or the commencement of an involuntary case
under the federal bankruptcy laws, as now or in this prospectus supplement
after in effect, or another present or future federal or state bankruptcy,
insolvency or similar law and the case is not dismissed within __________
days;
o the material breach of certain of the servicer's representations or
warranties and the servicer's failure to cure the breach within __________
days after notice of the breach;
o the servicer's term not being extended as provided in the pooling and
servicing agreement;
o [certain defaults under the insurance agreement; and]
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<PAGE>
o [a claim being made under the Policy.]
In addition, a servicer termination event includes any default by either
sub-servicer.
Rights Upon a Servicer Termination Event. If a servicer termination event has
occurred and is continuing, [the insurer, or, if an Insurer Default exists,
either] the trustee or the majority of certificateholders may terminate all, but
not less than all, of the servicer's rights and obligations under the pooling
and servicing agreement. Upon this termination, all authority, powers,
obligations and responsibilities of the servicer under the pooling and servicing
agreement automatically then pass to the backup servicer, [or, at the direction
of the insurer,] a successor servicer appointed by [the insurer, or, if an
Insurer Default exists, by] the Certificate Majority.
[Waiver of Past Defaults. The insurer may, on behalf of all
certificateholders, waive any default by the Servicer in the performance of its
obligations under the pooling and servicing agreement and its consequences. This
waiver will not impair the certificateholders' rights with respect to subsequent
defaults.]
CERTAIN REPORTS
Reports to Certificateholders. On each distribution date, the trustee will be
required to forward to each Class A certificateholder [and, to the insurer] a
statement, setting forth certain information for the Collection Period related
to the distribution date based on information provided to the trustee by the
servicer with respect to the preceding Collection Period. The information
provided in the statement will include:
o the amount of the distribution allocable to principal and the amount of
the distribution allocable to interest;
o the Class A Certificate Balance, after giving effect to distributions made
on the distribution date;
o the amount of fees paid to the trust with respect to the Collection
Period; the Class A certificate factor;
o certain loss and delinquency information; and
o whether certain events of default have occurred.
In addition, within the prescribed period of time for tax reporting purposes
after the end of each calendar year during the term of the pooling and servicing
agreement, the trustee will be required to mail to each person who at any time
during the calendar year will have been a Class A certificateholder a statement
containing certain information related to the certificateholder's preparation of
federal income tax returns.
The "Class A certificate factor" will be a seven-digit decimal number which
the servicer will compute each month indicating the Class A Certificate Balance
as of the close of business on the distribution date in that month as a fraction
of the respective original outstanding principal balance of the Class A
certificates. The Class A certificate factor will be 1.0000000 as of the
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Cut-Off Date. After the Cut-Off Date, the Class A certificate factor will
decline to reflect reductions in the Class A Certificate Balance as a result of
Scheduled Payments collected, partial prepayments, prepayments and liquidations
of the Receivables. The amount of a Class A certificateholder's pro rata share
of the Class A Certificate Balance can be determined on any date by multiplying
the original denomination of the holder's certificate by the Class A certificate
factor as of the close of business on the most recent distribution date.
TERMINATION
Termination of the Trust. The obligations of the servicer, the depositor and
the trustee under the pooling and servicing agreement [and of the insurer] will
terminate upon the latest of:
o the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any remaining
Receivables; and
o the payment to certificateholders of all amounts required to be paid to
them under the pooling and servicing agreement, the expiration of any
preference period related to the pooling and servicing agreement [and
payment to the insurer of all amounts payable or reimbursable to it under
the pooling and servicing agreement and the insurance agreement].
The representations, warranties and indemnities of the depositor, the seller
and the Servicer will survive any termination of the trust and the pooling and
servicing agreement.
Optional Purchase. The pooling and servicing agreement will provide that the
servicer is permitted at its option to purchase from the trust, as of the last
day of any month as of which the Aggregate Principal Balance with respect to the
Receivables is less than 10% of the original Aggregate Principal Balance, all
remaining Receivables at a price equal to the aggregate of the Purchase Amounts
of the Receivables as of the last day, plus the appraised value of any other
property held by the trust. [This repurchase requires the consent of the
insurer.]
AMENDMENT
The pooling and servicing agreement may be amended by the servicer, the
depositor and the trustee, [with the prior written consent of the insurer,] but
without the consent of the certificateholders, to cure any ambiguity, or to
correct or supplement any provision tin this prospectus supplement which may be
inconsistent with any other provision tin this prospectus supplement. However,
this amendment may not adversely affect in any material respect the interests of
the certificateholders.
The servicer, the depositor and the trustee may also amend the pooling and
servicing agreement with the prior written consent of [the insurer and] the
consent of the Certificate Majority to add, change or eliminate any other
provisions with respect to matters or questions arising under the pooling and
servicing agreement or affecting the rights of the certificateholders. However,
this amendment may not:
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o increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that
are required to be made on any certificate or change the pass-through rate
applicable to any class of certificates; or
o reduce the percentage of certificateholders required to consent to the
amendment, without, in either case, the consent of all of the affected
certificateholders.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general discussion of certain federal income tax
consequences of the purchase, ownership and disposition of Class A certificates.
This summary is based upon laws, regulations, rulings and decisions currently in
effect, all of which are subject to change. The discussion does not deal with
all federal tax consequences applicable to all categories of investors, some of
which may be subject to special rules. In addition, this summary is generally
limited to investors who will hold the Class A certificates as "capital assets,"
generally, property held for investment, within the meaning of Section 1221 of
the Code. Investors should consult their own tax advisors to determine the
federal, state, local and other tax consequences of the purchase, ownership and
disposition of the Class A certificates. Prospective investors should note that
no rulings have been or will be sought from the IRS with respect to any of the
federal income tax consequences discussed below, and no assurance can be given
that the IRS will not take contrary positions.
TAX STATUS OF THE TRUST
In the opinion of Cadwalader, Wickersham & Taft, special tax counsel to the
depositor, the trust will be classified as a grantor trust and not as an
association taxable as a corporation for federal income tax purposes. Each Class
A certificateholder will be treated as the owner of an interest in the ordinary
income and corpus portions of the Trust.
Each Class A certificateholder will be treated as owning its pro rata
percentage interest in the principal of, and interest payable on, each
Receivable, minus the portion of the interest, the excess interest, payable on
the Receivable that exceeds the sum of the applicable pass-through rate on the
certificates and the Servicing Fee Rate, and the ownership interest in each
Receivable will be treated as a "stripped bond" within the meaning of Section
1286 of the Code.
TAXATION OF CERTIFICATEHOLDERS
Subject to the discussion below under the heading "Discount and Premium,"
each Class A certificateholder is required to include for federal income tax
purposes its share of the gross income of the trust, including interest and
certain other charges accrued on the Receivables and any gain upon collection or
disposition of the Receivables, but not including any portion of the excess
interest. This gross income attributable to interest on the Receivables exceeds
the Class A Pass-Through Rate by an amount equal to the Class A
certificateholder's share of the expenses of the trust for the period during
which it owns a Class A certificate. Each Class A certificateholder is entitled
to deduct its share of the amount used to pay expenses of the trust to the
extent described below. Any amounts received by a Class A certificateholder from
the subordinate certificates, accounts established for the benefit of the
insurer or excess interest as a
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result of the subordination provisions will be treated for federal income tax
purposes as having the same characteristics as the payments they replace.
Each Class A certificateholder should report its share of the income of the
trust under its usual method of accounting. Accordingly, interest would be
included in a Class A certificateholder's gross income when it accrues on the
Receivables, or in the case of Class A certificateholders who are cash basis
taxpayers, when received by the Servicer on behalf of the Class A
certificateholders. Because
(1) interest accrues on the Receivables over differing monthly periods and is
paid in arrears and
(2) interest collected on a Receivable generally is paid to Class A
certificateholders in the following month, the amount of interest
accruing to a Class A certificateholder during any calendar month will
not equal the interest distributed in that month. Discount on a
Receivable would be included in income as described below.
Each Class A certificateholder will be entitled to deduct, consistent with
its method of accounting, its pro rata share of reasonable servicing fees and
other fees paid or incurred by the trust as provided in Section 162 or 212 of
the Code. If a Class A certificateholder is an individual, estate or trust, the
deduction for the Class A certificateholder's share of those fees will be
allowed only to the extent that all of the Class A certificateholder's
miscellaneous itemized deductions, including the Class A certificateholder's
share of the fees, exceed 2% of the Class A certificateholder's adjusted gross
income. In addition, in the case of certificateholders who are individuals,
certain otherwise allowable itemized deductions will be reduced by an amount
equal to 3% of the Class A certificateholder's adjusted gross income in excess
of a statutorily defined threshold, but not by more than 80% of the itemized
deductions.
To the extent that any fee is determined to be in excess of a reasonable
amount, and hence not deductible, the excess should be characterized as an
additional ownership right that has been stripped from the Receivables.
Accordingly, the gross income of the Class A certificateholders should not
include any amount attributable to the excess fee.
Rule of 78s Receivables. The annual statement regularly furnished to Class A
certificateholders for federal income tax purposes will include information
based on the actuarial method of accounting for interest and principal on the
Rule of 78s Receivables, and the amount of the fees paid to the servicer and
others. Class A certificateholders should generally be permitted to account for
interest on the Rule of 78s Receivables using the actuarial method, the method
used to compute the Class A certificate factor and the Class A Pass-Through
Rate. However, certain of the Receivables provide that, upon a prepayment in
full, the amount payable by the obligor will be determined under the Rule of 78s
method of loan amortization. Prospective investors should consult their own tax
advisors as to whether they may be required or permitted to use the Rule of 78s
method to account for interest on the Receivables. A Class A certificateholder
will be furnished information for federal income tax purposes enabling him to
report interest on the Receivables under the Rule of 78s method of accounting
only upon written request to the trustee, and payment of the actual costs of
producing that information.
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If a Receivable is prepaid, any amount received by the trust upon prepayment
in excess of the account balance using the actuarial method either
(1) would constitute income to a Class A certificateholder who had reported
income with respect to the Receivable on the actuarial method, and an
amount equal to the excess will be paid to the servicer as an additional
fee and be deductible, subject to the limitations described above, or
(2) would be treated as an interest stripped from the Receivables and not
sold to the Class A certificateholders.
DISCOUNT AND PREMIUM
A certificateholder that purchases a Class A certificate at a discount, i.e.,
for an amount less than its face amount, must include the discount in income
over the life of the Class A certificates. Distinctions in the Code between
original issue discount and market discount generally are not relevant in the
case of the Class A certificates.
The rate at which discount must be included in income depends on whether it
is greater or than a statutorily defined de minimis amount. Although not
entirely certain, it would appear that the de minimis computation can be done
for each overall Class A certificate and need not be done on a
Receivable-by-Receivable basis. Generally, discount is treated as de minimis if
it is less than 1/4 of one percent of the principal amount of the Class A
certificate times the number of full years remaining to the maturity date of the
Class A certificate. It is not clear whether the maturity date for this purpose
is the final maturity date or the weighted average maturity date, and whether
expected prepayments are taken into account.
If the discount is de minimis which should be the case for original
purchasers of Class A certificates it would appear that the discount may be
included in income as principal payments are received on the Receivables and in
proportion to the principal payments. Although not entirely clear, the income
attributable to de minimis discount should be treated as capital gain.
If the discount is more than a de minimis amount, the discount must be
included in income as it accrues on the basis of the yield to maturity of the
Class A certificate, to the particular purchaser. It is not clear whether a
prepayment assumption must be taken into account in computing this yield to
maturity and how actual prepayments will affect accruals of discount. Unless the
Class A certificates are originally issued with more than a de minimis amount of
discount, the Servicer will not be providing any information relating to the
computation of the accruals of discount by subsequent purchasers of Class A
certificates.
In the event that a Receivable is treated as purchased at a premium, i.e.,
the Purchase Price exceeds the portion of the remaining principal balance of the
Receivables allocable to the certificateholders, the premium will be amortizable
by a Class A certificateholder as an offset to interest income, with a
corresponding reduction in the certificateholder's basis, under a constant yield
method over the term of the Receivable if an election under Section 171 of the
Code is made, or was previously in effect, with respect to the Class A
certificates. This election will also apply to debt instruments held by the
taxpayer during the year in which the election is made and to all debt
instruments acquired after that year.
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SALE OF A CLASS A CERTIFICATE
If a Class A certificate is sold, gain or loss will be recognized equal to
the difference between the amount realized on the sale and the Class A
certificateholder's adjusted basis in the certificate. A certificateholder's
adjusted basis will equal the certificateholder's cost for the Class A
certificate increased by any discount previously included in income, and
decreased by any payments received that are attributable to accrued discount, or
by any offset previously allowed for accrued premium, and by the amount of
principal payments previously received on the Receivables. Any gain or loss will
be capital gain or loss if the Class A certificate was held as a capital asset.
FOREIGN CLASS A CERTIFICATEHOLDERS
Interest attributable to Receivables which is received by a foreign Class A
certificateholder, other than a foreign bank and certain other persons,
generally will not be subject to the normal 30% withholding tax, or lower treaty
rate, imposed with respect to those payments, provided that the Class A
certificateholder is not engaged in a trade or business in the United States and
that such certificateholder fulfills certain certification requirements. Under
these requirements, the holder must certify, under penalties of perjury, that it
is not a U.S. Person and provide its name and address.
BACKUP WITHHOLDING
Backup withholding of federal income tax at a rate of 31 percent may apply to
payments made in respect of the Class A certificates as well as payments of
proceeds from the sale of certificates, to certificateholders that are not
"exempt recipients" and that fail to provide certain identifying information,
such as the taxpayer identification number of the certificateholder, to the
trustee or its agent in the manner required. Individuals generally are not
exempt recipients, whereas corporations and certain other entities generally are
exempt recipients. Payments made in respect of the Class A certificates must be
reported to the IRS, unless the recipient is an exempt recipient or establishes
an exemption. Any amounts withheld under the backup withholding rules from a
payment to a person would be allowed as a refund or a credit against such
person's United States federal income tax, provided that the required
information is furnished to the IRS. Furthermore, certain penalties may be
imposed by the IRS on a certificateholder who is required to supply information
but who does not do so in the proper manner.
ERISA CONSIDERATIONS
Section 406 of ERISA and Section 4975 of the Code prohibit a pension, profit
sharing, or other employee benefit plan from engaging in certain transactions
involving "plan assets" with persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code with respect to the Plan. ERISA also
imposes certain duties on persons who are fiduciaries of Plans subject to ERISA
and prohibits certain transactions between a plan and parties in interest with
respect to these Plans. Under ERISA, any person who exercises any authority or
control respecting the management or disposition of the assets of a Plan is
considered to be a fiduciary of the Plan, subject to certain exceptions not here
relevant. A violation of these "prohibited
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transaction" rules may generate excise tax and other liabilities under ERISA and
the Code for these persons.
In addition to the matters described below, purchasers of Class A
certificates that are insurance companies should consult with their counsel with
respect to the United States Supreme Court case interpreting the fiduciary
responsibility rules of ERISA, John Hancock Mutual Life Insurance Co. v. Harris
Trust and Savings Bank, 114 S. Ct. 517 (1993). In John Hancock, the Supreme
Court ruled that assets held in an insurance company's general account may be
deemed to be "plan assets" for ERISA purposes under certain circumstances.
Prospective purchasers should determine whether the decision affects their
ability to make purchases of the Class A certificates.
Under a final regulation issued by the Department of Labor concerning the
definition of what constitutes the "plan assets" of an employee benefit plan
subject to ERISA or the Code, or an IRA, or any entity whose underlying assets
are deemed to be assets of an employee benefit plan or an IRA by reason of the
employee benefit plan's or the IRA's investment in that entity, the assets and
properties of certain entities in which a Plan makes an equity investment could
be deemed to be assets of the Plan unless certain exceptions under the final
regulation apply or an exemption is available. If Plans that purchase the Class
A certificates are deemed to own an interest in the underlying assets of the
trust, the operations of the trust could result in prohibited transactions.
The Department Of Labor has granted to PaineWebber Incorporated an
administrative exemption, Prohibited Transaction Exemption 90-36 which generally
exempts from the application of the prohibited transaction provisions of Section
406(a), Section 406(b)(1), Section 406(b)(2) and Section 407(a) of ERISA and the
excise taxes imposed under Sections 4975(a) and (b) of the Code, certain
transactions relating to the servicing and operation of asset pools, and the
purchase, sale and holding of asset-backed pass-through certificates, including
pass-through certificates evidencing interests in certain receivables, loans and
other obligations, such as the Class A certificates, provided that certain
conditions set forth in the exemption are satisfied.
If the general conditions of the exemption are satisfied, the exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA, as well as the excise taxes imposed by Sections 4975(c)(1)(A) through
(D) of the Code, in connection with the direct or indirect sale, exchange or
transfer of Class A certificates by Plans in the initial issue of certificates,
the holding of Class A certificates by Plans or the direct or indirect
acquisition or disposition in the secondary market of Class A certificates by
Plans. However, no exemption is provided from the restrictions of Section
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
Class A certificate on behalf of an Excluded Plan by any person who has
discretionary authority or renders investment advice with respect to the assets
of the Excluded Plan.
If the specific conditions of paragraph I.B. of Section I of the exemption
are also satisfied, the exemption may provide an exemption from the restrictions
imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(1)(E) of the
Code in connection with
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(1) the direct or indirect sale, exchange or transfer of Class A certificates
in the initial issuance of Class A certificates to a Plan when the person
who has discretionary authority or renders investment advice with respect
to the investment of plan assets in Class A certificates is (a) an
Obligor with respect to 5 percent or less of the fair market value of the
Receivables or (b) an affiliate of that person,
(2) the direct or indirect acquisition or disposition in the secondary market
of Class A certificates by Plans and
(3) the holding of Class A certificates by Plans.
Among the specific conditions that must be satisfied is the condition that
immediately after the acquisition of the Class A certificates no more than 25%
of the assets of the Plan with respect to which the person is a fiduciary are
invested in certificates representing an interest in a trust containing assets
sold or serviced by the same entity. As of the date hereof, the seller believes
no obligor with respect to Receivables included in the trust constitutes more
than 5 percent of the aggregate unamortized principal balance of the trust.
If the specific conditions of paragraph I.C. of Section I of the exemption
are satisfied, the exemption may provide an exemption from the restrictions
imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation of
the Trust.
The exemption may provide an exemption from the restrictions imposed by
Section 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code
if the restrictions are deemed to otherwise apply merely because a person is
deemed to be a "party in interest" or a "disqualified person" with respect to an
investing Plan by virtue of providing services to the Plan, or by virtue of
having certain specified relationships to that person, solely as a result of the
Plan's ownership of Class A certificates.
The exemption sets forth the following six general conditions which must be
satisfied for a transaction to be eligible for exemptive relief thereunder:
(1) The acquisition of the certificates by a Plan is on terms, including the
price for the certificates, that are at least as favorable to the Plan as
they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by the certificates acquired by the
Plan are not subordinated to the rights and interests evidenced by other
certificates of the trust;
(3) The certificates acquired by the Plan have received a rating at the time
of the acquisition that is one of the three highest general rating
categories from either Standard & Poor's Ratings Services, Moody's
Investors Service, Fitch IBCA, Inc. or Duff & Phelps Credit Rating Co.;
(4) The trustee is not an affiliate of any other member of the Restricted
Group;
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(5) The sum of all payments made to and retained by PaineWebber Incorporated
in connection with the distribution of certificates represents not more
than reasonable compensation for its services. The sum of all payments
made and retained by the seller under the assignment of the Receivables
to the trust represents not more than the fair market value of the
Receivables. The sum of all payments made to and retained by the servicer
represents not more than reasonable compensation for that person's
services under the pooling and servicing agreement and reimbursement of
that person's reasonable expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the 1933 Act.
The trust must also meet the following requirements:
(1) the Receivables must consist solely of assets of the type that have been
included in other investment pools;
(2) certificates in the other investment pools must have been rated in one of
the three highest rating categories of Standard & Poor's Ratings
Services, Moody's Investors Service, Fitch IBCA, Inc. or Duff & Phelps
Credit Rating Co. for at least one year prior to the Plan's acquisition
of certificates; and
(3) certificates evidencing interest in the other investment pools must have
been purchased by investors other than Plans for at least one year prior
to the Plan's acquisition of certificates
It is a condition of issuance of the Class A certificates that they be rated
AAA or its equivalent by a nationally recognized rating agency. Before
purchasing a Class A certificate based on the exemption, a fiduciary of a Plan
should itself confirm (1) that the certificate constitutes a "certificate" for
purposes of the exemption and (2) that the specific conditions and other
requirements set forth in the exemption would be satisfied. Any Plan fiduciary
considering the purchase of a Class A certificate should consult with its
counsel with respect to the potential applicability of ERISA and the Code to
that investment. Moreover, each Plan fiduciary should determine whether, under
the general fiduciary standards of investment prudence and diversification, an
investment in the Class A certificates is appropriate for the Plan, taking into
account the overall investment policy of the Plan and the composition of the
Plan's investment portfolio. The subordinate certificates may not be acquired by
any Plan.
LEGAL INVESTMENT
The Class A certificates will be eligible securities for purchase by money
market funds under the Investment Company Act of 1940.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the depositor has agreed to cause the issuer to sell to each of the underwriters
listed below, and each of the underwriters has agreed to purchase, the principal
amount of each class of the certificates set forth opposite its name below.
Under the terms and conditions of the underwriting agreement, each of the
underwriters is obligated to take and pay for all of the certificates if any are
taken.
CLASS A
UNDERWRITERS CERTIFICATES
- ------------ ------------
PaineWebber Incorporated................................ $
[____________________]..................................
Total...................................................
The depositor has been advised by the underwriters that they propose
initially to offer the certificates to the public at the prices set forth below,
and to selling group members at those prices less a selling concession not in
excess of the percentage set forth below for each class of certificates. The
underwriters may allow, and the selling group members may also allow, a
subsequent concession not in excess of the percentage set forth below for each
class of certificates. After the initial public offering, the public offering
price and such concessions may be changed.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT CONCESSION REALLOWANCE
-------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Class A Certificates % % % %
</TABLE>
The depositor does not intend to apply for listing of the certificates on a
national securities exchange, but has been advised by the underwriters that they
may make a market in the certificates. The underwriters are not obligated,
however, to make a market in the certificates and may discontinue market making
at any time without notice. We cannot assure you as to the liquidity of the
trading market for the certificates.
The depositor, the transferor and the servicer have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, each underwriter and
its affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the depositor, the transferor and the
servicer.
After the initial distribution of the certificates by the underwriters, this
prospectus supplement may be used by the underwriters or its successors, in
connection with offers and sales relating to market making transactions in the
certificates. The underwriters may act as principal or agent in these
transactions. The transactions will be at prices related to prevailing
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market prices at the time of sale. Each underwriter is a member of the New York
Stock Exchange, Inc.
The underwriter is an affiliate of the depositor.
ADDITIONAL INFORMATION
PaineWebber Asset Acceptance Corporation has filed with the SEC a
registration statement (Registration No. 333-_____) under the Securities Act of
1933, as amended, with respect to the certificates offered under this prospectus
supplement. This prospectus supplement and the accompanying prospectus, which
form a part of the registration statement, omit certain information contained in
the registration statement under the rules and regulations of the SEC. You may
read and copy the registration statement at the Public Reference Room at the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the SEC's
regional offices at Seven World Trade Center, 13th Floor, New York, New York,
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Rooms. In addition, the SEC maintains a site
on the World Wide Web containing reports, proxy materials, information
statements and other items. The address is http://www.sec.gov.
EXPERTS
[The consolidated balance sheets of __________, the insurer, and subsidiaries
as of December 31, ____ and ____ and the related consolidated statements of
income, changes in shareholder's equity, and cash flows for each of the three
years in the period ended December 31, ____, incorporated by reference in this
prospectus supplement. These statements have been so incorporated in reliance on
the report of __________, independent accountants, given on the authority of
that firm as experts in accounting and auditing.]
LEGAL MATTERS
The validity of the certificates and certain federal income tax matters will
be passed upon for the depositor by Cadwalader, Wickersham & Taft, New York, New
York. [Certain legal matters will be passed upon for the insurer by __________,
__________ to the insurer.]
RATINGS
As a condition to the issuance of the Class A certificates, the Class A
certificates must be rated "____" by __________________________________ and
"___" by _____________________________.
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time. The ratings assigned to
the offered certificates address the likelihood of the receipt by
certificateholders of all distributions to which such certificateholders are
entitled. The ratings assigned to the offered certificates do not represent any
assessment of
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the likelihood that principal prepayments might differ from those originally
anticipated or address the possibility that certificateholders might suffer a
lower than anticipated yield.
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GLOSSARY OF TERMS
"ABS" the prepayment model used in this prospectus supplement to measure
prepayments on [__________].
"AGGREGATE PRINCIPAL BALANCE" means, with respect to any Determination Date,
the sum of the Principal Balances, computed as of the related record date, for
all Receivables, other than (1) any Receivable that became a Liquidated
Receivable during the related Collection Period and (2) any Receivable that
became a Purchased Receivable on the immediately preceding Deposit Date.
"AMOUNT AVAILABLE" means, with respect to any distribution date, the sum of
(1) the Available Funds for the immediately preceding Determination Date[, plus
(2) the Deficiency Claim Amount, if any, received by the trustee with respect to
the distribution date, plus (3) the Policy Claim Amount, if any, received by the
trustee with respect to the distribution date].
"AMOUNT FINANCED" means, with respect to a Receivable, the amount advanced
under that Receivable toward the purchase price or refinancing of the
____________ and any related costs, including amounts in respect of
____________, ____________, ____________ and ____________, and other items
customarily financed as part of ____________.
"APR" means annual percentage rate.
"AVAILABLE FUNDS" means, with respect to any Determination Date, the sum of
(1) the Collected Funds for the Determination Date and (2) all Purchase Amounts
deposited in the Collection Account on the related Deposit Date.
"CAPITALIZED INTEREST ACCOUNT" is an account which is an asset of the trust
established with the trustee, and will be pledged to the trustee for the benefit
of the certificateholders.
"CERTIFICATE DISTRIBUTION ACCOUNT" an account established and maintained by
the servicer, in the name of the trustee, on behalf of the certificateholders
[and the insurer], in which amounts released from the Collection Account for
distribution to certificateholders will be deposited and from which all
distributions to certificateholders will be made.
"CERTIFICATE MAJORITY" means holders of 50% or more of the aggregate
principal balance of the certificates.
"CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any
distribution date, the sum of the Certificateholder's Principal Distributable
Amount and the Certificateholders' Interest Distributable Amount.
"CERTIFICATEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to any
distribution date, the excess of the Certificateholders' Interest Distributable
Amount for the preceding distribution date, over the amount in respect of
interest that was actually deposited in the Certificate Distribution Account on
the preceding distribution date, plus interest on the amount of interest due but
not paid to certificateholders on the preceding distribution date, to the extent
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<PAGE>
permitted by law, at the interest rate borne by those certificates from the
preceding distribution date to but excluding the current distribution date.
"CERTIFICATEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any distribution date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for the distribution date and the Certificateholders'
Interest Carryover Shortfall for that distribution date.
"CERTIFICATEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any distribution date, the sum of the products for each class of
Certificates of:
(1) the product of the applicable interest rate for the class and 1/12 and
(2) the outstanding principal amount of the class of certificates immediately
preceding the distribution date.
"CERTIFICATEHOLDERS' PERCENTAGE" will be approximately %, for each
distribution date until the Class A certificates have been paid in full, and
then will be equal to zero.
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with respect to
any distribution date, the excess of the Certificateholders' Principal
Distributable Amount for the preceding distribution date, over the amount in
respect of principal that was actually deposited in the Certificate Distribution
Account on the preceding distribution date, plus interest on the amount of
principal due but not paid to certificateholders on the preceding distribution
date, to the extent permitted by law, at the interest rate borne by those
certificates from the preceding distribution date to but excluding the current
distribution date.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" for any distribution
date will equal the sum of:
(1) the Certificateholders' Percentage of the Principal Distributable Amount
and
(2) any unpaid portion of the amount described in clause (1) with respect to
any prior distribution date.
"CLASS A CERTIFICATE BALANCE" means, initially, $_____ and then will equal
the Class A Certificate Balance reduced by all principal distributions on the
Class A certificates.
"CLASS A INTEREST CARRYOVER SHORTFALL" means, as of the close of business on
any distribution date, the excess of the Class A Interest Distributable Amount
for the distribution date plus, without duplication, any outstanding Class A
Interest Carryover Shortfall from the preceding distribution date plus interest
on the outstanding Class A Interest Carryover Shortfall, to the extent permitted
by law, at the Class A Pass-Through Rate from the preceding distribution date
through the current distribution date, over the amount of interest that the
Class A certificateholders actually received on the current distribution date.
"CLASS A INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
distribution date, 30 days of interest, calculated on the basis of a 360-day
year consisting of twelve 30-day months, at the Class A Pass-Through Rate on the
Class A Certificate Balance as of the close of business
S-53
<PAGE>
on the last day of the preceding Collection Period, and any outstanding Class A
Interest Carryover Shortfall.
"CLASS A PASS-THROUGH RATE" means ___% per annum.
"CLASS A PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of business on
any distribution date, the excess of the Class A Principal distributable amount
plus any outstanding Class A Principal Carryover Shortfall from the preceding
distribution date over the amount of principal that the Class A
certificateholders actually received on the current distribution date.
"CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT" means the Class A
certificateholders' pro rata share of the amount equal to the sum of the
following amounts with respect to the immediately preceding Collection Period,
computed in accordance with the simple interest method:
(1) that portion of all collections on Receivables allocable to principal,
including all full and partial principal prepayments;
(2) the Principal Balance of all Receivables, other than Purchased
Receivables, that became Liquidated Receivables during the related
Collection Period;
(3) (A) the portion of the Purchase Amount allocable to principal of all
Receivables that became Purchased Receivables as of the immediately
preceding Record Date, and (B) in the sole discretion of the Certificate
Insurer, the Principal Balance as of the immediately preceding Record
Date of all Receivables that were required to be purchased as of the
immediately preceding Record Date but were not so purchased and
(4) the aggregate amount of Cram Down Losses that occurred during the related
Collection Period.
With respect to each distribution date, the Class A Certificateholders' pro
rata share of such principal distribution (the "Class A Principal Distributable
Amount") is equal to the Class A Percentage of the amounts in clauses (1)
through and including (4) of the immediately preceding paragraph, provided, that
on the Final Scheduled Distribution Date, the Class A Principal Distributable
Amount will equal the Class A Certificate Balance as of the Final Scheduled
Distribution Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTED FUNDS" means, with respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Collection Period, including all Net Liquidation Proceeds
collected during the related Collection Period.
"COLLECTION ACCOUNT" is an account established in the name of the trustee on
behalf of the certificateholders, the certificateholders and the insurer, into
which payments or other amounts received with respect to the Receivables will be
deposited.
S-54
<PAGE>
"COLLECTION PERIOD" means, with respect to a Determination Date or a
distribution date, the calendar month preceding the month in which the
Determination Date or distribution date occurs, the calendar month being
referred to as the "related" Collection Period with respect to the Determination
Date or distribution date. With respect to a Record Date, the calendar month in
which the Record Date occurs is referred to in this prospectus supplement as the
"related" Collection Period to the Record Date.
"CONTROLLING PARTY" means, the insurer, so long as no Insurer Default exists,
and the trustee for the benefit of the certificateholders, for so long as an
Insurer Default exists. However, the owner trustee for the benefit of the
certificateholders will be the Controlling Party after all unpaid principal and
interest on the certificates and all amounts owing to the insurer under the
insurance agreement have been paid in full.
"CRAM DOWN LOSS" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding will have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the Scheduled Payments to be made on a Receivable, an amount equal to the excess
of the principal balance of the Receivable immediately prior to the order over
the principal balance of the Receivable as so reduced or the net present value,
using as the discount rate the higher of the APR on the Receivable or the rate
of interest, if any, specified by the court in the order, of the Scheduled
Payments as so modified or restructured. A "Cram Down Loss" will be deemed to
have occurred on the date of issuance of the order.
"CREDIT SCORE" is a [Fair, Isaac National Automotive Industry Market Score].
"CUT-OFF DATE" means, with respect to an Initial Receivable, the Initial
Cut-off Date, and, with respect to a Subsequent Receivable, the related
Subsequent Cut-off Date.
["DEFICIENCY CLAIM AMOUNT" means, with respect to any determination date, the
excess, if any, of the sum of the amounts payable on the related Distribution
Date under clauses (1), (2), (3), (4) and (5) under the heading "Description Of
The Certificates--Flow of Funds" over the amount of Available Funds with respect
to the Determination Date.]
["DEFICIENCY NOTICE" means, a written notice delivered by the trustee to a
collateral agent appointed by the insurer, insurer, the fiscal agent, if
necessary, and the servicer specifying the Deficiency Claim Amount for the
distribution date.]
"DEPOSIT DATE" means, with respect to any Collection Period, the business day
immediately preceding the related Determination Date.
"DETERMINATION DATE" means, with respect to any Collection Period, the _____
business day preceding the distribution date in the next calendar month.
"DISTRIBUTION AMOUNT" means, with respect to a distribution date, the sum of
(1) the Available Funds for the distribution date[, plus (2) the Deficiency
Claim Amount, if any, received by the trustee with respect to the distribution
date.]
S-55
<PAGE>
"DRAW DATE" means, with respect to any distribution date, the ______ business
day immediately preceding the distribution date.
"EXCLUDED PLAN" means, for purposes of the Class A certificates, a Plan
sponsored by (1) PaineWebber Incorporated, (2) the originators, (3) the
servicer, (4) the trustee, (5) the seller, (6) the depositor, (7) any obligor
with respect to Receivables constituting more than 5 percent of the aggregate
unamortized principal balance of the Receivables as of the date of initial
issuance, (8) the insurer and (9) any affiliate or successor of a person
described in (1) to (8).
"FINAL SCHEDULED DISTRIBUTION DATE" is the Class A Final Scheduled
Distribution Date.
"INITIAL CUT-OFF DATE" is __________, 200_.
"INITIAL PRE-FUNDED AMOUNT" a cash amount equal to approximately $__________
deposited in the Pre-Funding Account on the closing date.
"INITIAL RECEIVABLES" are the [auto loans] [recreational vehicle loans] [auto
leases] [structured settlements assigned to the issuer on the closing date.
["INSURER DEFAULT" means, the occurrence and continuance of any of the
following events:
(1) the insurer will have failed to make a payment required under the Policy
in accordance with its terms;
(2) the insurer will have (x) filed a petition or commenced any case or
proceeding under any provision or chapter of the United States Bankruptcy
Code or any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization, (y) made a
general assignment for the benefit of its creditors, or (z) had an order
for relief entered against it under the United States Bankruptcy Code or
any other similar federal or state law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is final
and nonappealable; or
(3) a court of competent jurisdiction, the New York Department of Insurance
or other competent regulatory authority will have entered a final and
nonappealable order, judgment or decree (x) appointing a custodian,
trustee, agent or receiver for the insurer or for all or any material
portion of its property or (y) authorizing the taking of possession by a
custodian, trustee, agent or receiver of the insurer (or the taking of
possession of all or any material portion of the property of the
insurer).]
"INSURER OPTIONAL DEPOSIT" means, with respect to any distribution date, an
amount delivered by the insurer for deposit into the Collection Account for any
of the following purposes:
(1) to provide funds in respect of the payment of fees or expenses of any
provider of services to the issuer with respect to the distribution date,
or
S-56
<PAGE>
(2) to include the funds to the extent that without those amounts a draw
would be required to be made on the Policy.
"LIQUIDATED RECEIVABLE" means, with respect to any Determination Date, a
Receivable as to which, as of the last day of the related Collection Period,
(1) 60 days have elapsed since the servicer repossessed the _____________,
(2) the servicer has determined in good faith that all amounts it expects to
recover have been received,
(3) the _____________ has been sold and the proceeds received or
(4) all or any portion of any scheduled payment by the obligor is 120 days or
more delinquent.
"NET LIQUIDATION PROCEEDS" means, with respect to any Liquidated Receivable,
all amounts, including insurance proceeds, realized with respect to the
Receivable, other than amounts withdrawn from the Reserve Account and drawings
under the Policy, net of:
(1) reasonable expenses incurred by the servicer in connection with the
collection of the Receivable and the repossession and disposition of the
_____________ and
(2) amounts that are required to be refunded to the obligor on that
Receivable; provided that Net Liquidation Proceeds with respect to any
Receivable may not be less than zero.
"OWNER TRUST AGREEMENT" is the trust agreement under which the trust for the
transactions described in this prospectus supplement is formed.
"PERSON" means, any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
"PLAN" is any:
(1) employee benefit plan as defined in Section 3(3) of ERISA,
(2) plan described in Section 4975(e)(1) of the Code, including individual
retirement accounts or Keogh plans, or
(3) entity whose underlying assets include plan assets by reason of a plan's
investment in entities specified in clauses (1) and (2) above.
["POLICY" is a financial guaranty insurance policy issued by the insurer that
guarantees full and timely payment of the certificateholders' distributable
amount on each distribution date.]
["POLICY CLAIM AMOUNT" means, with respect to any Determination Date on which
the trustee has delivered a Deficiency Notice the shortfall of (y) the sum of
(1) the amount of Available
S-57
<PAGE>
Funds with respect to the Determination Date, as stated in the servicer's
certificate with respect to the Determination Date, plus (2) the amount of the
Deficiency Claim Amount, if any, to be delivered by a collateral agent to the
trustee under a Deficiency Notice delivered with respect to the Distribution
Date, as stated in the certificate delivered on the immediately preceding
Deficiency Claim Date by a collateral agent, after giving effect to the
distributions required by the pooling and servicing agreement and described in
clauses (1) and (2) of "Description Of The Certificates--Flow of Funds", over
(z) the amount necessary to pay the Class A Interest Distributable Amount and
the Class A Principal Distributable Amount for the related distribution date.]
"POOL BALANCE" means, at any time, the sum of the Principal Balances of the
Receivables, excluding Purchased Receivables and Liquidated Receivables.
"PRE-FUNDED AMOUNT" is the Initial Pre-Funded Amount as reduced from time to
time during the Pre-Funding Period by the amount of the Initial Pre used to
purchase Subsequent Receivables in accordance with the pooling and servicing
agreement.
"PRE-FUNDING ACCOUNT" is an account which will be established with the
trustee which will be an asset of the trust and will be pledged to the trustee
for the benefit the certificateholders.
"PRE-FUNDING PERIOD" is the period from the closing date until the earliest
of:
(1) the date on which the amount on deposit in the Pre-Funding Account is
less than $__________,
(2) the occurrence of a servicer default under the pooling and servicing
agreement, or
(3) __________, 200_ . --
"PRINCIPAL BALANCE" for any Receivable, at any time, means the Amount
Financed minus:
(1) that portion of all amounts received on or prior to that date and
allocable to principal in accordance with the terms of the Receivable,
and
(2) any Cram Down Loss in respect of that Receivable.
"PRINCIPAL DISTRIBUTABLE AMOUNT" with respect to any distribution date will
be an amount equal to the sum of the following amounts:
(1) the principal portion, allocable on the basis of the simple interest
method, of all Collected Funds received during the immediately preceding
calendar month, other than Liquidated Receivables and Purchased
Receivables, including the principal portion of all prepayments;
(2) the Principal Balance of all Receivables that became Liquidated
Receivables during the related calendar month, other than Purchased
Receivables;
S-58
<PAGE>
(3) the principal portion of the Purchase Amounts received with respect to
all Receivables that became Purchased Receivables during the related
calendar month;
(4) at the option of the insurer, the Principal Balance of the Receivables
that were required to be purchased by the transferor and the servicer
during the related calendar month but were not purchased; and
(5) the aggregate amount of Cram Down Losses that have occurred during the
related calendar month.
"PURCHASE AMOUNT" means, with respect to a Receivable, the Principal Balance
and accrued interest on the Receivable, including one month's interest on the
Receivable, in the month of payment, at the APR less the servicing fee, after
giving effect to the receipt of any moneys collected, from whatever source, on
the Receivable, if any.
"PURCHASED RECEIVABLE" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer or repurchased
by the Transferor or the originator pursuant to the pooling and servicing
agreement.
"RATING AGENCIES" are __________ and __________ . -
"RECEIVABLES" the Initial Receivables together with the Subsequent
Receivables.
"RECORD DATE" with respect to any distribution date means the close of
business on the business day preceding that distribution date.
"REMAINING PRE-FUNDING AMOUNT" is any net earnings from the investment of
funds on deposit in the Pre-Funding Account.
"RESTRICTED GROUP" is any affiliate of a Person described in (1) to (8) of
the definition of Excluded Plan.
"RULE OF 78S" is the provision of payments according to a "sum of periodic
balances" or "sum of monthly payments" method and under which the portion of
each payment allocable to interest is higher during the early months of the term
of a Receivable and lower during later months than that under a constant yield
method for allocating payments between interest and principal.
"RULE OF 78S RECEIVABLES" means Receivables that provide for the allocation
of payments according to the "sum of periodic balances" or "sum of monthly
payments" method.
"SCHEDULED PAYMENT" means payments which are scheduled to be made on the
certificates during the term of the Policy in accordance with the original terms
of the certificates when issued and without regard to any subsequent amendment
or modification of the certificates or the pooling and servicing agreement that
has not been consented to by the insurer, which payments for each distribution
date are:
(1) the Certificateholders' Interest Distributable Amount for the
distribution date and
S-59
<PAGE>
(2) the Certificateholders' Principal Distributable Amount.
"SERVICER'S CERTIFICATE" means, with respect to each Determination Date, a
certificate, completed by and executed on behalf of the servicer, in accordance
with the applicable pooling and servicing agreement provisions.
"SERVICING FEE" is the fee to which the servicer is entitled under the
pooling and servicing agreement on each distribution date for the related
monthly period equal to the sum of:
(1) the Servicing Fee Rate multiplied by the Pool Balance as of the first day
of the monthly period and
(2) the investment earnings, net of losses, on the Collection Account.
"SERVICING FEE RATE" is the rate, equal to ___%, at which the Servicing Fee
is paid.
"SUBSEQUENT CUT-OFF DATE" the dates designated by the transferor from time to
time as subsequent cut-off dates.
"SUBSEQUENT RECEIVABLES" are the [auto loans] [recreational vehicle loans]
[auto leases] [structured settlements] assigned to the issuer from time to time
after the closing date and prior to __________.
"SUPPLEMENTAL SERVICING FEE" with respect to any Collection Period, all
administrative fees, expenses and charges paid by or on behalf of obligors,
including late fees, collected on the Receivables during the Collection Period.
"U.S. PERSON" means a citizen or resident of the United States for U.S.
federal income tax purposes, a corporation or partnership, except to the extent
provided in applicable Treasury regulations, created or organized in or under
the laws of the United States, any state or the District of Columbia, including
an entity treated as a corporation or partnership for U.S. federal income tax
purposes, an estate the income of which is subject to U.S. federal income
taxation regardless of its source, or 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 of those U.S. Persons have the authority to control all
substantial decisions of the trust, or, to the extent provided in applicable
Treasury regulations, certain trusts in existence on August 20, 1996, which are
eligible to elect to be treated as U.S. Persons.
"WEIGHTED AVERAGE RATE" means, with respect to any date of determination, a
per annum rate equal to
(1) the product of (x) the outstanding principal amount of the Class A-1
Certificates on that date and (y) the Class A Pass-Through Rate, divided
by
(2) the outstanding principal amount of the Class A certificates on that
date.
S-60
<PAGE>
"YIELD SUPPLEMENT ACCOUNT" is an account that the transferor will establish
for the benefit of the certificateholders and the insurer, which will initially
be a segregated trust account in the corporate trust department of the trustee.
"YIELD SUPPLEMENT AMOUNT" with respect to any distribution date will
determined by aggregating for all of the Receivables, one twelfth of the
difference, if positive, between
(1) the product of (a) the Principal Balance of the Receivable multiplied by
(b) a rate equal to the Weighted Average Rate plus approximately _____%,
which percentage represents the Servicing Rate plus approximately _____%,
and
(2) the product of (a) the Principal Balance of the Receivable multiplied by
(b) the APR on that Receivable.
S-61
<PAGE>
=========================================== ===================================
YOU SHOULD RELY ON THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED
PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION.
WE ARE NOT OFFERING THESE CERTIFICATES IN
ANY STATE WHERE THE OFFER IS NOT
PERMITTED.
--------------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
Summary.................................S-5
Risk Factors...........................S-12
Forward-Looking Statements.............S-16
Defined Terms..........................S-16 $___________ (APPROXIMATE)
The Trust..............................S-16
The Trust Fund.........................S-17
The Receivables Pool...................S-17 _____________________TRUST 200_-_
The Transferor.........................S-23 ISSUER
The depositor..........................S-24 ASSET-BACKED CERTIFICATES,
THE ORIGINATOR And The Servicer........S-24 SERIES 200_-_
Weighted Average Life of the
Securities...........................S-25
Description of Certificates............S-28
[The Insurer]..........................S-31 _________________________
[The Policy]...........................S-34 SERVICER
The Pooling and Servicing AGreement
and the Transfer Agreements..........S-37
Federal Income Tax Considerations......S-42 PAINEWEBBER ASSET
ERISA Considerations...................S-45 ACCEPTANCE CORPORATION
Legal Investment.......................S-48 DEPOSITOR
Underwriting...........................S-49 $___________
Additional Information.................S-50 CLASS A CERTIFICATES
Experts................................S-50
Legal MATTERS..........................S-50
Ratings................................S-50
Glossary of Terms......................S-52
-----------------------------------
PROSPECTUS PROSPECTUS SUPPLEMENT
-----------------------------------
Prospectus Supplement......................
Summary of Terms...........................
Risk Factors...............................
The Trust Funds............................
The Issuers................................
The Receivables............................ PAINEWEBBER INCORPORATED
Pool Factors...............................
Use of Proceeds............................
The Depositor..............................
The Trustee................................
Description of the Securities.............. _________, 200_
Description of the Trust Agreements........
Certain Legal Aspects of the Receivables...
Federal Income Tax Considerations..........
ERISA Considerations.......................
Methods of Distribution ...................
Incorporation of Information by Reference..
Legal Matters..............................
Financial Information......................
Additional Information.....................
Ratings....................................
Glossary of Terms..........................
DEALERS WILL BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN
ACTING AS UNDERWRITERS OF THESE SECURITIES
AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION,
ALL DEALERS SELLING THESE SECURITIES
WILL DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS UNTIL ____________, 200_.
=========================================== ===================================
<PAGE>
The information in this prospectus supplement is not complete and may be
changed. This prospectus supplement is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
of sale is not permitted.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED MAY 16, 2000
PROSPECTUS SUPPLEMENT DATED __________, 200_
(TO PROSPECTUS DATED ___________, 200_)
$______________ (APPROXIMATE)
____________________ OWNER TRUST 200_-_
(ISSUER)
____________________ ASSET-BACKED NOTES, SERIES 200_-_
$___________ ______% CLASS A-1 NOTES
$___________ ______% CLASS A-2 NOTES
$___________ ______% CLASS A-3 NOTES
[LOGO OF __________________]
_________________________
(ORIGINATOR AND SERVICER)
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
(DEPOSITOR)
THE TRUST FUND--
o The trust fund consists primarily of a pool of receivables consisting of
[auto loans] [recreational vehicle loans] [auto leases] [structured
settlements] and security interests in the underlying assets.
THE OFFERED NOTES--
o The trust will issue 3 classes of notes.
CREDIT ENHANCEMENT--
o [The Class A notes will be unconditionally and irrevocably guaranteed as
to the payment of scheduled interest and to specified payments of
principal pursuant to the terms of a financial guaranty insurance policy
to be issued by ____________________]
[____ LOGO]
____________________ Owner Trust 200_-_ is issuing notes in 3 classes
PRICE TO THE UNDERWRITING PROCEEDS TO THE
PUBLIC DISCOUNT DEPOSITOR
------------ ------------ ---------------
% % $
The price to public, underwriting discount and proceeds to depositor shown
are for the Class A-1, Class A-2 and Class A-3 notes in the aggregate. This
information is shown for each individual class on page S-[ ]. See "Underwriting"
in this prospectus supplement.
The proceeds to depositor are less expenses, estimated at $[ ]. See
"Underwriting" in this prospectus supplement.
- --------------------------------------------------------------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-___ OF
THIS PROSPECTUS SUPPLEMENT AND PAGE ___ IN THE PROSPECTUS.
The notes will not represent obligations of the depositor, originator or any
other person or entity other than the issuer. No governmental agency will insure
the notes or the collateral securing the notes.
You should consult with your own advisors to determine if the offered notes
are appropriate investments for you and to determine the applicable legal, tax,
regulatory and accounting treatment of the offered notes.
- --------------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE OFFERED
NOTES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PAINEWEBBER INCORPORATED
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information about the offered notes for the series 200_-_ in two
separate documents that progressively include more detail:
(1) the accompanying prospectus dated ___________, 200_. The accompanying
prospectus provides general information, some of which may not apply to the
offered notes for the series 200_-_.
(2) this prospectus supplement. This prospectus supplement describes the
specific terms of the notes for the series 200_-_. Sales of the offered
notes may not be completed unless you have received both this prospectus
supplement and the prospectus. You are urged to read both this prospectus
supplement and the prospectus in full.
IF THE TERMS OF THE OFFERED NOTES VARY BETWEEN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS, THEN YOU SHOULD RELY ON THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT.
Cross-references in this prospectus supplement and the accompanying
prospectus to captions in these materials are included to assist in locating
further related discussions. The following table of contents and the table of
contents in the accompanying prospectus provide the pages on which these
captions are located.
-ii-
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY........................................................................1
RISK FACTORS...................................................................8
Limited Liquidity May Adversely Affect Market Value Of Notes................8
Prepayments On The Receivables Will Cause Prepayments On The Notes
Resulting In Reinvestment Risk To You....................................8
Prepayments On The Receivables May Affect Your Yield On Your Notes..........8
Potential Prepayments On Notes Due To Failure To Transfer A Sufficient
Number Of Additional Receivables To The Trust............................8
Risk Of Potential Prepayments On Notes Due To Failure To Obtain Release
Of Existing Lien.........................................................9
You May Experience A Loss On Your Notes Because The Issuer Has Limited
Assets...................................................................9
[Originator Has A Limited Operating History................................10
[The Originator's Internet-Based Origination Programs May Give Rise To
Risks That Are Not Customary............................................10
You May Experience A Loss In Connection With An Event Of Default...........10
[Potential Losses On Your Notes Due To Geographic Concentration Of
Receivables.............................................................11
[Risk Of Recharacterization Of True Sale As A Pledge.......................11
FORWARD-LOOKING STATEMENTS....................................................12
DEFINED TERMS.................................................................12
THE TRUST.....................................................................12
General....................................................................12
Capitalization of the Issuer...............................................13
The Owner Trustee..........................................................13
The Indenture Trustee......................................................13
THE TRUST FUND................................................................13
THE RECEIVABLES POOL..........................................................14
Eligibility Criteria.......................................................14
Subsequent Receivables.....................................................15
Pool Composition...........................................................16
THE TRANSFEROR................................................................20
THE DEPOSITOR.................................................................20
THE ORIGINATOR AND THE SERVICER...............................................20
General....................................................................20
Origination Process and Credit Evaluation Procedures.......................21
Contract Processing, Purchase, Servicing and Administration................21
Delinquency Control and Collection Strategy................................21
Delinquency and Loss Experience............................................21
WEIGHTED AVERAGE LIFE OF THE NOTES............................................22
DESCRIPTION OF THE NOTES......................................................26
Payments of Interest.......................................................26
Payments of Principal......................................................27
Optional Redemption........................................................27
Mandatory Redemption.......................................................27
The Indenture..............................................................28
The Indenture Trustee......................................................34
DESCRIPTION OF THE CERTIFICATES...............................................35
[THE INSURER].................................................................35
General....................................................................35
Reinsurance................................................................36
Rating of Claims-Paying Ability............................................36
Capitalization.............................................................36
Insurance Regulation.......................................................37
[THE POLICY]..................................................................37
Other Provisions of the Policy.............................................39
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DESCRIPTION OF THE TRUST AGREEMENTS...........................................40
Assignment of Receivables..................................................41
Obligation to Repurchase Receivables.......................................42
Accounts...................................................................43
Certain Allocations........................................................45
Payments...................................................................46
Statements to Noteholders..................................................46
Servicer Default; Rights Upon Servicer Default.............................47
Servicing Compensation.....................................................48
Appointment of Subservicer.................................................48
Amendment..................................................................49
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES......................................50
FEDERAL INCOME TAX CONSIDERATIONS.............................................50
General....................................................................50
Classification of Investment Arrangement...................................50
Taxation of Holders........................................................50
Backup Withholding and Information Reporting...............................52
ERISA CONSIDERATIONS..........................................................52
LEGAL INVESTMENT..............................................................53
UNDERWRITING..................................................................54
ADDITIONAL INFORMATION........................................................55
EXPERTS.......................................................................55
LEGAL MATTERS.................................................................55
RATINGS.......................................................................55
GLOSSARY OF TERMS.............................................................57
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SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND DOES NOT
CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO CONSIDER IN MAKING AN INVESTMENT
DECISION. TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE OFFERED NOTES,
YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS.
RELEVANT PARTIES
The Issuer................... ___________ Owner Trust 200_-_, a _______ business
trust, will issue the notes.
Originator................... ___________ originates the receivables consisting
of [auto loans] [recreational vehicle loans] [auto
leases] [structured settlements] and will sell and
contribute the receivables to the transferor. The
originator is a ___________ [company], whose
executive offices are located at _____________.
Transferor................... ___________ will assign the receivables to the
depositor. [The transferor is a ___________ and is
a wholly-owned subsidiary of the originator.] The
transferor's principal executive offices are
located at ___________.
Depositor.................... PaineWebber Asset Acceptance Corporation will
assign the receivables to the issuer. The
depositor is a Delaware corporation. The
depositor's principal executive offices are
located at 1285 Avenue of the Americas, New York,
New York 10019, telephone number (212) 713-2000.
Servicer..................... ______________ will service the receivables
assigned to the issuer. The servicer is a
_________ with its principal place of business in
__________. The servicer's address is __________,
telephone number (___) ____-____.
Indenture Trustee,
Backup Servicer
[and Indenture Collateral
Agent]..................... _______________ will serve as the indenture
trustee under the indenture, as backup servicer
under the sale and servicing agreement, [as
indenture collateral agent for the reserve
account] and as custodian for the receivables
files. The indenture trustee's address is _______,
telephone number ( ) ____-____.
Owner Trustee................ _______________ will serve as the trustee of the
issuer. The owner trustee's address is __________,
telephone number ( ) ___-____
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Initial Cut-off Date......... Beginning of business on ________, 200_. The
issuer will receive payments due on, or received
with respect to, the receivables on or after this
date.
Closing Date................. The issuer will issue the notes on or about
________, 200_.
Payment Dates................ The first payment date will be ____________, 200_.
After that, the payment dates will be the __ day
of each month if the __ day is a business day. If
the __ day is not a business day, then the payment
date will be the following business day.
The Notes.................... Each class of notes will have the initial
principal amount, interest rate and final
scheduled payment date set forth in the following
table.
PRINCIPAL INTEREST FINAL SCHEDULED
CLASS AMOUNT RATE PAYMENT DATE
----- --------- -------- ---------------
$ %
$ %
$ %
If any class of notes is not repaid in full on or
prior to its final scheduled payment date, an
event of default will occur.
Book-Entry Registration...... The notes will be initially available only in
book-entry form through the facilities of The
Depository Trust Company, Clearstream Banking,
societe anonyme, or the Euroclear System, except
under limited circumstances. See "Description of
the Securities--Book-Entry Registration" in the
prospectus.
The Receivables and
the Other Trust Fund
Properties................. The primary assets of the issuer will be the
receivables consisting of [auto loans]
[recreational vehicle loans] [auto leases]
[structured settlements]. The receivables will be
sold and contributed by the originator to the
transferor, and assigned by the transferor to the
depositor. The depositor will transfer the
receivables to the issuer. The issuer will pledge
the receivables to the indenture trustee for the
benefit of the noteholders on the day of closing
and from time to time on subsequent transfer dates
on or before __________, 200_.
The Receivables Pool......... As of the beginning of business on __________,
200_, the receivables in the pool have:
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o an aggregate principal balance of $___________;
o a weighted average annual percentage rate of
approximately ___________%;
o a weighted average remaining term to stated
maturity of approximately ___________ months;
and
o a remaining term to stated maturity of not more
than __ months and not less than __months.
Other Trust Fund Properties.. In addition to the receivables, the trust fund
will also include:
o all moneys received with respect to the initial
receivables after the initial cut-off date and
the subsequent receivables after the applicable
subsequent cut-off dates;
o the security interests in the underlying assets
of the receivables;
o any proceeds from claims under insurance
policies covering the underlying assets of the
receivables or the related obligors;
o all instruments and documents relating to the
receivables;
o a security interest in amounts on deposit in
certain bank accounts; and
o all rights of the issuer under the sale and
servicing agreement.
PRE-FUNDING
Pre-funding Account.......... On the day of closing, the transferor will deposit
approximately $___________ of the proceeds from
the sale of notes into a pre-funding account held
by the indenture trustee. The issuer will use
funds on deposit in this account to acquire
additional receivables from the transferor from
time to time on or before __________, 200_.
The receivables acquired by the issuer during the
period between the day of the closing and
__________, 200_ will also have been originated by
___________.
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The characteristics of the subsequently-acquired
receivables will not differ materially from the
receivables acquired by the issuer on the day of
the closing.
Capitalized Interest Account. On the day of closing, the transferor will also
deposit $_______ into a capitalized interest
account held by the indenture trustee. The amount,
if any, deposited into the capitalized interest
account will be applied on the payment dates
occurring on or prior to __________, 200_ to fund
an amount equal to the amount of interest accrued
for that payment date at the weighted average
interest rates on the portion of the notes having
a principal balance in excess of the principal
balances of the receivables pledged by the issuer.
Any amounts remaining in the capitalized interest
account on __________, 200_ and not used for these
purposes will be paid to the transferor on that
date. See "Description of the Trust Agreements--
Accounts--Capitalized Interest Account" in this
prospectus supplement.
Interest Payments............ Each class of notes will bear interest each year
at the rate listed in the table under "--The
Notes" above. Interest on each class of notes will
accrue on a "30/360" basis. This means that the
interest payable on each payment date on each
class of notes will be the product of:
(1) the outstanding principal balance of the
class of notes;
(2) the applicable interest rate; and
(3) 1/12.
PRINCIPAL PAYMENTS
Calculation.................. The aggregate amount of principal payable on the
notes on each payment date will be equal to an
amount called the "noteholders' principal
distributable amount," which will generally be
equal to the noteholders' percentage of the sum
of:
(1) the amount of principal collected on the
receivables
during the prior calendar month,
(2) the outstanding principal balance of any
receivable that became a liquidated
receivable during the prior calendar month,
(3) the principal balance of each receivable that
was purchased by the originator or the
transferor during the prior calendar month,
and [at the option of the
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insurer,] the principal balance of each
receivable that was required to be, but was
not, so purchased,
(4) the aggregate amount of any reduction of the
principal balance of a receivable as a result
of a court order in an insolvency proceeding,
and
(5) any unpaid portion of the amounts included in
1, 2, 3 and 4 above for a prior payment date
that were not paid to the noteholders,
because of insufficient available cash.
Sequential Pay Feature....... Absent an event of default which has resulted in
an acceleration of the notes, the noteholders'
principal distributable amount will be payable to
the Class A-1 notes, the Class A-2 notes and the
Class A-3 notes in that order. This means that no
principal will be paid to the Class A-2 notes
until the Class A-1 notes have been paid in full,
and so forth. The noteholders' principal
distributable amount is more fully described under
"Description of the Trust Agreements--Payments" in
this prospectus supplement.
The Certificates............. The issuer will also issue $___________ aggregate
principal amount of non-interest bearing
certificates pursuant to a trust agreement to be
dated as of __________, 200_ between the depositor
and the owner trustee. The certificates are not
being offered pursuant to this prospectus
supplement and will initially be held by the
transferor.
The certificates will not receive any
distributions on a payment date until the
noteholders have received all amounts required to
be distributed to them on such payment date [and
until the reserve account has been fully funded
and certain amounts owed to the insurer have been
paid.]
[The Reserve Account]........ [The transferor will establish a reserve account
for the benefit of the insurer. On the day of
closing, the transferor will make an initial
deposit of cash into the reserve account. On each
payment date, if the amount on deposit in the
reserve account is less than the required amount,
additional amounts will be deposited into the
reserve account from collections on the
receivables that are available for this purpose.
Funds will be withdrawn from the reserve account
on each payment date if the amount of available
funds on any payment date is not sufficient to
pay:
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<PAGE>
o the monthly servicing fee;
o accrued and unpaid fees owing to the indenture
trustee, the owner trustee, the indenture
collateral agent, the custodian and the backup
servicer;
o required payments of interest and principal to
the noteholders; and
o amounts owed to the insurer.
The amount required to be on deposit in the
reserve account may increase or decrease without
the consent of the noteholders. As a result, you
should not rely on amounts on deposit in or
required to be deposited to the reserve account as
a source of funds for payments on the notes.]
[The Yield Supplement
Account]................... [The transferor will establish a yield supplement
account held by indenture trustee for the benefit
of the noteholders. On the day of closing, the
transferor will deposit approximately $___________
in the yield supplement account.
On each payment date, the issuer will use funds in
the yield supplement account to cover any
shortfall between:
o the weighted average interest rate on the notes
plus approximately ___________%; and
o the interest rate on each receivable.]
[Insurer and the Policy]..... [__________ is a ________ financial guaranty
insurance company. ___________ will issue a
policy, which will guarantee the payment of timely
interest and principal due on the notes, but only
as set forth under the heading "The Policy" in
this prospectus supplement.]
OPTIONAL REDEMPTION.......... If the aggregate principal balance of the
receivables on any payment date is __% or less of
the sum of the aggregate principal balance of the
initial receivables as of the initial cut-off date
and the aggregate principal balance of all
subsequently-acquired receivables as of their
subsequent cut-off dates, the transferor may
reacquire the receivables. If the transferor
elects to reacquire the receivables, the
outstanding principal balance of the notes will be
paid in full together with accrued interest.
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FEDERAL INCOME
TAX CONSIDERATIONS........... In the opinion of Cadwalader, Wickersham & Taft,
for federal income tax purposes, the notes will be
characterized as debt, and the issuer will not be
classified as a separate entity that is an
association, or a publicly traded partnership,
taxable as a corporation.
If you purchase a note, you agree to treat it as
debt for tax purposes. See "Federal Income Tax
Considerations" in this prospectus supplement for
additional information concerning the application
of federal and state tax laws to the issuer and
the notes.
ERISA CONSIDERATIONS......... The notes are generally eligible for purchase by
employee benefit plans that are subject to ERISA.
However, administrators of employee benefit plans
should review the matters discussed under "ERISA
Considerations" in the prospectus and in this
prospectus supplement before purchasing notes.
RATINGS...................... The notes must receive at least the following
ratings from ___________ and ___________ in order
to be issued:
RATING
------
CLASS
----- --------- ---------
A-1
A-2
A-3
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RISK FACTORS
BEFORE MAKING AN INVESTMENT DECISION, YOU SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISKS WHICH WE BELIEVE DESCRIBE THE PRINCIPAL FACTORS THAT MAKE AN
INVESTMENT IN THE NOTES SPECULATIVE OR RISKY. IN PARTICULAR, PAYMENTS ON YOUR
NOTES WILL DEPEND ON PAYMENTS RECEIVED ON AND OTHER RECOVERIES WITH RESPECT TO
THE RECEIVABLES. THEREFORE, YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS
RELATING TO THE RECEIVABLES.
LIMITED LIQUIDITY MAY ADVERSELY AFFECT MARKET VALUE OF NOTES
A secondary market for the notes may not develop or, if it does develop, it
may not provide you with liquidity of investment or continue while your notes
are outstanding. Lack of liquidity could result in a substantial decrease in the
market value of your notes. See "Risk Factors--Limited Liquidity of Securities
May Adversely Affect the Market Value of Your Securities" in the accompanying
prospectus.
PREPAYMENTS ON THE RECEIVABLES WILL CAUSE PREPAYMENTS ON THE NOTES RESULTING IN
REINVESTMENT RISK TO YOU
The receivables may be prepaid, in full or in part, voluntarily or as a
result of:
o prepayments on defaults;
o casualties to the related assets; or
o other reasons.
Since the rate of payment of principal of the notes depends in part on the
rate of payment, including prepayments, of the principal balance of the
receivables, final payment of the notes could occur significantly earlier than
the final scheduled payment date for each class of notes. You will bear the risk
that you may have to reinvest the principal on your notes earlier than you
expected at a rate of interest that is less than the rate of interest on your
notes.
PREPAYMENTS ON THE RECEIVABLES MAY AFFECT YOUR YIELD ON YOUR NOTES
If you purchase your notes at a premium, prepayments on the receivables may
reduce your yield. The ratings on the notes do not address the possibility that
prepayment rates may affect your yield on your notes.
POTENTIAL PREPAYMENTS ON NOTES DUE TO FAILURE TO TRANSFER A SUFFICIENT NUMBER OF
ADDITIONAL RECEIVABLES TO THE TRUST
If all of the funds on deposit in the pre-funding account are not used to
purchase additional receivables during the pre-funding period, any remaining
amount on deposit in the pre-funding account will be used to make principal
payments on the notes. See "Description of the Notes--Mandatory Redemption" in
this prospectus supplement. The originator has identified an existing pool of
receivables that the originator believes will satisfy the established criteria
for receivables that
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<PAGE>
will be assigned to the issuer on subsequent transfer dates. See "The
Receivables Pool--Subsequent Receivables" in this prospectus supplement.
However, the issuer cannot assure you that the identified receivables will in
fact satisfy that criteria and that there will be a sufficient number of
eligible receivables to assign to the issuer.
RISK OF POTENTIAL PREPAYMENTS ON NOTES DUE TO FAILURE TO OBTAIN RELEASE OF
EXISTING LIEN
[The receivables that the originator has identified for possible transfer to
the issuer on subsequent transfer dates are subject to a lien securing amounts
advanced under a warehouse credit line that the originator uses to finance
receivables it owns. Although the originator anticipates that amounts on deposit
in the pre-funding account will be sufficient to repay the related warehouse
debt and release the lien on additional receivables, we cannot assure you that
those amounts will be sufficient or that the originator will have other sources
of cash that could be used to repay the warehouse debt. If the related warehouse
debt were not repaid and the lien released, the transferor would be unable to
assign those additional receivables to the issuer and any amount remaining in
the pre-funding account at the end of the pre-funding period will be used to
partially redeem the notes in the manner described under "Description of the
Notes--Mandatory Redemption" in this prospectus supplement.]
YOU MAY EXPERIENCE A LOSS ON YOUR NOTES BECAUSE THE ISSUER HAS LIMITED ASSETS
The issuer's primary assets or source of funds for payments on the notes are:
o the receivables;
o the pre-funding account;
o [the reserve limited assets account;]
o [the yield supplement account;]
o the capitalized interest account; and
o [the insurance policy issued by ___________.]
For repayment, you must rely upon payments on the receivables, amounts on
deposit in the pre-funding account, [the yield supplement account, the
capitalized interest account and amounts, if any, in the reserve account]. The
pre-funding account and the capitalized interest account will only be maintained
until the first payment date after the pre-funding period. The money in the
pre-funding account will only be used to purchase additional receivables and is
not available to cover losses on the receivables. The capitalized interest
account covers obligations of the issuer relating to the portion of the issuer's
assets not invested in receivables and is not designed to provide protection
against losses on the receivables. [Although the insurance policy will be
available to cover shortfalls in distributions each month, if ___________
defaults in its obligations under the insurance policy, the noteholders must
rely solely on:
o amounts received with respect to the receivables without the benefit of
the insurance policy;
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<PAGE>
o amounts, if any, on deposit in the reserve account; and
o the amount released from the yield supplement account on each payment
date.]
If this happens, the indenture trustee may be unable to realize on the assets
underlying the receivables and the proceeds to be distributed to noteholders on
a current basis may be reduced.
[ORIGINATOR HAS A LIMITED OPERATING HISTORY
All of the receivables were originated by ___________ in accordance with its
credit underwriting criteria. The originator was formed in ___________ and
commenced its operations as an originator of [auto loans] [recreational vehicle
loans] [auto leases] [structured settlements] only in __________. Since that
time it has experienced rapid growth in its portfolio of [auto loans]
[recreational vehicle loans] [auto leases] [structured settlements]. The
originator therefore has limited historical performance data with respect to the
majority of the [auto loans] [recreational vehicle loans] [auto leases]
[structured settlements] it currently services. Although the originator has
calculated and presented in this prospectus supplement its delinquency and net
loss experience with respect to its entire portfolio of serviced [auto loans]
[recreational vehicle loans] [auto leases] [structured settlements], we cannot
assure you that the information presented will reflect actual experience with
respect to the receivables acquired by the issuer. In addition, we cannot assure
you that the future delinquency or loan loss experience of the servicer with
respect to the receivables will be better or worse than that set forth in the
table headed "The Originator and the Servicer--Delinquency and Loss Experience"
in this prospectus supplement. The originator is at an early stage of
operations, is subject to the risks inherent in the establishment of a new
business and must, among other things, continue to attract and retain qualified
credit and collection personnel and support its [auto loans] [recreational
vehicle loans] [auto leases] [structured settlements] business. See "The
Originator and the Servicer" in this prospectus supplement.]
[THE ORIGINATOR'S INTERNET-BASED ORIGINATION PROGRAMS MAY GIVE RISE TO RISKS
THAT ARE NOT CUSTOMARY
The originator generally uses the internet and the mail to communicate with
obligors during the process of underwriting and originating [auto loans]
[recreational vehicle loans] [auto leases]. For a discussion of the underwriting
and origination process, see "The Originator and the Servicer" in this
prospectus supplement. The underwriting and origination processes and loan
documentation used by the originator are novel and were developed to capitalize
on the potential benefits of conducting its business over the internet and
through the mail. These processes and the related documentation may entail risks
that would not exist in a customary [auto loan] [recreational vehicle loan]
[auto lease] origination program and may give rise to challenges based on
consumer protection or other laws based on issues that are currently untested in
the courts. We cannot assure you that these risks could not adversely affect the
collectibility or enforceability of the contracts or the security interests in
the underlying assets.]
YOU MAY EXPERIENCE A LOSS IN CONNECTION WITH AN EVENT OF DEFAULT
[Unless an insurer default has occurred and is continuing,] neither the
indenture trustee nor the noteholders may declare an event of default under the
indenture. [So long as an insurer event
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of default has not occurred and is not continuing, an event of default will
occur only upon delivery by the insurer to the indenture trustee of notice of
the occurrence of events of default under the insurance agreement.] If a default
occurs under the indenture, [so long as an insurer default has not occurred and
is not continuing, the insurer] will have the right, but not the obligation, to
cause the sale, in whole or in part, of the receivables and the other assets of
the trust, which will result in a prepayment, in whole or in part, of the notes
in advance of their maturity dates. [Following the occurrence of an event of
default, the indenture trustee will continue to submit claims under the
insurance policy as necessary to enable the issuer to continue to make payments
on the notes in accordance with the terms of the indenture on each payment date.
Following the occurrence of an event of default, however, the insurer may elect,
in its sole discretion, to pay all or any portion of the outstanding amount of
the notes, plus accrued interest on the notes.] You may not be able to reinvest
the principal repaid to you earlier than expected at a rate of return that is at
least equal to the rate of return on your notes.
[POTENTIAL LOSSES ON YOUR NOTES DUE TO GEOGRAPHIC CONCENTRATION OF RECEIVABLES
Economic conditions in the states where the obligors under the receivables
reside affect the delinquency, loan loss and repossession experience of the
issuer with respect to the receivables. Based on the principal balance of the
original pool of receivables as of __________, 200_, ______% of the receivables
were originated in ___________, _____% in ___________, and _____% in
___________. No other states have concentrations in excess of ____%.
Accordingly, adverse economic conditions or other factors affecting ________,
_______ or ________ could have an especially significant impact on the
delinquency, loan loss or repossession experience of the issuer and may
adversely affect the timing and amount of payment of principal and interest on
your notes.]
[RISK OF RECHARACTERIZATION OF TRUE SALE AS A PLEDGE
The originator warrants to the transferor in the sale and servicing agreement
that the sale and contribution of the receivables by it to the transferor is a
valid sale and contribution of the receivables to the transferor. In addition,
under the sale and servicing agreement the originator and the transferor have
agreed to treat the transactions described in this prospectus supplement as a
sale and contribution of the receivables to the transferor, and the originator
will take all actions that are required under applicable law to perfect the
transferor's ownership interest in the receivables. However, if the originator
were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of the originator or the originator itself as debtor-in-
possession were to take the position that the sale and contribution of the
receivables from the originator to the transferor should be recharacterized as a
pledge of those receivables to secure a borrowing from the originator, then
delays in payments of collections of receivables could occur. Alternatively, if
the court rules in favor of the trustee, debtor-in-possession or creditor,
reductions in the amount of those payments could result.
It is possible that the risk of recharacterization of the transfer between
the originator and the transferor may be increased by the fact that, for
accounting purposes, the transferor will treat the notes as debt and the
transfer of the receivables from the transferor to the depositor as a pledge
rather than a sale and contribution.
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If the transfer of receivables to the transferor were respected as a sale and
contribution, the receivables would not be part of the originator's bankruptcy
estate and would not be available to the originator's creditors.
In addition, if the originator were to become a debtor in a bankruptcy case
and a creditor or trustee-in-bankruptcy of that debtor or the originator itself
were to request a court to order that the originator should be substantively
consolidated with the transferor, delays in payments on the notes could result.
If the bankruptcy court rules in favor of the creditor, trustee-in-bankruptcy or
the originator, reductions in those payments could result.]
FORWARD-LOOKING STATEMENTS
In this prospectus supplement and the accompanying prospectus, we use certain
forward-looking statements. These forward-looking statements are found in the
material, including each of the tables, set forth under "Risk Factors" and
"Weighted Average Life Of The Securities" in this prospectus supplement.
Forward-looking statements are also found elsewhere in this prospectus
supplement and prospectus and include words like "expects," "intends,"
"anticipates," "estimates" and other similar words. These statements are
intended to convey our projections or expectations as of the date of this
prospectus supplement. These statements are inherently subject to a variety of
risks and uncertainties. Actual results could differ materially from those we
anticipate due to changes in, among other things:
(1) economic conditions and industry competition,
(2) political and/or social conditions, and
(3) the law and government regulatory initiatives.
We will not update or revise any forward-looking statement to reflect changes
in our expectations or changes in the conditions or circumstances on which these
statements were originally based.
DEFINED TERMS
We define and use capitalized terms in this prospectus supplement and the
prospectus to assist you in understanding the terms of the offered notes and
this offering. We define the capitalized terms we used in this prospectus
supplement under the caption "Glossary of Terms" beginning on page S-[__] in
this prospectus supplement.
THE TRUST
GENERAL
The issuer, ___________ Owner Trust 200_-_ is a business trust formed under
the laws of the State of ___________ under a trust agreement. After its
formation, the issuer will not engage in any activity other than:
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o acquiring, holding and managing the trust fund;
o issuing the notes and certificates to finance its acquisition of its
interest in the trust fund;
o making payments on the notes and the certificates issued by it; and
o engaging in other activities that are necessary, suitable or convenient to
accomplish those objectives.
The trust's principal offices are in ___________, in care of ___________, as
owner trustee, at the address listed below under "--The Owner Trustee" in this
prospectus supplement.
CAPITALIZATION OF THE ISSUER
The following table illustrates the capitalization of the issuer as of
__________, 200_, as if the issuance and sale of the notes and the certificates
have taken place on that date:
Class A-1___________% Asset Backed Notes...................... $
Class A-2___________% Asset Backed Notes......................
Class A-3___________% Asset Backed Notes......................
Asset Backed Certificates..................................... ____________
Total................................................... $
============
THE OWNER TRUSTEE
___________ is the owner trustee under the Owner Trust Agreement. The owner
trustee is a ___________ banking corporation and its principal offices where
information can be obtained relating to the issuer and the notes are located at
___________. The originator, the transferor, the depositor and their respective
affiliates may maintain normal commercial banking relations with the owner
trustee and its affiliates.
THE INDENTURE TRUSTEE
___________ is the indenture trustee under the indenture. The indenture
trustee is a ___________ and its principal offices are located at ___________.
The originator, the transferor, the depositor and their respective affiliates
may maintain normal commercial banking relations with the indenture trustee and
its affiliates.
THE TRUST FUND
The trust fund will include, among other things, the following property of
the issuer:
(1) the Receivables;
(2) all payments due on or received under the Initial Receivables after the
beginning of business on the Initial Cut-off Date and under the
Subsequent Receivables after the Subsequent Cut-off Dates;
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(3) any amounts as from time to time may be held in the collection account,
the Note Distribution Account, [the Yield Supplement Account,] the
Pre-Funding Account and the Capitalized Interest Account;
(4) an assignment of the security interests of the originator in the assets
underlying the Receivables;
(5) an assignment of the right to receive proceeds from claims on certain
physical damage, credit life and disability insurance policies covering
the assets underlying the Receivables or the obligors;
(6) the receivable file related to each Receivable; and
(7) certain other rights under the trust agreements.
The trust fund will also include an assignment of the transferor's rights
against the originator and the depositor's rights against the transferor and the
originator under the Sale and Servicing Agreement upon the occurrence of certain
breaches of representations and warranties.
The Receivables were originated by ___________, the originator, in the
ordinary course of business using its underwriting criteria. All of the
Receivables will be sold and assigned by the originator to __________, the
transferor, assigned by the transferor to the depositor and assigned by the
depositor to the issuer under the Sale and Servicing Agreement. The Subsequent
Receivables will be purchased by the transferor from the originator and will be
assigned from the transferor to the depositor and from the depositor to the
issuer in accordance with the Sale and Servicing Agreement and one or more
subsequent transfer agreements.
Under the Indenture, the issuer will grant a security interest in the
Receivables included in the trust fund in favor of the indenture trustee on
behalf of the noteholders.
THE RECEIVABLES POOL
ELIGIBILITY CRITERIA
The pool of Receivables will consist of the Initial Receivables purchased by
the issuer as of the Initial Cut-off Date and the Subsequent Receivables
purchased by the issuer as of the related Subsequent Cut-off Dates. The Initial
Receivables have been selected, and the Subsequent Receivables will be selected,
from the portfolio of the originator for inclusion in the pool of Receivables by
several criteria, including the following:
o each Receivable has an annual percentage rate of at least ___________%,
o each Receivable as of the related cut-off date, was not more than ____
days past due;
o each Receivable has a scheduled maturity not later than ____ months before
__________, 20__;
S-14
<PAGE>
o each Receivable had an original term to stated maturity of not more than
____ months; and
o each Receivable has had at least _____ scheduled payments received by the
servicer prior to the related cut-off date.
No selection criteria or procedures believed by the originator or the
transferor to be adverse to [the insurer], the noteholders or the
certificateholders were used in selecting the receivables.
SUBSEQUENT RECEIVABLES
During the Pre-Funding Period, the transferor is obligated to purchase from
the originator and to assign to the depositor the Subsequent Receivables. The
Subsequent Receivables will then be assigned to the issuer, on each subsequent
transfer date. The aggregate principal balance of the Subsequent Receivables is
anticipated by the originator to equal approximately $__________. In connection
with each assignment of Subsequent Receivables, the issuer will be required to
pay to the depositor a cash purchase price equal to __% of the outstanding
principal balance of the Subsequent Receivables as of their Subsequent Cut-off
Dates [less required deposits to the reserve account.] The depositor will pay
the cash purchase price to the transferor and the transferor in turn will pay it
to the originator. At this agreed upon purchase price, the Initial Pre-Funded
Amount will be sufficient to purchase the entire $___________ aggregate
principal balance of Subsequent Receivables that the originator anticipates will
be transferred to the transferor. The purchase price will be withdrawn from the
Pre-Funding Account and paid to the depositor for further payment to the
transferor and the originator as described in the second preceding sentence.
Any assignment of Subsequent Receivables is subject to the following
conditions, among others:
o each such Subsequent Receivable and the underlying asset satisfies the
eligibility criteria specified under "--Eligibility Criteria" above as of
the related Subsequent Cut-off Date;
o [the insurer, so long as no Insurer Default has occurred and is not
continuing, will have approved in its absolute and sole discretion the
assignment of the Subsequent Receivables to the issuer;]
o neither the originator nor the transferor will have selected the
Subsequent Receivables in a manner that it believes is adverse to the
interests of [the insurer,] the certificateholders or the noteholders;
o the originator has delivered certain opinions of counsel with respect to
the validity of the conveyance of such Subsequent Receivables;
o the Rating Agencies will have confirmed that the ratings on the notes have
not been withdrawn or reduced as a result of the assignment of the
Subsequent Receivables to the issuer; and
o no event of default under the indenture has occurred and is continuing.
S-15
<PAGE>
In addition, the obligation of the issuer to purchase the Subsequent
Receivables on a subsequent transfer date is subject to the condition that the
Receivables assigned to the issuer, including the Subsequent Receivables to be
conveyed to the issuer on the subsequent transfer date meet the following
criteria:
o each Subsequent Receivable assigned to the issuer will have an annual
percentage rate of _______% or higher;
o each Subsequent Receivable assigned to the issuer will have a remaining
term to stated maturity of not more than __ months; and
o not more than __% of the pool balance will have obligors whose mailing
addresses are in any one state other than [_________] unless an opinion of
counsel acceptable to the Rating Agencies [and the insurer] with respect
to the security interest in the underlying asset is furnished by the
transferor on or prior to the subsequent transfer date.
Except for the criteria described in the preceding paragraphs, there are no
required characteristics for the Subsequent Receivables. Therefore, following
the transfer of Subsequent Receivables to the issuer, the aggregate
characteristics of the entire pool of Receivables included in the trust,
including the composition of the Receivables, the distribution by annual
percentage rate, the geographic distribution and the distribution by remaining
term described in the following tables, will vary from those of the Initial
Receivables.
POOL COMPOSITION
Set forth in the following tables is information concerning the composition,
distribution by geographic location, distribution by remaining Principal
Balance, distribution by APR, distribution by original term to stated maturity,
distribution by remaining term to stated maturity and distribution by loan
purpose of the Initial Receivables to be assigned to the issuer as of the
Initial Cut-off Date.
S-16
<PAGE>
COMPOSITION OF THE INITIAL RECEIVABLES POOL
AS OF THE INITIAL CUT-OFF DATE
Aggregate Principal Balance.............. $
Number of Receivables....................
Average Principal Balance................ $
(Range)..................................
Average Original Amount Financed......... $
(Range)..................................
Weighted Average APR.....................
(Range)..................................
Weighted Average Original Term to Stated
Maturity...............................
(Range)..................................
Weighted Average Remaining Term to Stated
Maturity...............................
(Range)..................................
DISTRIBUTION BY REMAINING PRINCIPAL BALANCE OF THE INITIAL RECEIVABLES AS OF
THE INITIAL CUT-OFF DATE
AGGREGATE AGGREGATE
RANGE OF REMAINING PRINCIPAL NUMBER OF PRINCIPAL PRINCIPAL
BALANCES RECEIVABLES BALANCE BALANCE (1)
- ---------------------------- ----------- --------- -----------
$ %
- -------------------------
(1) Percentages may not add to 100.00% due to rounding.
S-17
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE INITIAL RECEIVABLES POOL AS OF THE
INITIAL CUT-OFF DATE
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
STATE (1) RECEIVABLES BALANCE BALANCE (2)
- --------------------------------- ----------- --------- -------------
Alabama.......................... $ %
Arizona..........................
Arkansas.........................
California.......................
Colorado.........................
Connecticut......................
District of Columbia.............
Florida..........................
Georgia..........................
Idaho............................
Indiana..........................
Iowa.............................
Kansas...........................
Kentucky.........................
Maine............................
Maryland.........................
Massachusetts....................
Michigan.........................
Minnesota........................
Missouri.........................
Montana..........................
Nebraska.........................
New Jersey.......................
New Mexico.......................
New York.........................
North Carolina...................
Ohio.............................
Oklahoma.........................
Oregon...........................
Rhode Island.....................
South Carolina...................
Tennessee........................
Texas............................
Utah.............................
Virginia.........................
Washington.......................
West Virginia....................
Wisconsin........................
Total......................
- -------------------------
(1) Based on mailing addresses of the obligors as of the date of origination.
(2) Percentages may not add to 100.00% due to rounding.
S-18
<PAGE>
DISTRIBUTION BY ANNUAL PERCENTAGE RATE OF THE INITIAL RECEIVABLES AS OF
THE INITIAL CUT-OFF DATE
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF ANNUAL PERCENTAGE RATES RECEIVABLES BALANCE BALANCE (2)
- -------------------------------- ----------- ------- -----------
$ %
- -------------------------
(1) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION BY ORIGINAL TERM TO STATED MATURITY OF THE INITIAL RECEIVABLES AS
OF THE INITIAL CUT-OFF DATE
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF ANNUAL PERCENTAGE RATES RECEIVABLES BALANCE BALANCE (2)
- -------------------------------- ----------- --------- -------------
$ %
- -------------------------
(1) Percentages may not add to 100.00% due to rounding.
S-19
<PAGE>
DISTRIBUTION BY REMAINING TERM TO STATED MATURITY OF THE
INITIAL RECEIVABLES AS OF THE INITIAL CUT-OFF DATE
PERCENTAGE OF
AGGREGATE AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
RANGE OF REMAINING TERMS (1) RECEIVABLES BALANCE BALANCE (2)
- ---------------------------- ----------- --------- -------------
$ %
- -------------------------
(1) Defined as the number of months from the Initial Cut-off Date to stated
maturity.
(2) Percentages may not add to 100.00% due to rounding.
THE TRANSFEROR
_________________, will be organized as a _____________ on or before the
closing date and is wholly-owned by _____________. The transferor will be
organized for limited purposes, which include selling and assigning receivables
sold to it by the originator to the depositor and any activities incidental to
and necessary or convenient for the accomplishment of that purpose. The
principal executive offices of the transferor are located at
_________________________, __________, ________, _______, and its telephone
number is (___) ____-_____.
THE DEPOSITOR
PaineWebber Asset Acceptance Corporation, a Delaware corporation, is a
wholly-owned limited purpose finance subsidiary of PaineWebber Group Inc. The
principal executive offices of the depositor are located at 1285 Avenue of the
Americas, New York, New York 10019.
THE ORIGINATOR AND THE SERVICER
______________, a _____________, was formed in ______. Its executive offices
are located at _____________, and its telephone number is (___) ___-____.
GENERAL
[DESCRIBE ORIGINATOR'S BUSINESS GENERALLY]
S-20
<PAGE>
ORIGINATION PROCESS AND CREDIT EVALUATION PROCEDURES
[DESCRIBE FOR SPECIFIC ORIGINATOR]
CONTRACT PROCESSING, PURCHASE, SERVICING AND ADMINISTRATION
[DESCRIBE FOR SPECIFIC ORIGINATOR]
DELINQUENCY CONTROL AND COLLECTION STRATEGY
[DESCRIBE FOR SPECIFIC OBLIGOR]
DELINQUENCY AND LOSS EXPERIENCE
[DESCRIBE FOR SPECIFIC OBLIGOR]
DELINQUENCY EXPERIENCE
___ MONTHS ENDED YEAR ENDED
___________ DECEMBER 31,
---------------- ------------
Number of Receivables Outstanding
Delinquencies as a Percentage of
Receivables (1)
31-60 Days
61-90 Days
Over 90 Days
- -------------------------
(1) Calculated as the number of delinquencies during the period divided by the
number of receivables outstanding at the end of the period.
S-21
<PAGE>
NET LOSS AND REPOSSESSION EXPERIENCE
(DOLLAR AMOUNTS IN THOUSANDS)
____ MONTHS
ENDED YEAR ENDED
___________ DECEMBER 31,
----------- ------------
Average Number of Receivables Outstanding (1)
Average Principal Amount Outstanding (1)
Number of Repossessions
Number of Repossessions as a Percent of
Average
Number of Receivables Outstanding
(Annualized)
Principal Amount of Repossessions as a
Percent of Average Principal Amount
Outstanding (Annualized)
Net Losses for the Period Ended
Net Losses as a Percent of Average
Principal Amount
Outstanding (Annualized) (2)
- -------------------------
(1) Averages are calculated based on beginning and end-of-period balances.
(2) "Net Losses" are equal to the aggregate balance for all contracts which are
determined to be uncollectible in the period less any recoveries on
contracts in the period or any prior periods excluding expenses associated
with collection, repossession and disposition of the receivables.
WEIGHTED AVERAGE LIFE OF THE NOTES
Information regarding certain maturity and prepayment considerations with
respect to the notes is set forth under "Risk Factors--Yield is Sensitive to
Rate of Principal Prepayments on Receivables" and "The Receivables--Maturity and
Prepayment Considerations" in the prospectus. No principal payments on any class
of notes will be made until all notes with lower class designations have been
paid in full. For example, no payments on the Class A-3 notes will be made until
the Class A-1 notes and Class A-2 notes have been paid in full. See "Description
of the Notes--Payments of Principal" in this prospectus supplement. As the rate
of payment of principal of each class of notes depends primarily on the rate of
payment including prepayments of the principal balance of the Receivables, final
payment of any class of the notes could occur significantly earlier than the
applicable Final Scheduled Payment Date for that class. Reinvestment risk
associated with early payment of the notes will be borne exclusively by the
noteholders. It is expected that final payment of each class of notes will occur
on or prior to the Final Scheduled Payment Date. However, if sufficient funds
are not available to pay the notes of any class in full on or prior to the
applicable Final Scheduled Payment Date, final payment of such class of notes
would occur later than such date.
S-22
<PAGE>
Prepayments on [auto loan] [recreational vehicle loan] [auto lease]
[structured settlement] receivables can be measured relative to a prepayment
standard or model. The model used in this prospectus supplement, the ABS,
represents an assumed rate of prepayment each month relative to the original
number of receivables in a pool of receivables. ABS further assumes that all the
receivables are the same size and amortize at the same rate and that each
receivable in each month of its life will either be paid as scheduled or be
prepaid in full. For example, in a pool of receivables originally containing
10,000 receivables, a 1% ABS rate means that 100 receivables prepay each month.
ABS does not purport to be a historical description of prepayment experience or
a prediction of the anticipated rate of prepayment of any pool of receivables,
including the Receivables.
The following tables have been prepared on the basis of the characteristics
of the Receivables. The tables assume that:
(1) the Receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases;
(2) each scheduled monthly payment on the Receivables is made on the last day
of each month and each month has 30 days;
(3) payments on the notes are made on each payment date;
(4) [the Yield Supplement Amount is deposited into the Collection Account
each period;]
(5) the amount deposited into the Pre-Funding Account on the closing date is
applied in its entirety to the purchase of Receivables transferred to the
issuer during the Pre-Funding Period and to make related deposits to [the
Reserve Account, the Yield Supplement Account and] the Capitalized
Interest Account; and
(6) the transferor exercises its option to purchase the Receivables.
The tables also assume that the Receivables have been aggregated into
hypothetical pools with all of the Receivables 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. The scheduled monthly payment for each of the
pools which is based on its aggregate principal balance, APR, original number of
scheduled payments and remaining number of scheduled payments as of the related
Cut-off Date.
ORIGINAL REMAINING
AGGREGATE TERM TO AMORTIZATION
PRINCIPAL MATURITY (IN TERM
POOL BALANCE APR MONTHS) (IN MONTHS) CUT-OFF DATE
- -------------- --------- ------- ------------ ------------ ------------
1 $ %
2
3
4
S-23
<PAGE>
The actual characteristics and performance of the Receivables will differ
from the assumptions used in constructing the tables. The assumptions used are
hypothetical and have been provided only to give a general sense of how the
principal cash flows might behave under varying prepayment scenarios. For
example, it is very unlikely that the Receivables will prepay at a constant
level of ABS until maturity or that all of the Receivable will prepay at the
same level of ABS. Moreover, the diverse terms of Receivables within each of the
four hypothetical pools could produce slower or faster principal distributions
than indicated in the tables at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
Receivables are as assumed. Any difference between the assumptions and the
actual characteristics and performance of the Receivables, or actual prepayment
experience, will affect the percentages of initial balances outstanding over
time and the weighted average lives of each class of notes.
The following tables have been prepared based on the assumptions described
above, including the assumptions regarding the characteristics and performance
of the Receivables which will differ from the actual characteristics and
performance of the Receivables, and should be read in conjunction with those
assumptions.
PERCENT OF INITIAL CLASS A-1 NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
PAYMENT DATE 0.00% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------ ----- ----- ----- ----- ----- -----
Closing Date..............
December ___________......
January ___________.......
February ___________......
March ___________.........
April ___________.........
May ___________...........
June ___________..........
July ___________..........
August ___________........
September ___________.....
October ___________.......
November ___________......
December ___________......
- -------------------------
(1) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of that note to the related payment date, (b) adding
the results and (c) dividing the sum by the related initial principal amount
of that Note.
(2) This calculation assumes that the transferor does not exercise its option to
purchase the Receivables.
S-24
<PAGE>
PERCENT OF INITIAL CLASS A-2 NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
PAYMENT DATE 0.00% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------ ----- ----- ----- ----- ----- -----
Closing Date..............
December ___________......
January ___________.......
February ___________......
March ___________.........
April ___________.........
May ___________...........
June ___________..........
July ___________..........
August ___________........
September ___________.....
October ___________.......
November ___________......
December ___________......
Weighted Average Life
(years)(1)
Weighted Average Life
(years)(1) (2)
- -------------------------
(1) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the related initial principal amount of
that note.
(2) This calculation assumes that the transferor does not exercise its option to
purchase the Receivables.
PERCENT OF INITIAL CLASS A-3 NOTE PRINCIPAL BALANCE AT VARIOUS ABS PERCENTAGES
PAYMENT DATE 0.00% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------ ----- ----- ----- ----- ----- -----
Closing Date..............
December ___________......
January ___________.......
February ___________......
March ___________.........
April ___________.........
May ___________...........
June ___________..........
July ___________..........
August ___________........
September ___________.....
October ___________.......
S-25
<PAGE>
PAYMENT DATE 0.00% 1.00% 1.30% 1.50% 1.70% 2.00%
- ------------ ----- ----- ----- ----- ----- -----
November ___________......
December ___________......
Weighted Average Life
(years)(1)
Weighted Average Life
(years)(1) (2)
- -------------------------
(1) The weighted average life of a note is determined by (a) multiplying the
amount of each principal payment of the note by the number of years from the
date of the issuance of the note to the related payment date, (b) adding the
results and (c) dividing the sum by the related initial principal amount of
that note.
(2) This calculation assumes that the transferor does not exercise its option to
purchase the Receivables.
DESCRIPTION OF THE NOTES
The notes will be issued pursuant to an indenture to be dated as of
__________, 200_ between the issuer and the indenture trustee. A copy of the
indenture will be filed with the SEC following the issuance of the notes. The
following summary, together with the description in the prospectus under the
heading "Description of the Securities," describes the material terms of the
notes and the indenture. The following summary supplements the description of
the general terms and provisions of the notes of any given series and the
related indenture set forth in the prospectus.
PAYMENTS OF INTEREST
The Class A-1 notes will bear interest at the rate of ___________ % per
annum; the Class A-2 notes will bear interest at the rate of ___________% per
annum and the Class A-3 notes will bear interest at a rate of ___________% per
annum.
Each class of the notes will constitute fixed income securities, as described
under "Summary of Terms--Securities--General Nature of the Securities as
Investments" in the prospectus. Interest on the principal balances of each class
of the notes will accrue at the respective interest rate for that class and will
be payable to the persons in whose names the notes are registered on the related
Record Date monthly on each payment date commencing _________, 200_. See
"Description of the Securities--Book-Entry Registration" in the prospectus.
With respect to any payment date, interest on the outstanding amount of each
class of notes will be an amount equal to one twelfth of the applicable interest
rate, multiplied by the principal amount of that class of notes as of the close
of business on the preceding payment date, or the closing date, for the initial
payment date. Interest distributions payable for any payment date but not
distributed on that payment date will be payable on the next payment date
increased by an amount equal to interest on the amount at the applicable
interest rate to the extent lawful. See "Description of the Trust
Agreements--Payments" in this prospectus supplement.
S-26
<PAGE>
Interest payments to the holders of the notes of any class will have the same
priority. [If an Insurer Default occurs, the amount available for interest
payments could be less than the amount of interest payable on the notes on any
payment date. If this happens, each class of holders of notes will receive their
ratable share, based upon the aggregate amount of interest payable to each class
of notes of the aggregate amount available to be distributed in respect of
interest on the notes.]
PAYMENTS OF PRINCIPAL
Principal payments will be made to the noteholders on each payment date in an
amount generally equal to the Noteholders' Principal Distributable Amount.
Absent an event of default, on each payment date, to the extent of available
funds, the indenture trustee will distribute an amount up to the Noteholders'
Principal Distributable Amount in respect of principal on the notes first to the
Class A-1 notes, then to the Class A-2 notes and then to the Class A-3 notes.
The principal balance of the Class A-1 notes, to the extent not previously
paid, will be due on the Class A-1 Final Scheduled Payment Date. The principal
balance of the Class A-2 notes, to the extent not previously paid, will be due
on the Class A-2 Final Scheduled Payment Date. The principal balance of the
Class A-3 notes, to the extent not previously paid, will be due on the Class A-3
Final Scheduled Payment Date.
The actual date on which the aggregate outstanding principal balance of any
class of notes is paid in full may be earlier than the applicable Final
Scheduled Payment Date based on a variety of factors, including those described
under "Weighted Average Life of the Notes" in this prospectus supplement and
under the headings "Risk Factors--Yield is Sensitive to Rate of Principal
Prepayments on Receivables" and "The Receivables--Maturity and Prepayment
Considerations" in the prospectus.
OPTIONAL REDEMPTION
The transferor may reacquire the Receivables when the Pool Balance as of the
end of the related Collection Period has declined to __% or less of the sum of
the Pool Balance as of the Initial Cut-off Date, plus the aggregate Principal
Balance of the Subsequent Receivables as of their respective Subsequent Cut-off
Dates. This redemption will cause an early retirement of the notes. The
redemption price will be equal to the unpaid principal amount of the notes plus
accrued and unpaid interest on the notes.
MANDATORY REDEMPTION
On the payment date on or immediately following the last day of the
Pre-Funding Period, any funds remaining in the Pre-Funding Account, after giving
effect to the purchase of all Subsequent Receivables, including any purchase on
the last day of the Pre-Funding Period, exclusive of earnings from the
investment of funds in the Pre-Funding Account will be applied to redeem each
class of notes then outstanding. The aggregate principal amount of each class of
notes to be redeemed will be an amount equal to that class's pro rata share,
based on the respective current principal amount of each class of notes of these
remaining funds, net of investment earnings. However, if the remaining funds,
net of investment earnings, are $_____ or
S-27
<PAGE>
less, the amount will be applied exclusively to reduce the outstanding principal
balance of the class of notes then entitled to receive distributions of the
Noteholders' Principal Distributable Amount. It is unlikely that the aggregate
principal amount of Subsequent Receivables will exactly equal the Pre-Funded
Amount, and therefore it is likely that at least a nominal amount of principal
will be prepaid to the noteholders at the end of the Pre-Funding Period. See
"Risk Factors--Risk of Potential Prepayments on Notes Due to Failure to Obtain
Release of Existing Lien" in this prospectus supplement.
THE INDENTURE
Events of Default, Rights Upon Event of Default. [Unless an Insurer Default
is continuing, "events of default is continuing" under the indenture will
consist of insurance agreement indenture cross defaults, and will constitute an
event of default under the indenture only if the insurer has delivered to the
indenture trustee, and not rescinded, a written notice specifying that the
insurance agreement indenture cross default constitutes an event of default
under the indenture. Insurance agreement indenture cross defaults include, among
others:
(1) any failure of the issuer to make any payment when due on the notes;
(2) a demand for payment being made under the Policy;
(3) certain events of bankruptcy, insolvency, receivership or liquidation of
the issuer;
(4) the issuer is treated as an association, or publicly traded partnership,
taxable as a corporation for federal or state income tax purposes;
(5) the sum of the Available Funds with respect to any distribution date plus
the amount, if any, available to be withdrawn from the reserve account is
less than the sum of the amounts described in clauses 1 through 5 under
"Description of the Trust Agreements--Payments" in this prospectus
supplement;
(6) the notes not being treated as indebtedness for federal or applicable
state income tax purposes and the characterization having a material
adverse effect on the trust, the noteholders or the insurer;
(7) any failure by the issuer to observe or perform in any material respect
any other covenants or agreements in the indenture, or any representation
or warranty of the issuer made in the indenture or in any certificate or
other writing delivered pursuant to the indenture or in connection with
the indenture proving to have been incorrect in any material respect when
made, and the failure continuing or not being cured, or the circumstance
or condition in respect of which the misrepresentation or warranty was
incorrect not having been eliminated or otherwise cured, for 30 days
after the giving of written notice of the failure or incorrect
representation or warranty to the issuer and the indenture trustee by the
insurer; and
(8) [the violation of certain portfolio performance tests specified in the
insurance agreement.]
S-28
<PAGE>
Upon the occurrence of an event of default, so long as an Insurer Default has
not occurred and is not continuing, the insurer will have the right, but not the
obligation, to cause the indenture trustee to liquidate the assets of the trust
fund in whole or in part, on any date or dates following the acceleration of the
notes due to such event of default as the Insurer, in its sole discretion, may
elect, and to distribute the proceeds of such liquidation in accordance with the
terms of the indenture. The insurer may not, however, cause the indenture
trustee to liquidate the trust fund in whole or in part if the proceeds of the
liquidation would not be sufficient to pay all outstanding principal of and
accrued interest on the notes, unless the event of default arose from a claim
being made on the Policy or from certain events of bankruptcy, insolvency,
receivership or liquidation of the assets of the trust. Following the occurrence
of any event of default, the indenture trustee will continue to submit claims
under the Policy for any shortfalls in the Scheduled Payments on the notes.
Following any event of default under the indenture, the insurer may elect to pay
all or any portion of the outstanding amount of the notes, plus any accrued
interest. See "The Policy" in this prospectus supplement.]
[If an Insurer Default has occurred and is continuing,] an "event of default"
means any one of the following events, whatever the reason for such event of
default and whether it is voluntary or involuntary or is 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:
(1) default in the payment of any interest on the notes when it becomes due
and payable, and the default continues for a period of five days;
(2) default in the payment of the principal of or any installment of the
principal of the notes when it becomes due and payable;
(3) default in the observance or performance of any covenant or agreement of
the issuer made in the indenture, or any representation or warranty of
the issuer made in the indenture or in any certificate or other writing
delivered under the indenture or in connection with the indenture proves
to be incorrect in any material respect as of the time when the
representation or warranty was made, and the default continues or is not
cured, or the circumstance or condition in respect of which the
misrepresentation or warranty was incorrect is not eliminated or
otherwise cured, for a period of ____ days, or for a longer period, not
in excess of ____ days, as may be reasonably necessary to remedy the
default; provided that the default is capable of remedy within ____ days
or less and the servicer on behalf of the indenture trustee delivers an
officer's certificate to the indenture trustee to the effect that the
issuer has commenced, or will promptly commence and diligently pursue,
all reasonable efforts to remedy the default, after there is given, by
registered or certified mail, to the issuer by the indenture trustee or
to the issuer and the indenture trustee by the holders of at least
[____]% of the outstanding principal balance of the notes, a written
notice specifying the default or incorrect representation or warranty and
requiring it to be remedied and stating that the notice is a "notice of
default" under the indenture;
(4) certain events of bankruptcy, insolvency, receivership or liquidation
with respect to the originator, the transferor or the issuer.
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If an event of default occurs and is continuing, [and an Insurer Default has
occurred and is continuing,] the indenture trustee may declare the principal of
the notes to be immediately due and payable. This declaration may be rescinded
by the Note Majority if:
o the issuer has paid to the indenture trustee a sum sufficient to pay all
amounts then due; and
o all events of default, other than nonpayment of the principal of the notes
due solely as a result of such acceleration, have been cured or waived.
If the notes have been declared due and payable following an event of
default, the indenture trustee may with the consent of the Controlling Party and
must, at the direction of the Controlling Party, institute proceedings to
collect amounts due or foreclose on the trust fund, exercise remedies as a
secured party, sell the trust fund or elect to have the issuer maintain
possession of the trust fund and continue to apply collections on the trust fund
as if there had been no declaration of acceleration. The indenture trustee,
however, will be prohibited from selling the trust fund following an event of
default if the proceeds of the sale are not sufficient to pay all outstanding
principal of and accrued interest on the notes, unless:
(1) [no Insurer Default has occurred and is continuing and] the related event
of default arose from [a claim being made on the Policy or] from certain
events of bankruptcy, insolvency, receivership or liquidation with
respect to the issuer or; and
(2) [an Insurer Default has occurred and is continuing and] (a) the holders
of all the outstanding notes consent to the sale; or (b) the indenture
trustee determines that the trust fund 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 provides written notice to the Rating Agencies
and obtains the consent of the holders of notes representing [66-2/3]% of
the aggregate principal balance of the outstanding notes.
Subject to the provisions of the indenture relating to the duties of the
indenture trustee, if an event of default occurs and is continuing with respect
to the notes, the indenture trustee will be under no obligation to exercise any
of the rights or powers under the indenture at the request or direction of any
of the Controlling Party or holders of such notes, if the indenture trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with the
request. Subject to the provisions for indemnification and certain limitations
contained in the indenture, the Controlling Party will have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the indenture trustee with respect to the notes or exercising any trust or
power conferred on the indenture trustee and the Controlling Party may, in
certain cases, waive any default with respect to the indenture, except a default
in the payment of principal or interest or a default in respect of a covenant or
provision of the indenture that cannot be modified without the waiver or consent
of all of the holders of the outstanding notes.
[Neither the insurer,] nor any holder of a note will have the right to
institute any proceeding with respect to the indenture unless:
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<PAGE>
(1) [the insurer or] the holder previously gave to the indenture trustee
written notice of a continuing event of default;
(2) [the insurer or] the holders of not less than __% in principal amount of
the outstanding notes made written request of the indenture trustee to
institute the proceeding in its own name as indenture trustee;
(3) [the insurer or] the holder or holders offered the indenture trustee
reasonable indemnity;
(4) the indenture trustee failed to institute the proceeding for __ days; and
(5) a Note Majority did not give any direction inconsistent with the written
request to the indenture trustee during the __-day period.
If an event of default occurs and is continuing and if it is known to the
indenture trustee, the indenture trustee will mail to each noteholder [and the
insurer, unless an Insurer Default has occurred and is continuing] notice of the
event of default within __ days after it occurs. Except in the case of a failure
to pay principal of or interest on any note, the indenture trustee may withhold
the notice of an event of default and so long as it determines in good faith
that withholding the notice is in the interest of the noteholders.
In addition, the indenture trustee and the noteholders, by accepting the
notes, will covenant that they will not at any time institute against the
depositor, the transferor, the servicer or the issuer any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
No recourse may be taken, directly or indirectly, with respect to the
obligations of the issuer or the indenture trustee on the notes or under the
indenture or any certificate or other writing delivered in connection with the
indenture, against:
(A) the depositor, the issuer or the indenture trustee in its individual
capacity; or
(B) any partner, owner, beneficiary, agent, officer, director, employee or
agent of the depositor, the issuer or the indenture trustee or of any
successor or assignee of the depositor, the issuer or the indenture
trustee in its individual capacity, except as that person may have
expressly agreed.
Amendment. The indenture may be amended by the issuer, with the consent of
the indenture trustee [and, if the insurer is the Controlling Party, the
insurer,] but without the consent of the noteholders to cure any ambiguity, or
to correct or supplement any provision in the indenture which may be
inconsistent with any other provision in the indenture. The issuer and the
indenture trustee may also amend the indenture:
(1) [with the consent of the insurer, if the insurer is the Controlling
Party; or]
(2) [if the insurer is no longer the Controlling Party,] with the consent of
a Note Majority to add, change or eliminate any other provisions with
respect to matters or questions arising under the indenture or affecting
the rights of the noteholders; provided that the action will not:
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o increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the notes or distributions that are
required to be made for the benefit of the noteholders; or
o reduce the percentage of the noteholders required to consent to the
amendment, without, in either case, the consent of the holders of all
notes outstanding.
The indenture requires the issuer to deliver to the indenture trustee [and
the insurer] upon the execution and delivery of the indenture and any amendment
to the indenture an opinion of counsel, satisfactory to the insurer and the
indenture trustee that all financing statements and continuation statements have
been filed that are necessary to fully protect and preserve the indenture
trustee's interest in the trust fund.
Certain Covenants. The indenture will provide that the issuer may not
consolidate with or merge into any other entity, unless:
o the entity formed by or surviving the consolidation or merger is organized
under the laws of the United States or any state;
o such entity expressly assumes the issuer's obligation to make due and
punctual payments upon the notes and the performance or observance of
every agreement and covenant of the issuer under the indenture;
o no event of default will have occurred and be continuing immediately after
the transaction;
o the issuer has been advised that the rating of the notes then in effect
would not be reduced or withdrawn by the Rating Agencies as a result of
the transaction;
o the issuer has received an opinion of counsel to the effect that the
transaction would have no material adverse tax consequence to the issuer,
[the insurer,] any noteholder or any certificateholder;
o any action necessary to maintain the lien and security interest under the
indenture has been taken;
o the issuer has delivered an officer's certificate and an opinion of
counsel each stating that the transaction and the supplemental indenture
comply with the provisions of the indenture of the issuer and that all
conditions precedent in the indenture to the transaction have been
complied with; and
o [so long as no Insurer Default has occurred and is not continuing, the
issuer has given the insurer written notice of the transaction at least 20
business days prior to the consolidation or merger and] the issuer or the
person, if other than the issuer, formed by or surviving the consolidation
or merger has a net worth, immediately prior to giving effect to the
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.
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<PAGE>
The indenture will also provide that the issuer may not convey or transfer
all or substantially all of its properties or assets to any other entity, unless
the entity that acquires the assets of the issuer:
o agrees that all right, title and interest conveyed or transferred shall be
subject and subordinate to the rights of noteholders,
o unless otherwise agreed, expressly agrees to indemnify, defend and hold
harmless the issuer against and from any loss, liability or expense
arising under or related to the indenture and the notes,
o expressly agrees to make all filings with the SEC, and any other
appropriate entity, required by the Securities Exchange Act of 1934 in
connection with the notes, and
o is organized under the laws of the United States or any state.
The issuer will not, among other things:
o except as expressly permitted by the Trust Agreements or certain related
documents with respect to the issuer sell, transfer, exchange or otherwise
dispose of any of the assets of the issuer;
o claim any credit on or make any deduction from the principal and interest
payable in respect of the notes, other than amounts withheld under the
Internal Revenue Code of 1986, or assert any claim against any present or
former holder of the notes because of the payment of taxes levied or
assessed upon any part of the trust fund;
o permit the validity or effectiveness of the indenture to be impaired or
permit the lien in favor of the indenture trustee created by the indenture
to be amended, hypothecated, subordinated, terminated or discharged or
permit any person to be released from any covenants or obligations with
respect to the notes except as may be expressly permitted by the
indenture;
o permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance, other than certain liens that arise by operation of
law, to be created on or extend to or otherwise arise upon or burden the
trust fund or any part of the trust fund, or any interest in the trust
fund or the proceeds of the trust fund;
o permit the lien of the related indenture not to constitute a valid first
priority, other than certain liens that arise by operation of law,
security interest in the assets of the trust fund;
o amend, modify or fail to comply with the provisions of the trust fund or
related documents without the prior written consent of the Controlling
Party; or
S-33
<PAGE>
o assume, guarantee or otherwise become liable, directly or indirectly, for
any indebtedness other than indebtedness incurred pursuant to the notes,
obligations under [the insurance agreement and] the indenture or otherwise
in accordance with the trust fund or related documents.
Annual Compliance Statement. The issuer will be required to file annually
with the indenture trustee [and the insurer] a written statement as to the
fulfillment of its obligations under the indenture.
Indenture Trustee's Annual Report. The indenture trustee will be required to
mail each year to all noteholders a brief report relating to, among other
things:
o its eligibility and qualification to continue as indenture trustee under
the indenture;
o any amounts advanced by it under the indenture;
o the amount, interest rate and maturity date of certain indebtedness owing
by the trust to the indenture trustee in its individual capacity;
o the property and funds physically held by the indenture trustee as such;
and
o any action taken by it that materially affects the notes and that has not
been previously reported.
Satisfaction and Discharge of Indenture. The indenture trustee will be
discharged with respect to the collateral securing the notes upon the delivery
to the indenture trustee for cancellation of all notes or, with certain
limitations, upon deposit with the indenture trustee of funds sufficient for the
payment in full of all of the notes.
Trust Indenture Act. The indenture will comply with applicable provisions of
the Trust Indenture Act of 1939, as amended.
THE INDENTURE TRUSTEE
The indenture trustee may resign at any time, in which event the issuer will
be obligated to appoint a successor trustee eligible under the indenture [which,
if there is no Insurer Default, will be acceptable to the insurer]. The issuer
will remove the indenture trustee, if the indenture trustee ceases to be
eligible to continue as indenture trustee under the indenture or if the
indenture trustee becomes insolvent. In these circumstances, the issuer will be
obligated to appoint a successor trustee eligible under the indenture that, if
no insurer default exists, is acceptable to the insurer. Any resignation or
removal of the indenture trustee and appointment of a successor trustee will be
subject to any conditions or approvals, including the approval of the insurer
and will not become effective until acceptance of the appointment by a successor
trustee.
S-34
<PAGE>
DESCRIPTION OF THE CERTIFICATES
The certificates are not being offered by this prospectus supplement. The
certificates will be issued under the Owner Trust Agreement. A copy of the Owner
Trust Agreement will be filed with the SEC following the issuance of the notes.
The certificates will initially be sold to the transferor on the closing date
for cash in the amount of $____________________.
On each payment date, all distributions on the certificates will be
subordinated in priority of payment in full of the Noteholders' Principal
Distributable Amount and Noteholders' Interest Distributable Amount for that
payment date. The certificateholders' will not receive any distribution on any
payment date unless the Noteholders' Distributable Amount has been deposited in
the Note Distribution Account. See "Description of the Trust
Agreements--Payments" and "--Accounts" in this prospectus supplement.
[THE INSURER]
[The following information has been obtained from _______________, the
insurer, and has not been verified by the issuer, the depositor, the transferor,
the originator or the underwriters. No representation or warranty is made by the
issuer, the depositor, the transferor, the originator or the underwriters.
GENERAL
________________ is a _______________ incorporated in ____ under the laws of
the State of ___________. The insurer is licensed to engage in the financial
guaranty insurance business in _____ states, the District of Columbia and Puerto
Rico.
The insurer and its subsidiaries are engaged in the business of writing
financial guaranty insurance, principally in respect of securities offered in
domestic and foreign markets. In general, financial guaranty insurance consists
of the issuance of a guaranty of scheduled payments of an issuer's
securities--thereby enhancing the credit rating of those securities--in
consideration for the payment of a premium to the insurer. The insurer and its
subsidiaries principally insure asset-backed, collateralized and municipal
securities. Asset-backed securities are generally supported by residential
mortgage loans, consumer or trade receivables, securities or other assets having
an ascertainable cash flow or market value. Collateralized securities include
public utility first mortgage bonds and sale/leaseback obligation bonds.
Municipal securities consist largely of general obligation bonds, special
revenue bonds and other special obligations of state and local governments. The
insurer insures both newly issued securities sold in the primary market and
outstanding securities sold in the secondary market that satisfy the insurer's
underwriting criteria.
[ADDITIONAL INSURER CORPORATE INFORMATION]
The principal executive offices of the insurer are located at
_________________________________, and its telephone number at that location is
____________________.
S-35
<PAGE>
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by the insurer or any of its
domestic or international operating insurance company subsidiaries are generally
reinsured among such companies on an agreed-upon percentage substantially
proportional to their respective capital, surplus and reserves, subject to
applicable statutory risk limitations. In addition, the insurer reinsures a
portion of its liabilities under certain of its financial guaranty insurance
policies with other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. This reinsurance is utilized by the insurer as
a risk management device and to comply with certain statutory and rating agency
requirements. This reinsurance does not alter or limit the insurer's obligations
under any financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
The insurer's insurance financial strength is rated "______" by ______. The
insurer's insurer financial strength is rated "______" by _______. The insurer's
claims-paying ability is rated "______" by _____________ and ________________.
Such ratings reflect only the views of the respective rating agencies, are not
recommendations to buy, sell or hold securities and are subject to revision or
withdrawal at any time by such rating agencies.
CAPITALIZATION
The following table sets forth the capitalization of the insurer and its
wholly owned subsidiaries on the basis of generally accepted accounting
principles as of _____________, 200_:
___________, 200_
-----------------
(UNAUDITED)
(IN THOUSANDS)
Deferred Premium Revenue (net of
prepaid reinsurance premiums)......... $
Surplus Notes...........................
Minority Interest.......................
Shareholder's Equity:
Common Stock..........................
Additional Paid-in Capital............
Accumulated Other Comprehensive.........
Income (net of deferred income taxes)...
Accumulated Earnings....................
Total Shareholder's Equity..............
Total Deferred Premium Revenue,
Surplus Notes, Minority Interest
and Shareholder's Equity..............
S-36
<PAGE>
For further information concerning the insurer, see the Consolidated
Financial Statements of ________________ and Subsidiaries, and the accompanying
notes, incorporated by reference in this prospectus supplement. The insurer's
financial statements are included as Exhibits to the Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q filed with the SEC by the insurer and may be
reviewed at the EDGAR Website maintained by the SEC and at the insurer's
website, ____________.com. Copies of the statutory quarterly and annual
statements filed with the State of __________________by ________________ are
available upon request to the State of __________________.
INSURANCE REGULATION
The insurer is licensed and subject to regulation as a financial guaranty
insurance corporation under the laws of the State of _______, its state of
domicile. In addition, the insurer and its insurance subsidiaries are subject to
regulation by insurance laws of the various other jurisdictions in which they
are licensed to do business. [As a financial guaranty insurance corporation
licensed to do business in the State of _______, the insurer is subject to
Article 69 of the New York Insurance Law which, among other things, limits the
business of each such insurer to financial guaranty insurance and related lines,
requires that each such insurer maintain a minimum surplus to policyholders,
establishes contingency, loss and unearned premium reserve requirements for each
such insurer, and limits the size of individual transactions and the volume of
transactions that may be underwritten by each such insurer. Other provisions of
the New York Insurance Law, applicable to non-life insurance companies such as
the insurer, regulate, among other things, permitted investments, payment of
dividends, transactions with affiliates, mergers, consolidations, acquisitions
or sales of assets and incurrence of liability for borrowings.]
[THE POLICY]
The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy.
Simultaneously with the issuance of the notes, the insurer will deliver the
Policy to the indenture trustee for the benefit of each noteholder. Under the
Policy, the insurer will unconditionally and irrevocably guarantee to the
indenture trustee for the benefit of each noteholder the full and complete
payment of:
o Scheduled Payments on the notes; and
o the amount of any Scheduled Payment which subsequently is avoided in whole
or in part as a preference payment under applicable law.
In the event the indenture trustee fails to make a claim under the Policy,
noteholders do not have the right to make a claim directly under the Policy, but
may sue to compel the indenture trustee to do so.
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<PAGE>
Scheduled Payments do not include payments which become due on an accelerated
basis as a result of:
o a default by the issuer,
o an election by the issuer to pay principal on an accelerated basis,
o the occurrence of an event of default under the indenture or
o any other cause,
unless the insurer elects, in its sole discretion, to pay in whole or in part
the principal due upon acceleration, together with any accrued interest to the
date of acceleration.
In the event the insurer does not so elect, the Policy will continue to
guarantee Scheduled Payments due on the notes in accordance with their original
terms. Scheduled Payments will not include, unless the insurer elects, in its
sole discretion, to pay the amount in whole or in part:
o any portion of the Noteholders' Interest Distributable Amount due to
noteholders because the appropriate notice and certificate for payment in
proper form was not timely received by the insurer, or
o any portion of the Noteholders' Interest Distributable Amount due to
noteholders representing interest on any Noteholders' Interest Carryover
Shortfall accrued from and including the date of payment of the amount of
the Noteholders' Interest Carryover Shortfall under the Policy.
Scheduled Payments will not include any amounts due in respect of the notes
attributable to any increase in interest rate, penalty or other sum payable by
the issuer by reason of any default or event of default in respect of the notes
or by reason of any deterioration of the creditworthiness of the issuer no
coverage will be provided under the Policy in respect of any taxes, withholding
or other charge imposed with respect to any noteholder by any governmental
authority due in connection with the payment of any Scheduled Payment to a
noteholder.
Payment of claims on the Policy made in respect of Scheduled Payments will be
made by the insurer following receipt by the insurer of the appropriate notice
for payment on the later to occur of:
o 12:00 noon, New York City time, on the [___ business day following
receipt] of the notice for payment, and
o 12:00 noon, New York City time, on the date on which the payment was due
on the notes.
If payment of any amount avoided as a preference under applicable bankruptcy,
insolvency, receivership or similar law is required to be made under the Policy,
the insurer will cause the payment to be made on the later of:
o the date when due to be paid pursuant to the order of the court or other
governmental body; and
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<PAGE>
o the first to occur of:
o the fourth business day following receipt by the insurer from the
indenture trustee of:
(A) a certified copy of the order of the court or other governmental
body that exercised jurisdiction to the effect that noteholders are
required to return Scheduled Payments made with respect to the
notes during the term of the Policy because the payments were
avoidable as preference payments under applicable bankruptcy law,
(B) a certificate of the indenture trustee that the court order has
been entered and is not subject to any stay, and
(C) an assignment executed and delivered by the noteholder, in a form
as is reasonably required by the insurer and provided to the
noteholder by the insurer, irrevocably assigning to the insurer all
rights and claims of the noteholder relating to or arising under
the notes against the issuer or otherwise with respect to the
preference payment;
o [the date of receipt by the insurer from the indenture trustee of the
items referred to in clauses (A), (B) and (C) above if, at least ___
business days prior to the date of receipt, the insurer has received
written notice from the indenture trustee that the items were to be
delivered on that date and that date was specified in the notice].
the payment will be disbursed to the receiver, conservator, debtor-in-possession
or trustee in bankruptcy named in the court order and not to the indenture
trustee or any noteholder directly. This will be the case unless a noteholder
has previously paid the amount to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order, in which case
the payment will be disbursed to the indenture trustee for distribution to the
noteholder upon proof of the payment reasonably satisfactory to the insurer. In
connection with this, the insurer will have the rights provided under the
indenture including, without limitation, the right, in the absence of an Insurer
Default, to direct all matters relating to any preference claim and subrogation
to the rights of the indenture trustee and each noteholder in the conduct of any
proceeding with respect to a preference claim.
OTHER PROVISIONS OF THE POLICY
The terms "receipt" and "received" with respect to the Policy will mean
actual delivery to the Insurer and to its fiscal agent, if any, prior to 12:00
noon, New York City time, on a business day. Delivery either on a day that is
not a business day or after 12:00 noon, New York City time, will be deemed to be
received on the next succeeding business day. If any notice or certificate given
under a Policy by the indenture trustee is not in proper form or is not properly
completed, executed or delivered, it will be deemed not to have been received,
and the insurer or its fiscal
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<PAGE>
agent will promptly so advise the indenture trustee and the indenture trustee
may submit an amended notice.
Under the Policy, "business day" means any day other than a Saturday, Sunday,
legal holiday or other day on which commercial banking institutions in
[___________________], [__________________], [________________] or
[____________________] are authorized or obligated by law, executive order or
governmental decree to be closed.
The Insurer's obligations under the Policy in respect of Scheduled Payments
will be discharged to the extent funds are transferred to the indenture trustee
as provided in the Policy whether or not the funds are properly applied by the
indenture trustee.
The insurer will be subrogated to the rights of each noteholder to receive
payments of principal and interest to the extent of any payment by the insurer
under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the insurer ranking not less than pari passu with other unsecured
and unsubordinated indebtedness of the insurer for borrowed money. Claims
against the insurer under the Policy and each other financial guaranty insurance
policy issued by the insurer constitute pari passu claims against the general
assets of the insurer. The terms of the Policy cannot be modified or altered by
any other agreement or instrument, or by the merger, consolidation or
dissolution of the issuer. The Policy may not be canceled or revoked prior to
distribution in full of all Scheduled Payments. The Policy is not covered by the
Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. The Policy is governed by the laws of New York.
It is a condition to issuance that the notes be rated ______ by ______ and
______ by _______'s. The ratings by the Rating Agencies of the notes will be
based primarily on the issuance of the Policy. A rating is not a recommendation
to purchase, hold or sell notes. In the event that the rating initially assigned
to any of the notes is subsequently lowered or withdrawn for any reason,
including by reason of a downgrading of the claims-paying ability of the
insurer, no person or entity will be obligated to provide any additional credit
enhancement with respect to the notes. Any reduction or withdrawal of the rating
may have an adverse effect on the liquidity and market price of the notes.]
DESCRIPTION OF THE TRUST AGREEMENTS
The following summary, together with the description in the prospectus under
the heading "Description of the Trust Agreements," describes certain terms of
the Trust Agreements, which include the Sale and Servicing Agreement, the Owner
Trust Agreement, the indenture and any subsequent transfer agreement. Copies of
the Trust Agreements will be filed with the SEC following the issuance of the
notes. The summary describes the material terms of the Trust Agreements, but it
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all the provisions of the Trust Agreements.
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<PAGE>
ASSIGNMENT OF RECEIVABLES
Under the Sale and Servicing Agreement, the originator will sell and
contribute to the transferor, on or prior to the closing date, or, with respect
to the Subsequent Receivables, the related subsequent transfer date, without
recourse, all of its right, title and interest in and to the related Receivables
including, without limitation:
o the related Receivables, and all moneys due or received on the Receivables
after the Cut-off Date;
o an assignment of the security interests in the assets underlying the
Receivables granted by obligors under the Receivables and any other
interest of the originator in those assets;
o any proceeds with respect to the Receivables from claims on any theft,
physical damage, credit life or disability insurance policies covering the
assets underlying the Receivables or obligors and any proceeds from the
liquidation of the Receivables;
o all rights under any agreements providing for the repair of the related
[automobile] [recreational vehicle], including any extended warranty;
o the related files with respect to the Receivables; and
o the proceeds of any and all of the foregoing.
Also under the Sale and Servicing Agreement, the transferor will assign the
Receivables and other assets to the depositor, which will in turn assign the
Receivables and other assets to the issuer. Finally, pursuant to the indenture,
the issuer will pledge the Receivables and other assets to the indenture trustee
to secure the obligations of the issuer under the notes. The assignments of
Receivables under the Sale and Servicing Agreement may be treated as pledges
under the bankruptcy code and under other applicable insolvency law. See "Risk
Factors--Competing Claims to Ownership of Receivables May Result in Reduced
Payments on Your Securities" and "--Insolvency and Bankruptcy Proceedings Could
Adversely Affect Payments on the Securities" in the prospectus and "Risk
Factors--Risk of Recharacterization Of True Sale As A Pledge" in this prospectus
supplement.
In connection with the transfer and assignment of the Receivables on the
closing date and each subsequent transfer date, the originator will be required
to deliver or cause to be delivered to __________________________, as custodian,
the following with respect to each Receivable:
(a) [the note and security agreement or other evidence of the obligor's
indebtedness to repay the Receivable;]
(b) [a record of the information supplied by the obligor in the original
credit application;]
(c) [the original certificate of title or any documents that the servicer
keeps on file, in accordance with its customary procedures, evidencing
the security interest of
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_________ in the _______________, however, original certificates of title
generally are not delivered to the originator for __ days, but promptly
upon delivery they will be delivered to the custodian];
(d) [the lease contract];
(e) [the applicable structured settlement contract]; and
(f) any and all other documents that the servicer keeps on file, in
accordance with its customary procedures, relating to a Receivable, an
obligor or a _______________.
In the Sale and Servicing Agreement, the originator will represent and
warrant to the transferor and the transferor will represent and warrant to the
depositor and the issuer, among other things, that:
o the information provided in the related schedule of Receivables and the
related computer tape with respect to the Receivables is correct in all
material respects;
o neither the transferor nor the originator has received notice of any liens
or claims, including liens for work, labor, materials or unpaid state or
federal taxes, relating to the assets underlying the Receivable, that are
or may be prior to or equal to the lien granted by the Receivable;
o as of the closing date or the applicable subsequent transfer date, if any,
each of the Receivables is owned by the transferor free and clear of any
lien [and is secured by a first perfected security interest in favor of
the transferor in the asset underlying the Receivable];
o each related Receivable, at the time it was originated, complied and, as
of the closing date or the applicable subsequent transfer date, if any,
complies in all material respects with applicable federal and state laws,
including, without limitation, consumer credit, truth in lending, equal
credit opportunity and disclosure laws; and
o each of the Receivables as of the related Cut-off Date satisfied the
eligibility criteria for inclusion in the pool of Receivables that are
described under "The Receivables Pool--Eligibility Criteria" in this
prospectus supplement.
OBLIGATION TO REPURCHASE RECEIVABLES
Under the Sale and Servicing Agreement, the originator will be obligated to
repurchase a Receivable from the transferor if the interests of the issuer, [the
insurer] or the noteholders are materially and adversely affected by any breach
of any representation or warranty made by the originator with respect to the
Receivable, if the breach has not been cured following discovery by or notice to
the originator of the breach. The transferor will be obligated to repurchase a
Receivable from the issuer if the interests of the issuer, [the insurer] or the
noteholders are materially and adversely affected by any breach of any
representation or warranty made by the transferor with respect to the
Receivable, if the breach has not been cured following discovery by or notice to
the originator of the breach. Each Receivable will be purchased from the trust
by the
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originator or the transferor, as the case may be, at a price equal to the
Purchase Amount. The purchase obligations will constitute the sole remedy
available to the noteholders or the indenture trustee for any such uncured
breaches.
Pursuant to the Sale and Servicing Agreement, the servicer will be obligated
to purchase a Receivable from the issuer if the interests of the noteholders,
[the insurer] or the issuer in the Receivable are materially adversely affected
by a breach of specified servicing obligations under the Sale and Servicing
Agreement, if the breach has not been cured following the discovery or notice to
the servicer of the breach.
ACCOUNTS
Collection Account. The issuer will establish and maintain the Collection
Account with the indenture trustee in the name of the indenture trustee on
behalf of the noteholders, the certificateholders [and the insurer]. The issuer
will deposit into the Collection Account payments or other amounts received with
respect to the Receivables. The Collection Account will be maintained with the
indenture trustee so long as the indenture trustee's deposits have a rating
acceptable to [the insurer and] the Rating Agencies. If the deposits of the
indenture trustee or its corporate parent no longer have an acceptable rating,
the servicer will, with the indenture trustee's assistance as necessary, cause
the accounts to be moved within 30 days to a bank whose deposits have an
acceptable rating.
Distribution Accounts. The servicer will also establish and maintain the Note
Distribution Account, in the name of the indenture trustee, on behalf of the
noteholders [and the insurer]. Amounts released from the Collection Account for
distribution to noteholders will be deposited into the Note Distribution Account
and all distributions to noteholders will be made from the Note Distribution
Account. A separate account, the Certificate Distribution Account, will be
maintained for the purpose of making distributions to certificateholders.
[Reserve Account. Pursuant to a reserve account agreement, dated as of the
closing date, among the transferor, [the insurer,] the indenture trustee and
____________________, as indenture collateral agent, the transferor will cause
the indenture collateral agent to establish the reserve account in the name of
the indenture collateral agent [for the benefit of the insurer]. On the closing
date, the transferor will make an initial deposit of cash into the reserve
account. On each payment date, additional amounts will be deposited into the
reserve account from collections on the Receivables to the extent funds are
available for the deposit as described under "Description of the Trust
Agreements--Payments" in this prospectus supplement and from amounts, if any,
released from the Yield Supplement Account as described under "--Yield
Supplement Account" in this prospectus supplement. Funds will be withdrawn from
the reserve account on or before each payment date to pay any Deficiency Claim
Amount for the payment date, including amounts needed to pay the Noteholders'
Interest Distributable Amount and the Noteholders' Principal Distributable
Amount for that payment date.
The amount required under the reserve account agreement to be on deposit in
the reserve account at any time may increase or decrease without noteholder
consent. There can be no assurance that the amounts on deposit in the reserve
account will reach the amount required to be on deposit since the existence of
the reserve account and any other term or provision in the reserve account
agreement regarding the reserve account may be amended by the insurer without
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noteholder consent. Consequently, the noteholders should not rely on amounts on
deposit in or to be deposited to the reserve account in evaluating the
likelihood of receiving repayment of the notes.
Amounts, if any, on deposit in the reserve account on any payment date in
excess of the amount required to be on deposit in the reserve account for each
payment date will be paid to the certificateholders.
In addition, the issuer, the depositor, the insurer and the indenture
collateral agent may amend the reserve account agreement, and any provisions in
the insurance agreement relating to the reserve account, in any respect. The
amendment may include, without limitation, reducing or eliminating the amount
required to be on deposit in the reserve account and/or reducing or eliminating
the funding requirements of the reserve account or permitting those funds to be
used for the benefit of persons other than noteholders, without the consent of,
or notice to, the indenture trustee, the owner trustee or the noteholders. The
indenture collateral agent will not withhold or delay its consent with respect
to any amendment that does not adversely affect the indenture collateral agent
in its individual capacity. The insurer will be obligated on each payment date
to fund for the benefit of the noteholders the full amount of each Scheduled
Payment otherwise required to be made on such payment date in accordance with
the terms of the Policy.]
[Yield Supplement Account. The transferor will establish the Yield Supplement
Account for the benefit of the noteholders and the insurer, which will initially
be a segregated trust account in the corporate trust department of the indenture
trustee. On the closing date, the transferor will make an initial deposit to the
Yield Supplement Account in the amount specified in the Sale and Servicing
Agreement.
No later than 12:00 noon New York City time on each payment date, the
indenture trustee will cause an amount equal to the Yield Supplement Amount for
the payment date, determined as described below, to be transferred from the
Yield Supplement Account to the Collection Account. The "Yield Supplement
Amount" with respect to any Payment Date will determined by aggregating for all
of the Receivables, one twelfth of the difference, if positive, between:
(x) the product of:
(1) the Principal Balance of such Receivable multiplied by
(2) a rate equal to the Weighted Average Rate plus approximately ___%,
which percentage represents the Servicing Fee Rate plus approximately
___%; and
(y) the product of:
(1) the Principal Balance of the Receivable multiplied by
(2) the APR on the Receivable.
For purposes of calculating the Yield Supplement Amount on each payment date,
the servicer will determine the principal balance of each Receivable and the
Weighted Average Rate as of the first day of the related Collection Period.
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On each payment date, the amount required to be on deposit in the Yield
Supplement Account, after giving effect to the transfer of the Yield Supplement
Amount for the payment date to the Collection Account will be an amount equal to
the sum of all projected Yield Supplement Amounts for all future payment dates,
which will be determined assuming that future scheduled payments on the
Receivables are made on their scheduled due dates. The amount on deposit in the
Yield Supplement Account in excess of the maximum required balance on each
payment date will be transferred to the reserve account.]
Pre-Funding Account. On the closing date, the Pre-Funded Amount will be
deposited in the Pre-Funding Account. The Pre-Funding Account will be an asset
of the trust and will be pledged to the indenture trustee for the benefit the
noteholders.
The transferor expects that the Pre-Funded Amount will be reduced to less
than $_____ on or before the end of the Pre-Funding Period. Any Pre-Funded
Amount remaining at the end of the Pre-Funding Period will be payable to the
noteholders as described under "Description of the Notes--Mandatory Redemption"
in this prospectus supplement.
Capitalized Interest Account. On the closing date, cash in the approximate
amount of $________ will be deposited in the Capitalized Interest Account which
will be established with the indenture trustee. The Capitalized Interest Account
will be an asset of the trust, and will be pledged to the indenture trustee for
the benefit of the noteholders. The amount, if any, deposited in the Capitalized
Interest Account will be applied on the payment dates occurring on or prior to
_________, 200__ to fund an amount equal to the amount of interest accrued for
each of the payment dates at the weighted average interest rates on the portion
of the notes having a principal balance in excess of the principal balances of
the Receivables, which portion will equal the Pre-Funded Amount. Any amounts
remaining in the Capitalized Interest Account on the payment date on or
immediately following the last day of the Pre-Funding Period and not used for
those purposes are required to be paid directly to the transferor on that date.
CERTAIN ALLOCATIONS
On or before the Determination Date, the servicer will be required to deliver
a certificate to the indenture trustee [and the insurer], specifying, among
other things, the amount of aggregate collections on the Receivables and the
aggregate Purchase Amount of Receivables to be purchased by the transferor or
the servicer, all with respect to the preceding Collection Period.
[Not later than the fourth business day prior to each payment date, the
indenture trustee will, based solely on the information contained in the
servicer's certificate delivered on the related Determination Date, deliver to
the indenture collateral agent, [the insurer] and the servicer a written notice
specifying the Deficiency Claim Amount for the payment date. The deficiency
notice will direct the indenture collateral agent to transfer the Deficiency
Claim Amount from amounts on deposit in the reserve account for deposit in the
Collection Account.]
On each payment date, the servicer is required to instruct the indenture
trustee to distribute funds in the amounts and priority set forth below under
"--Payments" in this prospectus supplement.
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PAYMENTS
On each payment date, the indenture trustee will make the following payments
from the Collection Account in the following order of priority:
(1) first, from the Distribution Amount, to the servicer, any accrued and
unpaid servicing fee for the related calendar month to the extent not
retained by the servicer;
(2) second, from the Distribution Amount, pro rata, all accrued and unpaid
fees and expenses due and owing the indenture trustee, the owner
trustee, the backup servicer, the custodian and the indenture
collateral agent;
(3) third, from the Distribution Amount, to the Note Distribution Account,
the Noteholders' Interest Distributable Amount;
(4) fourth, from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Principal Distributable Amount, to be
distributed as described under "Description of the Notes--Payments of
Principal" in this prospectus supplement;
(5) [fifth, from the Distribution Amount, to the insurer, any amounts due
and owing under the insurance agreement;]
(6) [sixth, from Available Funds, to the reserve account, all Available
Funds remaining after the distributions pursuant to clauses 1 through
5 above;]
(7) [seventh, from amounts, if any, released from the reserve account on
that payment date due to an excess of the amount on deposit in the
reserve account over the amount required to be on deposit in the
reserve account, to the Certificate Distribution Account for
distribution to the certificateholders, the Certificateholders'
Principal Distributable Amount; and]
(8) [eighth, all remaining amounts released from the reserve account on
that payment date, after giving effect to the payment under clause 7,
to the Certificate Distribution Account for distribution to the
certificateholders.]
[In the event that the servicer's certificate indicates that the Distribution
Amount will be insufficient on any payment date to make the payments required
under clauses (1) through (4) above on the payment date, the indenture trustee
will furnish to the insurer no later than 12:00 noon, New York City time on the
third business day immediately preceding the payment date a notice of claim in
the amount of the Policy Claim Amount. Amounts paid by the insurer pursuant to
any notice of claim will be deposited by the insurer into the Note Distribution
Account for payment to the noteholders on the related payment date.]
STATEMENTS TO NOTEHOLDERS
On or prior to each payment date, the indenture trustee will be required to
forward a statement to the noteholders, the Rating Agencies [and the insurer].
These statements will be based on the information contained in the servicer's
certificate delivered by the servicer on or before the related Determination
Date. Each statement will include the following information as
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to the notes, with respect to that payment date or the period since the previous
payment date, as applicable:
(1) the amount of the distribution allocable to interest on or with respect
to the notes;
(2) the amount of the distribution allocable to principal with respect to the
notes;
(3) the Noteholders' Interest Carryover Shortfall if any, the Noteholders'
Principal Carryover Shortfall, if any, and the change in such amounts
from the preceding statement;
(4) the amount of the distribution, if any, payable pursuant to a claim on
the Policy;
(5) the amount of the servicing fee paid to the servicer with respect to the
related Collection Period; and
(6) the aggregate Purchase Amounts for Receivables, if any, that were
repurchased in the Collection Period.
Each amount set forth pursuant to subclauses (1), (2) and (3) with respect to
notes will be expressed as a dollar amount per $1,000 of the initial principal
amount of the notes.
Unless and until definitive notes are issued, the reports will be sent on
behalf of the issuer to Cede & Co., as registered holder of the notes and the
nominee of DTC.
Within the required period of time after the end of each calendar year, the
indenture trustee will furnish to each person who at any time during the
calendar year was a noteholder, a statement as to the aggregate amounts of
interest and principal paid to the noteholder and any other information that the
issuer deems necessary to enable the noteholder to prepare its tax returns.
SERVICER DEFAULT; RIGHTS UPON SERVICER DEFAULT
A "servicer default" under the Sale and Servicing Agreement will include:
(a) any failure by the servicer to deliver to the owner trustee or the
indenture trustee any deposit or payment required to be so made, which
failure continues unremedied for one business day after written notice
from [the insurer], the owner trustee or the indenture trustee is
received by the servicer or after discovery of the failure by the
Servicer,
(b) any failure by the servicer duly to observe or perform in any material
respect any other covenant or agreement in the Sale and Servicing
Agreement which failure materially and adversely affects the rights of
the noteholders [and the insurer] and which continues unremedied after
applicable grace periods,
(c) certain events of insolvency, readjustment of debt, marshaling of assets
and liabilities or similar proceedings with respect to the servicer or
the transferor and certain actions by the servicer or the transferor
indicating its insolvency,
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reorganization pursuant to bankruptcy proceedings, or inability to pay
its obligations,
(d) failure to deliver a servicer's certificate or annual statement of
servicer's compliance within specified periods,
(e) breach of any representation or warranty of the servicer set forth in the
Sale and Servicing Agreement, which materially and adversely affects the
rights of the noteholders [or the insurer] and remains uncured after
applicable grace periods, and
(f) [unless an Insurer Default has occurred and is continuing, certain
defaults under the insurance agreement].
If a servicer default occurs, then the Controlling Party or holders of notes
representing not less than [25]% of the voting rights of the notes, or if the
notes have been paid in full and the indenture has been discharged in accordance
with its terms, by holders of certificates evidencing not less than [25]% of the
voting interest of the certificates, may terminate the rights and obligations of
the servicer under the Sale and Servicing Agreement. If this event occurs when
__________ is the servicer, or, if ________ is terminated as servicer,
_____________ acting as backup servicer, has agreed, subject to the
qualifications contained in the Sale and Servicing Agreement, to serve as
successor servicer under the Sale and Servicing Agreement. As successor
servicer, it will receive compensation at the Servicing Fee Rate and will no
longer be entitled to receive a fee as backup servicer.
Consistent with its customary procedures, the servicer may, in its
discretion, arrange with the obligor on a Receivable to extend or modify the
payment schedule. However, no such arrangement will reduce the principal balance
or APR of any Receivable or modify any Receivable if the amendment or
modification would extend the final payment date of any Receivable beyond the
Final Scheduled Payment Date. Some of the arrangements may result in the
servicer purchasing the Receivable for the Purchase Amount. See "Risk
Factors--Yield is Sensitive to Rate of Principal Prepayments on Receivables" in
the prospectus. The servicer may sell the assets underlying the respective
Receivable at public or private sale, or take any other action permitted by
applicable law.
The servicer may refinance any Receivable by accepting a new promissory note
from the related obligor and applying the proceeds of the refinancing to pay all
obligations in full of the obligor under the Receivable. The receivable created
by the refinancing will not be property of the issuer.
SERVICING COMPENSATION
The servicer is entitled on each payment date to the Servicing Fee for the
related monthly period. The servicer may retain the Servicing Fee from
collections on the Receivables.
APPOINTMENT OF SUBSERVICER
The servicer may at any time appoint a subservicer to perform all or any
portion of its obligations as servicer upon the prior written consent of the
Controlling Party. However, the
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servicer may refer delinquent accounts to an outside collection agency for
further collection and possible repossession of the related Receivable without
the consent of the Controlling Party. The servicer will remain obligated and
liable to the indenture trustee[, the insurer] and the noteholders for the
servicing and administering of the Receivables in accordance with the provisions
of the Receivables without diminution of its obligation and liability by virtue
of the appointment of a subservicer and to the same extent and under the same
terms and conditions as if the servicer alone were servicing and administering
the Receivables. The fees and expenses of the subservicer will be as agreed
between the servicer and its subservicer from time to time and none of the
indenture trustee, [the insurer], the noteholders will have any responsibility
for those fees and expenses.
AMENDMENT
The Sale and Servicing Agreement may be amended from time to time by the
transferor, the depositor, the indenture trustee, the originator, the servicer,
the backup servicer, the custodian and the issuer, [with the consent of the
insurer, so long as an Insurer Default has not occurred and is not continuing,]
but without the consent of any of the noteholders or certificateholders to cure
any ambiguity. This type of amendment may be made to correct or supplement any
of its provisions, to comply with any changes in the code, or to make any other
provisions with respect to matters or questions arising under the Internal
Revenue Code of 1986, as amended, which would not be inconsistent with the
provisions of the Sale and Servicing Agreement or the insurance agreement.
However, [if the insurer is no longer the Controlling Party,] the action may
not, as evidenced by an opinion of counsel delivered to the depositor, the owner
trustee, the Rating Agencies and the indenture trustee, adversely affect in any
material respect the interests of any noteholders and the certificateholders.
The Sale and Servicing Agreement may also be amended from time to time by the
transferor, the depositor, the originator, the servicer, the backup servicer,
the indenture trustee and the owner trustee, with
o [the consent of the insurer, if the insurer is the Controlling Party, but
without the consent of any noteholders or certificateholders,] or
o [if the insurer is no longer the Controlling Party,] with the consent of a
Note Majority and the consent of the holders of certificates evidencing
not less than a majority of the aggregate outstanding principal amount of
the certificates, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Sale and
Servicing Agreement or of modifying in any manner the rights of the
noteholders or the certificateholders.
However, this amendment may not:
o increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that
are required to be made for the benefit of the noteholders or the
certificateholders or
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o reduce the percentage of the outstanding principal amount of the notes and
the certificates, the holders of which are required to consent to the
amendment, without the consent of the holders of all the outstanding notes
and the holders of all the outstanding certificates, of the class affected
by the amendment.
[In addition, if an Insurer Default has occurred and is continuing, the
action may not materially adversely affect the interest of the insurer.]
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Information regarding certain legal aspects of the receivables is set forth
under "Certain Legal Aspects of the Receivables" in the prospectus.
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
Set forth below is a summary of certain United States federal income tax
considerations relevant to the beneficial owner of a note that holds the note as
a capital asset and, unless otherwise indicated below, is a U. S. Person. This
summary does not address special tax rules that may apply to certain types of
investors, such as banks, insurance companies and securities dealers, and
investors that hold notes as part of an integrated investment. This summary
supplements the discussion contained in the accompanying prospectus under the
heading "Federal Income Tax Considerations," and supersedes that discussion to
the extent that it is inconsistent therewith. The authorities on which this
discussion is based are subject to change or differing interpretations, and that
change or interpretation could apply retroactively. This discussion reflects the
applicable provisions of the Code, as well as regulations promulgated by the
U.S. Department of the Treasury. Investors should consult their own tax advisors
in determining the federal, state, local and any other tax considerations to
them of the purchase, ownership and disposition of the notes.
CLASSIFICATION OF INVESTMENT ARRANGEMENT
In the opinion of Cadwalader, Wickersham & Taft, special counsel to the
depositor, the issuer will not be treated as an association or a publicly traded
partnership taxable as a corporation or a taxable mortgage pool for federal
income tax purposes, but rather the issuer will be ignored and treated as a mere
security device when there is a single beneficial owner of the issuer, or will
be treated as a domestic partnership when there are two or more beneficial
owners of the issuer.
TAXATION OF HOLDERS
Characterization of the Notes. There are no regulations, published rulings or
judicial decisions addressing the characterization for federal income tax
purposes of securities with terms that are substantially the same as those of
the notes. A basic premise of United States federal income tax law is that the
economic substance of a transaction generally will determine the United States
federal income tax considerations of the transaction. The determination of
whether the economic substance of a loan secured by an interest in property is
instead a sale of a
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beneficial ownership interest in the property has been made by the Internal
Revenue Service and the courts on the basis of numerous factors designed to
determine whether the issuer has relinquished, and the investor has obtained,
substantial incidents of ownership in the property. Among those factors, the
primary factors examined are whether the investor has the opportunity to gain if
the property increases in value, and has the risk of loss if the property
decreases in value. Based on an assessment of these factors, in the opinion of
Cadwalader, Wickersham & Taft, special counsel to the depositor, the notes will
be treated as indebtedness for federal income tax purposes and not as an
ownership interest in the Receivables or an equity interest in the issuer.
Interest and Original Issue Discount. Interest on the notes will be treated
as income to beneficial owners as those amounts are paid or accrue in accordance
with the holder's method of accounting. It is anticipated that the notes will
[not] be issued with original issue discount for federal income tax purposes.
Any premium or de minimis original issue discount with respect to the notes will
be determined in the same manner as described under "Federal Income Tax
Considerations" in the accompanying prospectus. The prepayment assumption that
will be used for accruing original issue discount, for determining if original
issue discount is de minimis or for amortizing premium for federal income tax
purposes is 100% of the prepayment assumption, in the case of the Class A-1
notes and % CPR, in the case of the Class A-2 and Class A-3 Notes.
Sale, Exchange, Retirement or Other Disposition. Upon the sale, exchange,
retirement or other disposition of a note, a beneficial owner who holds the note
as a capital asset generally will recognize capital gain or loss equal to the
difference, if any, between the amount realized (adjusted for accrued stated
interest) on the sale or other disposition of the owner's note and the owner's
cost for that note, increased by any original issue discount or accrued market
discount reported as income or decreased by any amortized bond premium.
Long-term capital gains of non-corporate investors, generally, gains on notes
held for more than one year, would be subject to a lower maximum tax rate than
ordinary income or short-term capital gains of those holders. Corporations are
subject to the same tax rate on ordinary income and capital gains.
Taxation of Certain Foreign Investors. Interest, including original issue
discount, payable to beneficial owners of notes who are nonresident aliens,
foreign corporations, or other non-U.S. Persons, i.e., any person who is not a
U.S. Person, will be considered "portfolio interest" and, therefore, generally
will not be subject to 30% United States withholding tax, provided that this
non-U.S. Person: (1) is not a "10-percent shareholder" within the meaning of
Code Section 871(h)(3)(B) or a controlled foreign corporation described in Code
Section 881(c)(3)(C) with respect to the depositor or the issuer and (2)
provides the owner trustee, or the person who would otherwise be required to
withhold tax from those distributions under Code Section 1441 or 1442, with an
appropriate statement, signed under penalties of perjury, identifying the
beneficial owner and stating, among other things, that the beneficial owner of
the note is a non-U.S. Person. If that statement, or any other required
statement, is not provided, 30% withholding will apply unless reduced or
eliminated pursuant to an applicable tax treaty or unless the interest on the
note is effectively connected with the conduct of a trade or business within the
United States by that non-U.S. Person. In the latter case, the non-U.S. Person
will be subject to United States federal income tax at regular rates. Investors
who are non-U.S. Persons should consult their own tax advisors regarding the
specific tax considerations to them of owning a note.
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The IRS recently issued final regulations which provide alternative methods
of satisfying the beneficial ownership certification requirement described
above. These new regulations will be effective January 1, 2001. Current
withholding certificates will remain valid until the earlier of December 31,
2000 or the date of expiration of the certificate under the rules as currently
in effect. These new regulations will require, in the case of notes held by a
foreign partnership, that:
(a) the certification described above be provided by the partners rather than
by the foreign partnership; and
(b) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships. Non-U.S.
Persons should consult their own tax advisors concerning the application of the
certification requirements in these new regulations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments made on the notes and proceeds from the sale of notes to or through
certain brokers may be subject to a "backup" withholding tax of 31% of
"reportable payments," including interest accruals, original issue discount,
and, under certain circumstances, payments in respect of principal amount,
unless, in general, the beneficial owner complies with certain procedures or is
an exempt recipient. Any amounts so withheld from payments on the notes would be
refunded by the Internal Revenue Service or allowed as a credit against the
beneficial owner's federal income tax. The new regulations will change certain
of the rules relating to certain presumptions currently available relating to
information reporting and backup withholding. Non-U.S. Persons are urged to
contact their own tax advisors regarding the application to them of backup
withholding and information reporting.
Reports of interest, original issue discount and certain information needed
to compute accrued market discount will be made annually to the Internal Revenue
Service and to beneficial owners that are not excepted from the reporting
requirements.
See "Federal Income Tax Considerations--Trusts Treated as Partnerships--Tax
Characterization of the Trust as a Partnership" in the accompanying prospectus.
ERISA CONSIDERATIONS
The notes may be purchased by an employee benefit plan or an individual
retirement account subject to ERISA or Section 4975 of 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 the assets of the issuer
being deemed to constitute plan assets or in a nonexempt prohibited transaction
as defined in Section 406 of ERISA or Section 4975 of the Code.
Under Section 2510.3-101 of the regulations issued by the U.S. Department of
Labor, when a Plan invests in an "equity interest" in an entity, including for
these purposes interests that may be denominated as debt but that have
substantial equity features, the Plan's assets could be deemed,
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for purposes of ERISA and Section 4975 of the Code, to include both the equity
interest and an undivided interest in each of the underlying assets of the
entity. If the underlying assets of the entity are deemed to be Plan assets, the
obligations and other responsibilities of Plan sponsors, Plan fiduciaries, Plan
administrators, and parties in interest, under ERISA, and, disqualified persons
under the Code, under Parts 1 and 4 of Subtitle B of Title I of ERISA and
Section 4975 of the Code, as applicable, may be expanded. As a result, there may
be an increase in their liability under these and other provisions of ERISA and
the Code, except to the extent, if any, that a favorable statutory or
administrative exemption or exception applies. In addition, various providers of
fiduciary or other services to the issuer, and any other parties with authority
or control with respect to the issuer, could be deemed to be Plan fiduciaries or
otherwise parties in interest or disqualified persons by virtue of their
provision of such services. Although there is little guidance on the subject,
the transferor intends to take the position that, at the time of their issuance,
the notes should be treated as indebtedness without substantial equity features
for purposes of Section 2510.3-101. In analyzing these issues with their own
counsel, prospective purchasers of notes should consider, among other things,
that although special counsel has concluded that the notes are debt for federal
income tax purposes, it is not clear whether the notes would be treated as
issued by the issuer, the transferor or another person related to the
transferor.
Without regard to whether the notes are treated as an equity interest for
such purposes, the acquisition or holding of notes by or on behalf of a Plan
could be considered to give rise to a prohibited transaction if an affiliate,
the transferor, the issuer, the servicer, the indenture trustee or the owner
trustee is or becomes a party in interest, under ERISA, or disqualified person,
under the Code, with respect to such Plan. Certain exemptions from the
prohibited transaction rules could be applicable to the purchase and holding of
notes by a Plan depending on the type and circumstances of the plan fiduciary
making the decision to acquire the notes. The exemptions, even if applicable,
may not apply to all possible prohibited transactions and other violations of
ERISA and Section 4975 of the Code. By its acceptance of a note, each noteholder
will be deemed to have represented and warranted that its purchase and holding
of the note will not result in a nonexempt prohibited transaction under Section
406(a) of ERISA or Section 4975 of the Code.
PRIOR TO MAKING AN INVESTMENT IN NOTES, EMPLOYEE BENEFIT PLAN INVESTORS,
WHETHER OR NOT SUBJECT TO ERISA OR SECTION 4975 OF THE CODE, SHOULD CONSULT WITH
THEIR LEGAL AND OTHER ADVISORS CONCERNING THE IMPACT OF ERISA AND THE CODE, AND,
PARTICULARLY IN THE CASE OF NON-ERISA PLANS AND ARRANGEMENTS, ANY ADDITIONAL
STATE, LOCAL AND FOREIGN LAW CONSIDERATIONS, AS APPLICABLE, AND THE POTENTIAL
CONSEQUENCES IN THEIR SPECIFIC CIRCUMSTANCES OF AN INVESTMENT IN NOTES.
LEGAL INVESTMENT
The Class A-1 notes will be eligible securities for purchase by money market
funds under the Investment Company Act of 1940.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
the depositor has agreed to cause the issuer to sell to each of the underwriters
listed below, and each of the underwriters has agreed to purchase, the principal
amount of each class of the notes set forth opposite its name below. Under the
terms and conditions of the underwriting agreement, each of the underwriters is
obligated to take and pay for all of the notes if any are taken.
CLASS A-1 CLASS A-2 CLASS A-3
UNDERWRITERS NOTES NOTES NOTES
- ------------ --------- --------- ---------
PaineWebber Incorporated.............. $ $ $
[--------------------].................
Total..................................
The depositor has been advised by the underwriters that they propose
initially to offer the notes to the public at the prices set forth below, and to
selling group members at those prices less a selling concession not in excess of
the percentage set forth below for each class of notes. The underwriters may
allow, and the selling group members may also allow, a subsequent concession not
in excess of the percentage set forth below for each class of notes. After the
initial public offering, the public offering price and such concessions may be
changed.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT CONCESSION REALLOWANCE
-------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Class A-1 Notes % % % %
Class A-2 Notes
Class A-3 Notes
</TABLE>
The depositor does not intend to apply for listing of the notes on a national
securities exchange, but has been advised by the underwriters that they may make
a market in the notes. The underwriters are not obligated, however, to make a
market in the notes and may discontinue market making at any time without
notice. We cannot assure you as to the liquidity of the trading market for the
notes.
The depositor, the transferor and the servicer have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, each underwriter and
its affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with the depositor, the transferor and the
servicer.
After the initial distribution of the notes by the underwriters, this
prospectus supplement may be used by the underwriters or its successors, in
connection with offers and sales relating to market making transactions in the
notes. The underwriters may act as principal or agent in these
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transactions. The transactions will be at prices related to prevailing market
prices at the time of sale. Each underwriter is a member of the New York Stock
Exchange, Inc.
The underwriter is an affiliate of the depositor.
ADDITIONAL INFORMATION
PaineWebber Asset Acceptance Corporation has filed with the SEC a
registration statement (Registration No. 333-_____) under the Securities Act of
1933, as amended, with respect to the notes offered under this prospectus
supplement. This prospectus supplement and the accompanying prospectus, which
form a part of the registration statement, omit certain information contained in
the registration statement under the rules and regulations of the SEC. You may
read and copy the registration statement at the Public Reference Room at the SEC
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the SEC's
regional offices at Seven World Trade Center, 13th Floor, New York, New York,
10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Rooms. In addition, the SEC maintains a site
on the World Wide Web containing reports, proxy materials, information
statements and other items. The address is http://www.sec.gov.
EXPERTS
[The consolidated balance sheets of __________, the insurer, and subsidiaries
as of December 31, ____ and ____ and the related consolidated statements of
income, changes in shareholder's equity, and cash flows for each of the three
years in the period ended December 31, ____, incorporated by reference in this
prospectus supplement. These statements have been so incorporated in reliance on
the report of __________, independent accountants, given on the authority of
that firm as experts in accounting and auditing.]
LEGAL MATTERS
The validity of the notes and certain federal income tax matters will be
passed upon for the depositor by Cadwalader, Wickersham & Taft, New York, New
York. [Certain legal matters will be passed upon for the insurer by __________,
__________ to the insurer.]
RATINGS
As a condition to the issuance of the Class A notes, the Class A-1 notes must
be rated "____" by __________________________________ and "___" by
_____________________________, and the Class A-2 notes and the Class A-3 notes
must be rated "___" by ___________________ and "___" by
__________________________.
A security rating is not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time. The ratings assigned to
the offered notes address the likelihood of the receipt by noteholders of all
distributions to which such noteholders are entitled. The ratings assigned to
the offered notes do not represent any assessment of the
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likelihood that principal prepayments might differ from those originally
anticipated or address the possibility that noteholders might suffer a lower
than anticipated yield.
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GLOSSARY OF TERMS
"ABS" the prepayment model used in this prospectus supplement to measure
prepayments on Receivables.
"AMOUNT FINANCED" means, with respect to a Receivable, the amount advanced
under that Receivable toward the purchase price or refinancing of the
[automobile] [recreational vehicle] and any related costs.
"APR" means annual percentage rate.
"AVAILABLE FUNDS" means, with respect to any Determination Date, the sum of:
(1) the Collected Funds for the related Collection Period,
(2) all Purchase Amounts deposited in the Collection Account during the
related Collection Period,
(3) the Monthly Capitalized Interest Amount with respect to the related
payment date,
(4) [the Yield Supplement Amount with respect to the related payment date,
and]
(5) following the acceleration of the notes pursuant to the indenture, the
amount of money or property collected by the indenture trustee with
respect to the assets of the issuer, from the sale of the assets or
otherwise since the preceding Determination Date.
"CAPITALIZED INTEREST ACCOUNT" is an account which is an asset of the trust
established with the indenture trustee, and will be pledged to the indenture
trustee for the benefit of the noteholders.
"CERTIFICATE DISTRIBUTION ACCOUNT" is a separate account maintained for the
purpose of making distributions to certificateholders.
"CERTIFICATEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any payment date, the Certificateholders' Percentage of the Principal
Distributable Amount.
"CERTIFICATEHOLDERS' PERCENTAGE" means
(1) for each payment date prior to the payment date on which the Class A-3
notes are paid in full, _____%,
(2) on the payment date on which the Class A-3 notes are paid in full, the
percentage equivalent of a fraction, the numerator of which is the
excess, if any, of:
(a) the Principal Distributable Amount for the payment date over
(b) the outstanding principal amount of the Class A-3 notes immediately
prior to the payment date, and
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the denominator of which is the Principal Distributable Amount for
the payment date, and
(3) for each subsequent payment date to and including the payment date on
which the Certificate Balance is reduced to zero, 100%.
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with respect to
any payment date, the excess of the Certificateholders' Principal Distributable
Amount for the preceding payment date, over the amount in respect of principal
that was actually deposited in the Certificate Distribution Account on that
preceding payment date.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any payment date, the sum of the Certificateholders' Monthly Principal
Distributable Amount for the payment date and the Certificateholders' Principal
Carryover Shortfall for the payment date. However, the Certificateholder's
Principal Distributable Amount may not exceed the Certificate Balance.
CLASS A-1 FINAL SCHEDULED PAYMENT DATE" is _______________, the date on which
the Class A-1 notes will be due.
"CLASS A-2 FINAL SCHEDULED PAYMENT DATE" is _______________, the date on
which the Class A-2 notes will be due.
"CLASS A-3 FINAL SCHEDULED PAYMENT DATE" is _______________, the date on
which the Class A-3 notes will be due.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLECTED FUNDS" means, with respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Collection Period, including all Net Liquidation Proceeds
collected during the related Collection Period.
"COLLECTION ACCOUNT" is an account established in the name of the indenture
trustee on behalf of the noteholders, the certificateholders and the insurer,
into which payments or other amounts received with respect to the Receivables
will be deposited.
"COLLECTION PERIOD" is any calendar month, or, in the case of the initial
Collection Period, the period from the Initial Cut-off Date to and including
_______________, 200_. References to the "Collection Period" in this prospectus
supplement shall mean the "remittance period" for purposes of the prospectus.
"CONTROLLING PARTY" means, [the insurer, so long as no Insurer Default
exists, and] the indenture trustee for the benefit of the noteholders, [for so
long as an Insurer Default exists]. However, the owner trustee for the benefit
of the certificateholders will be the Controlling Party after all unpaid
principal and interest on the notes [and all amounts owing to the insurer under
the insurance agreement] have been paid in full.
"CRAM DOWN LOSS" means, with respect to a Receivable if a court of
appropriate jurisdiction in an insolvency proceeding has issued an order
reducing the amount owed on such Receivable or otherwise modifying or
restructuring the scheduled payments to be made on such Receivable, an amount
equal to:
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(1) the excess of the principal balance of the Receivable immediately prior
to the order over the principal balance of the Receivable as so reduced
and/or
(2) if the court has issued an order reducing the effective rate of interest
on the Receivable, the net present value of the scheduled payments with
respect to the Receivables as so modified or restructured. When
calculating this net present value, the discount rate will be the higher
of the annual percentage rate on that Receivable or the rate of interest,
if any, specified by the court in that order.
A Cram Down Loss will be deemed to have occurred on the date of
issuance of the order.
"CUT-OFF DATE" means, with respect to an Initial Receivable, the Initial
Cut-off Date, and, with respect to a Subsequent Receivable, the related
Subsequent Cut-off Date.
"DEFICIENCY CLAIM AMOUNT" on any Determination Date will equal the excess, if
any, of the sum of the amounts payable on the related payment date from the
Distribution Amount:
(1) to the servicer, any accrued and unpaid servicing fee for the related
calendar month to the extent not retained by the servicer;
(2) pro rata, all accrued and unpaid fees and expenses due and owing the
indenture trustee, the owner trustee, the backup servicer, the custodian
and the indenture collateral agent;
(3) to the Note Distribution Account, the Noteholders' Interest Distributable
Amount;
(4) to the Note Distribution Account, the Noteholders' Principal
Distributable Amount, to be distributed as described under "Description
of the Notes--Payments of Principal" in this prospectus supplement; and
(5) [to the Insurer, any amounts due and owing under the Insurance Agreement;
over the amount of Available Funds with respect to that Determination
Date].
"DETERMINATION DATE" is the ______ business day prior to each payment date.
"DISTRIBUTION AMOUNT" with respect to any payment date, the sum of:
(1) the Available Funds for the immediately preceding Determination Date,
plus
(2) [any amounts received with respect to the Deficiency Claim Amount, from
the Reserve Account, an Insurer Optional Deposit or otherwise other than
from draws under the Policy, by the indenture trustee, with respect to
the payment date].
"FINAL SCHEDULED PAYMENT DATES" are the Class A-1 Final Scheduled Payment
Date, the Class A-2 Final Scheduled Payment Date and the Class A-3 Final
Scheduled Payment Date referred to in this prospectus supplement.
"INITIAL CUT-OFF DATE" is __________, 200_.
"INITIAL PRE-FUNDED AMOUNT" a cash amount equal to approximately $ deposited
in the Pre-Funding Account on the closing date.
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"INITIAL RECEIVABLES" are [auto loans] [auto leases] [recreational vehicle
loans] [structured settlements] assigned to the issuer on the closing date.
["INSURER DEFAULT" means the insurer is in continuing default on its
obligations under the Policy or where bankruptcy events have occurred with
respect to the insurer.]
["INSURER OPTIONAL DEPOSIT" means, with respect to any payment date, an
amount delivered by the insurer for deposit into the Collection Account for any
of the following purposes:
(1) to provide funds in respect of the payment of fees or expenses of any
provider of services to the issuer with respect to the payment date, or
(2) to include the funds to the extent that without those amounts a draw
would be required to be made on the Policy.]
"LIQUIDATED RECEIVABLE" means, with respect to any Determination Date, a
Receivable as to which, as of the last day of the related Collection Period,
(1) 60 days have elapsed since the servicer repossessed the asset underlying
the Receivable,
(2) the servicer has determined in good faith that all amounts it expects to
recover have been received,
(3) the asset underlying the Receivable has been sold and the proceeds
received or
(4) all or any portion of any scheduled payment by the obligor is 120 days or
more delinquent.
"NET LIQUIDATION PROCEEDS" means, with respect to any Liquidated Receivable,
all amounts, including insurance proceeds, realized with respect to the
Receivable, other than amounts withdrawn from the Reserve Account and drawings
under the Policy, net of
(1) reasonable expenses incurred by the servicer in connection with the
collection of the Receivable and the repossession and disposition of the
asset underlying the Receivable and
(2) amounts that are required to be refunded to the obligor on that
Receivable; provided that Net Liquidation Proceeds with respect to any
Receivable may not be less than zero.
"NON-U.S. PERSON" is a person who is not a U.S. Person.
"NOTE DISTRIBUTION ACCOUNT" is an account established and maintained by the
servicer, in the name of the indenture trustee, on behalf of the noteholders and
the insurer, in which amounts released from the Collection Account for
distribution to noteholders will be deposited and from which all distributions
to noteholders will be made.
"NOTE MAJORITY" means holders of 50% or more of the aggregate principal
balance of the notes.
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"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any payment date,
the sum of the Noteholder's Principal Distributable Amount and the Noteholders'
Interest Distributable Amount.
"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to any
payment date,
o the excess of:
(1) the Noteholders' Interest Distributable Amount for the preceding
payment date, over
(2) the amount in respect of interest that was actually deposited in the
Note Distribution Account on the preceding payment date, plus
o interest on the amount of interest due but not paid to noteholders on the
preceding payment date, to the extent permitted by law, at the interest
rate borne by those notes from the preceding payment date to but excluding
the current payment date.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to any
payment date, the sum of the Noteholders' Monthly Interest Distributable Amount
for the payment date and the Noteholders' Interest Carryover Shortfall for that
payment date.
"NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any payment date, the sum of the products for each class of Notes of:
(1) the product of the applicable interest rate for the class and 1/12 and
(2) the outstanding principal amount of the class of notes immediately
preceding the payment date.
"NOTEHOLDERS' PERCENTAGE" will be approximately %, for each payment date
until the Class A-3 notes have been paid in full, and then will be equal to
zero.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" for any payment date will equal
the sum of:
(1) the Noteholders' Percentage of the Principal Distributable Amount and
(2) any unpaid portion of the amount described in clause (1) with respect to
any prior payment date.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with respect to any
payment date:
o the excess of:
(1) the Noteholders' Principal Distributable Amount for the preceding
payment date, over
(2) the amount in respect of principal that was actually deposited in
the Note Distribution Account on the preceding payment date, plus
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o interest on the amount of principal due but not paid to noteholders on the
preceding payment date, to the extent permitted by law, at the interest
rate borne by those notes from such preceding payment date to but
excluding the current payment date.
"OWNER TRUST AGREEMENT" is the trust agreement under which the trust for the
transactions described in this prospectus supplement is formed.
"PLAN" is any:
(1) employee benefit plan as defined in Section 3(3) of ERISA,
(2) plan described in Section 4975(e)(1) of the Code, including individual
retirement accounts or Keogh plans, or
(3) entity whose underlying assets include plan assets by reason of a plan's
investment in entities specified in clauses (1) and (2) above.
["POLICY" is a financial guaranty insurance policy issued by the insurer that
guarantees full and timely payment of the noteholders' distributable amount on
each payment date.]
["POLICY CLAIM AMOUNT" means, the amount by which (a) the portion of the
Distribution Amount available to make Scheduled Payments on the notes for any
payment date is less than (b) the amount necessary to make the Scheduled
Payments on the notes for that payment date.]
"POOL BALANCE" means, at any time, the sum of the Principal Balances of the
Receivables, excluding Purchased Receivables and Liquidated Receivables.
"PRE-FUNDED AMOUNT" is the Initial Pre-Funded Amount as reduced from time to
time during the Pre-Funding Period by the amount of the Initial Pre-Funded
Amount used to purchase Subsequent Receivables in accordance with the Sale and
Servicing Agreement.
"PRE-FUNDING ACCOUNT" is an account which will be established with the
indenture trustee which will be an asset of the trust and will be pledged to the
indenture trustee for the benefit the noteholders.
"PRE-FUNDING PERIOD" is the period from the closing date until the earliest
of:
(1) the date on which the amount on deposit in the Pre-Funding Account is
less than $__________,
(2) the occurrence of a servicer default under the Sale and Servicing
Agreement, or
(3) __________, 200_.
"PRINCIPAL BALANCE" for any Receivable, at any time, means the Amount
Financed minus:
(1) that portion of all amounts received on or prior to that date and
allocable to principal in accordance with the terms of the Receivable,
and
(2) any Cram Down Loss in respect of that Receivable.
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"PRINCIPAL DISTRIBUTABLE AMOUNT" with respect to any payment date will be an
amount equal to the sum of the following amounts:
(1) the principal portion, allocable on the basis of the simple interest
method, of all Collected Funds received during the immediately preceding
calendar month, other than Liquidated Receivables and Purchased
Receivables, including the principal portion of all prepayments;
(2) the Principal Balance of all Receivables that became Liquidated
Receivables during the related calendar month, other than Purchased
Receivables;
(3) the principal portion of the Purchase Amounts received with respect to
all Receivables that became Purchased Receivables during the related
calendar month;
(4) [at the option of the insurer,] the Principal Balance of the Receivables
that were required to be purchased by the transferor and the servicer
during the related calendar month but were not purchased; and
(5) the aggregate amount of Cram Down Losses that have occurred during the
related calendar month.
"PURCHASE AMOUNT" means, with respect to a Receivable, the Principal Balance
and accrued interest on the Receivable. This amount includes one month's
interest on the Receivable, in the month of payment, at the APR less the
servicing fee, after giving effect to the receipt of any moneys collected, from
whatever source, on such Receivable, if any.
"PURCHASED RECEIVABLE" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the servicer or repurchased
by the transferor or the originator pursuant to the Sale and Servicing
Agreement.
"RATING AGENCIES" are _______________ and _______________.
"RECEIVABLES" the Initial Receivables together with the Subsequent
Receivables.
"RECORD DATE" with respect to any payment date means the close of business on
the business day preceding that payment date.
"SALE AND SERVICING AGREEMENT" is the sale and servicing agreement dated as
of , 200_, between the originator, as seller and servicer, the transferor, the
depositor, the issuer and the indenture trustee, backup servicer and custodian.
["SCHEDULED PAYMENT" means payments which are scheduled to be made on the
notes during the term of the Policy in accordance with the original terms of the
notes when issued and without regard to any subsequent amendment or modification
of the notes or the indenture that has not been consented to by the Insurer,
which payments for each payment date are:
(1) the Noteholders' Interest Distributable Amount for such Payment Date and
(2) the Noteholders' Principal Distributable Amount.]
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"SERVICING FEE" is the fee to which the servicer is entitled under the Sale
and Servicing Agreement on each payment date for the related monthly period
equal to the sum of:
(1) the Servicing Fee Rate multiplied by the Pool Balance as of the first day
of the monthly period and
(2) the investment earnings, net of losses, on the Collection Account.
"SERVICING FEE RATE" is the rate, equal to ___%, at which the Servicing Fee
is paid.
"SUBSEQUENT CUT-OFF DATE" the dates designated by the transferor from time to
time as subsequent cut-off dates.
"SUBSEQUENT RECEIVABLES" are the [auto loans] [auto leases] [recreational
vehicle loans] [structured settlements] assigned to the issuer from time to time
after the closing date and prior to.
"TRUST AGREEMENT" means any of the Sale and Servicing Agreement, the Owner
Trust Agreement, the indenture and any subsequent transfer agreement.
"U.S. PERSON" means:
(1) a citizen or resident of the United States;
(2) a corporation, partnership or other entity created or organized in or
under the laws of the United States, any state of the United States or
the District of Columbia, unless, in the case of a partnership, Treasury
regulations are adopted that provide otherwise, including an entity
treated as a corporation or partnership for U.S. federal income tax
purposes;
(3) an estate that is subject to U.S. federal income tax regardless of the
source of its income; or
(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 U.S.
Persons have the authority to control all substantial decisions of that
trust (or, to the extent provided in applicable Treasury regulations,
certain trusts in existence on August 20, 1996, which are eligible to
elect to be treated as U.S. Persons).
"WEIGHTED AVERAGE RATE" means, with respect to any date of determination, a
per annum rate equal to:
(1) the sum of:
(a) the product of (x) the outstanding principal amount of the Class A-1
Notes on that date and (y) the Class A-1 Interest Rate,
(b) the product of (x) the outstanding principal amount of the Class A-2
Notes on that date and (y) the Class A-2 Interest Rate, and
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(c) the product of (x) the outstanding principal amount of the Class A-3
Notes on that date and (y) the Class A-3 Interest Rate, divided by
(2) the outstanding principal amount of those notes on that date.
["YIELD SUPPLEMENT ACCOUNT" is an account that the transferor will establish
for the benefit of the noteholders and the insurer, which will initially be a
segregated trust account in the corporate trust department of the indenture
trustee.]
["YIELD SUPPLEMENT AMOUNT" with respect to any payment date will determined
by aggregating for all of the Receivables, one twelfth of the difference, if
positive, between
(1) the product of (a) the Principal Balance of the Receivable multiplied by
(b) a rate equal to the Weighted Average Rate plus approximately _____%,
which percentage represents the Servicing Fee Rate plus approximately
_____%, and
(2) the product of (a) the Principal Balance of the Receivable multiplied by
(b) the APR on that Receivable.]
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=========================================== ===================================
YOU SHOULD RELY ON THE INFORMATION
CONTAINED OR INCORPORATED BY REFERENCE IN
THIS PROSPECTUS SUPPLEMENT AND THE ATTACHED
PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION.
WE ARE NOT OFFERING THESE NOTES IN ANY $___________ (APPROXIMATE)
STATE WHERE THE OFFER IS NOT PERMITTED.
------------------------------
TABLE OF CONTENTS __________________________
PROSPECTUS SUPPLEMENT OWNER TRUST 200__-____
Summary.................................S-1
Risk Factors............................S-8
Forward-Looking Statements.............S-12
Defined Terms..........................S-12 [LOGO OF _________]
The Trust..............................S-12
The Trust Fund.........................S-13
The Receivables Pool...................S-14
The Transferor.........................S-20 ________________________
The Depositor..........................S-20 ORIGINATOR AND SERVICER
THE ORIGINATOR And The Servicer........S-20
Weighted Average Life of the NOTES.....S-22
Description of the Notes...............S-26
Description of the Certificates........S-35 PAINEWEBBER ASSET
[The Insurer]..........................S-35 ACCEPTANCE CORPORATION
[The Policy]...........................S-37 DEPOSITOR
Description of the Trust Agreements....S-40
Certain Legal Aspects of the
Receivables..........................S-50
Federal Income Tax Considerations......S-50 ASSET-BACKED NOTES,
ERISA Considerations...................S-52 SERIES 200__-__
Legal Investment.......................S-53
Underwriting...........................S-54
Additional Information.................S-55
Experts................................S-55
Legal MATTERS..........................S-55 ----------------------------------
Ratings................................S-55 PROSPECTUS SUPPLEMENT
Glossary of Terms......................S-57 ----------------------------------
PROSPECTUS
[Summary of Terms......................
Risk Factors...........................
Defined Terms.......................... PAINEWEBBER INCORPORATED
The Trust Funds........................
The Issuers............................
The Receivables........................
Pool Factors...........................
Use of Proceeds........................ __________, 200__
The Depositor..........................
The Trustee............................
Description of the Securities.........
Description of the Trust Agreements....
Certain Legal Aspects of the
Receivables..........................
Federal Income Tax Considerations......
ERISA Considerations...................
Methods of Distribution ...............
Incorporation of Information by
Reference............................
Legal
Matters..............................
Financial
Information..........................
Additional Information
.....................................
Ratings................................
Glossary of Terms......................]
DEALERS WILL BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS
WHEN ACTING AS UNDERWRITERS OF THESE
SECURITIES AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN
ADDITION, ALL DEALERS SELLING THESE
SECURITIES WILL DELIVER A PROSPECTUS
SUPPLEMENT AND PROSPECTUS UNTIL
____________, 200_.
=========================================== ===================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses expected to be incurred in connection with the issuance
and distribution of the securities being registered, other than underwriting
compensation, are as set forth below. All such expenses except for the
registration and filing fees are estimated:
SEC Registration Fee...................... $264.00
Legal Fees and Expenses................... *
Accounting Fees and Expenses.............. *
Trustee's Fees and Expenses
(including counsel fees)............... *
Printing and Engraving Expenses........... *
Rating Agency Fees........................ *
Miscellaneous............................. *
-------
Total $264.00
=======
*To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of
Delaware empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful on the merits or
otherwise in the defense of any action, suit or proceeding referred to in
subsections (a) and (b), or in the defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith; that
indemnification and advancement of expenses provided by, or granted pursuant to,
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and empowers the corporation to purchase and
maintain insurance on behalf of a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.
The by-laws of the Depositor provide, in effect, that to the full
extent permitted by law, the Depositor shall indemnify and hold harmless each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether or not by or in the right
of the Depositor, by reason of the fact that he is or was a director or officer,
or his testator or intestate is or was a director or officer of the Depositor,
or by reason of the fact that such person is or was serving at the request of
the Depositor as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise of any type or kind,
domestic or foreign, against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement, actually and reasonably incurred as a
result of such action, suit or proceeding.
Pursuant to Section 145 of the General Corporation Law of Delaware,
liability insurance is maintained covering directors and principal officers of
the Depositor.
Section 6(b) of the proposed form of Underwriting Agreement provides
that each Underwriter severally will indemnify and hold harmless the Depositor,
each of its directors, each of its officers who signs the Registration
Statement, and each person, if any, who controls the Depositor within the
meaning of the Securities Act of 1933, as amended, against any losses, claims,
damages or liabilities to which any of them may become subject under the
Securities Act of 1933, the Securities Exchange Act of 1934 or other federal or
state law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or an alleged untrue statement of a material
fact contained in the registration statement when it became effective, or in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made therein in reliance upon and in conformity with
certain written information furnished to the Depositor by such Underwriter,
specifically for use in the preparation thereof, and will reimburse the
Depositor for any legal or other expenses reasonably incurred by the Depositor
in connection with investigating or defending against such loss, claim, damage,
liability or action.
The Pooling and Servicing Agreement for each series of Certificates
and the Sale and Servicing Agreement for each series of Notes will provide that
no director, officer, employee or agent of the Depositor is liable to the Trust
Fund or the Certificateholders or the Issuer or the Noteholders, as applicable,
except for such person's own willful misfeasance, bad faith or gross negligence
in the performance of duties or reckless disregard of obligations and duties.
The Pooling and Servicing Agreement for each series of Certificates and the Sale
and Servicing Agreement for each series of Notes will further provide that, with
the exceptions stated above, a director, officer, employee or agent of the
Depositor is entitled to be indemnified against any loss, liability or expense
incurred in connection with legal action relating to such Pooling and Servicing
Agreement and related Certificates or such Sale and Servicing Agreement and
related Notes, as applicable, other than such expenses related to particular
Loans.
ITEM 16. EXHIBITS.
1.1 Form of Underwriting Agreement for Notes.
1.2 Form of Underwriting Agreement for Certificates.
3.1 Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
4.1 Form of Pooling and Servicing Agreement (including
form of Certificates).
4.2 Form of Trust Agreement.
4.3 Form of Indenture (including form of Notes).
4.4 Form of Sale and Servicing Agreement (relating to
Notes).
5.1 Opinion of Cadwalader, Wickersham & Taft with
respect to legality.
8.1 Opinion of Cadwalader, Wickersham & Taft with respect to certain tax
matters (included as part of Exhibit 5.1).
10.1 Form of Receivables Sale Agreement.
23.1 Consent of Cadwalader, Wickersham & Taft (included
as part of Exhibit 5.1).
24.1 Power of Attorney (included on page II-6 of this
Registration Statement).
- ------------
ITEM 17. UNDERTAKINGS.
A. Undertakings pursuant to Rule 415.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, as amended, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
The Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act (the "TIA") in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the TIA.
The Registrant hereby undertakes to provide to the underwriters at
the closing specified in the underwriting agreements certificates or notes, as
the case may be, in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser.
B. Undertaking in respect of indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, PaineWebber Asset Acceptance Corporation certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing
on Form S-3, reasonably believes that the security rating requirement contained
in Transaction Requirement B.5 of Form S-3 will be met by the time of the sale
of the securities registered hereunder, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 16th day of May,
2000.
PAINEWEBBER ASSET
ACCEPTANCE CORPORATION
By: /s/ Joseph Piscina
-------------------------------
Name: Joseph Piscina
Title: President
<PAGE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph Piscina, Daniel Leyden, Barbara Dawson,
Michael T. Sullivan, and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for and in his name,
place and stead, in any and all capacities to sign any or all amendments
(including post-effective amendments) to this Registration Statement and any or
all other documents in connection therewith, and to file the same, with all
exhibits thereto, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as might or could be done in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Joseph Piscina President and Director May 16, 2000
- --------------------------- (Principal Executive
Joseph Piscina Officer)
/s/ Daniel Leyden Senior Vice President May 16, 2000
- --------------------------- (Principal Accounting
Daniel Leyden Officer and Principal
Financial Officer)
/s/ Barbara Dawson Director May 16, 2000
- ---------------------------
Barbara Dawson
/s/ Michael T. Sullivan Director May 16, 2000
- ---------------------------
Michael T. Sullivan
<PAGE>
EXHIBIT INDEX
Number Description of Document
- ------ -----------------------
1.1 Form of Underwriting Agreement for Notes.
1.2 Form of Underwriting Agreement for Certificates.
3.1 Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
4.1 Form of Pooling and Servicing Agreement (including form of
Certificates).
4.2 Form of Trust Agreement.
4.3 Form of Indenture (including form of Notes).
4.4 Form of Sale and Servicing Agreement (relating to Notes).
5.1 Opinion of Cadwalader, Wickersham & Taft with respect to
legality.
8.1 Opinion of Cadwalader, Wickersham & Taft with respect to certain
tax matters (included as part of Exhibit 5.1).
10.1 Form of Receivables Sale Agreement.
23.1 Consent of Cadwalader, Wickersham & Taft (included as part of
Exhibit 5.1).
24.1 Power of Attorney (included on page II-6 of this Registration
Statement).
Exhibit 1.1
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
$[_____________________]
(Approximate)
[___________________] Trust
Series 200[_]-[_]
FORM OF UNDERWRITING AGREEMENT
[_____________], 200[_]
PaineWebber Incorporated
[________________________]
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
PaineWebber Asset Acceptance Corporation, a Delaware corporation (the
"COMPANY"), proposes to sell to PaineWebber Incorporated ("PWI"),
[____________________________] ("[______]"), [______________________]
("[______]"),[____________________________] ("[______]") and
[____________________________] ("[______]" and together with [_____], [_____],
[________] and PWI, the "UNDERWRITERS"), pursuant to this agreement
("AGREEMENT"), [________] Asset Backed Notes, Series 200[_]-[__], Class A-1,
Class A-2 and Class A-3 Notes (the "NOTES") issued by [______________________]
200[_]-[__], a [___________] business trust (the "OWNER TRUST" or the "ISSUER").
The Owner Trust will be formed pursuant to a trust agreement, to be dated as of
[______ __,____] (the "OWNER TRUST AGREEMENT"), among the Company, as depositor,
[_________________], as owner trustee (the "OWNER TRUSTEE"), [__________], as
paying agent ("[_________]," and in such capacity, the "PAYING AGENT") and
[___________________] ("[________]" or the "TRANSFEROR"). The Class A-1 Notes
will be secured by a pool of [_______________________________] (the
"[_________]"), the Class A-2 Notes will be secured by a pool of
[_______________________________] (the "[_________]"), and the Class A-3 Notes
will be secured by a pool of [___________________________] (the "[____________]"
and together with the [_________] and the [__________], the "[_______]") all
which represent the assets of the Owner Trust, as described in the Prospectus
(as hereinafter defined). The [_______] will be sold by the Company to the Owner
Trust pursuant to a sale and servicing agreement, to be dated as of [_____
__,.____] (the "SALE AND SERVICING AGREEMENT"), among the Owner Trust, as
issuer, the Company, as depositor, [______________], as indenture trustee (in
such capacity, the "INDENTURE TRUSTEE"), and [___________], as master servicer
and transferor. The [_________] will be sold by [_________] to the Company
pursuant to a receivables transfer agreement, to be dated as of [_____ __,____]
(the "RECEIVABLES TRANSFER AGREEMENT"), between the Company, as depositor,
<PAGE>
and [__________], as transferor. The Notes will be issued pursuant to an
indenture, to be dated as of [_____ __, ____] (the "INDENTURE"), between the
Owner Trust and the Indenture Trustee. Reference is hereby made to (i) an
indemnification and contribution agreement, dated [_____ __, ____] (the
"INDEMNIFICATION AND CONTRIBUTION AGREEMENT"), among the Company, the
Underwriters and [_______], (ii) an administration agreement, to be dated as of
[_____ __, ____] (the "ADMINISTRATION AGREEMENT"), among the Owner Trust,
[_________] (in such capacity, the "ADMINISTRATOR") and [_________] and (iii) a
custodial agreement, to be dated as of [_____ __, ____] (the "CUSTODIAL
AGREEMENT"), among [________], the Company and [________] (in such capacity, the
"CUSTODIAN"). The Receivables Transfer Agreement, the Sale and Servicing
Agreement, the Indenture, the Owner Trust Agreement, the Indemnification and
Contribution Agreement, the Custodial Agreement, the Administration Agreement
and this Agreement are collectively referred to herein as the "TRANSACTION
DOCUMENTS." The Notes are described more fully in the Prospectus (as hereinafter
defined). Only the Notes are being sold pursuant to this Agreement.
The Company has filed with the Securities and Exchange Commission
(the "COMMISSION") a registration statement on Form S-3 (No. [________]) for the
registration of the Certificates under the Securities Act of 1933 (the "1933
ACT"), which registration statement has become effective and copies of which, as
amended to the date hereof, have been delivered to each of the Underwriters. The
Company proposes to file with the Commission pursuant to Rule 424(b)(5) under
the rules and regulations of the Commission under the Act (the "1933 ACT
REGULATIONS") a prospectus supplement, dated [___________________] [_], 200[_]
(the "PROSPECTUS SUPPLEMENT"), to the prospectus, dated [___________________]
[_], 200[_], included in such registration statement, relating to the Offered
Certificates and the method of distribution thereof. Such registration statement
on Form S-3, including exhibits thereto, as amended as of the date hereof, is
hereinafter called the "REGISTRATION STATEMENT"; and such prospectus,
supplemented by the Prospectus Supplement or further supplement relating to the
Notes, is hereinafter called the "PROSPECTUS".
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to the Underwriters as follows:
(i) The Registration Statement, as amended as of the effective
date thereof (the "EFFECTIVE DATE") and the Prospectus, as of the date
thereof, complied in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations. The Registration Statement, as of
the Effective Date, did not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
as of the date thereof, did not, and as of the Closing Date will not,
contain 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;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus (a) arising from or included in
[_____________] Information (as defined in the Indemnification and
Contribution Agreement) or (b) made in reliance upon and in conformity
with information furnished to the Company in writing by each of the
Underwriters expressly for use in the Registration
-2-
<PAGE>
Statement or Prospectus. The Company and the Underwriters hereby
acknowledge that only the statements set forth in the last paragraph of
the cover of the Prospectus Supplement, under the caption "Underwriting"
in the Prospectus Supplement (other than the last paragraph under such
caption) and the Underwriter Information (as defined in Section 9(k))
contained in any Furnished Term Sheets (as defined in Section 9(d)),
constitute statements made in reliance upon and in conformity with
information furnished to the Company in writing by each of the
Underwriters expressly for use in the Registration Statement, or
Prospectus (such statements being collectively referred to as
"UNDERWRITER STATEMENTS").
(ii) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company, whether or not arising in the
ordinary course of business, and (B) there have been no transactions
entered into by the Company, other than those in the ordinary course of
business, which are material with respect to the Company, in either case
which would materially and adversely affect the Company's ability to
perform its obligations hereunder or under the Transaction Documents to
which it is a party.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own, lease and operate
its properties and to conduct its business, as now conducted by it, and
to enter into and perform its obligations under the Transaction
Documents to which it is a party; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a
material and adverse effect on the Company's ability to perform its
obligations hereunder or under any Transaction Document to which the
Company is a party.
(iv) The Company is not in violation of its charter or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company is a party, or to which any of the property or assets
of the Company may be subject, or by which it or any of them may be
bound; and the issuance and sale of the Notes to each of the
Underwriters, the execution, delivery and performance of the Transaction
Documents to which it is a party and the consummation of the
transactions contemplated therein and compliance by the Company with its
obligations thereunder have been duly authorized by all necessary
corporate action and will not conflict with or constitute a breach of,
or default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to, any material contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or
any applicable law, administrative regulation or administrative or court
decree.
-3-
<PAGE>
(v) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against or affecting
the Company, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might materially
and adversely affect Company's ability to perform its obligations
hereunder or under the Transaction Documents to which it is a party; all
pending legal or governmental proceedings to which the Company is a
party or of which its property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, are, considered in the aggregate,
not material.
(vi) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the
offering, issuance or sale of the Notes hereunder, except such as have
been, or as of the Closing Date will have been, obtained or such as may
otherwise be required under applicable state securities laws in
connection with the purchase and offer and sale of the Notes by the
Underwriters and any recordation of the respective assignments of the
[_] to the Indenture Trustee pursuant to the Indenture that have not
yet been completed.
(vii) The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to perform
its obligations hereunder or under any Transaction Document to which the
Company is a party, and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the ability of the Company to
perform its obligations hereunder or under the Transaction Documents.
(viii) Each of the Transaction Documents to which it is a party
has been duly authorized, executed and delivered by the Company and
constitutes a legal, valid and binding agreement enforceable against the
Company in accordance with its terms, except as enforceability may be
limited by (A) bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws affecting the enforcement of the rights
of creditors generally, (B) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law, and (C)
public policy considerations underlying the securities laws, to the
extent that such public policy considerations limit the enforceability
of the provisions of such Transaction Documents that purport to provide
indemnification from securities law liabilities.
(ix) At the time of the execution and delivery of the Sale and
Servicing Agreement, the Company (i) will have good and marketable title
to the [ ] being transferred by it to the Owner Trust pursuant thereto,
free and clear of any lien, mortgage, pledge, charge, encumbrance,
adverse claim or other security interest (collectively "LIENS"), to the
extent good and marketable title to the [_] is transferred to the
Company, free and clear of all Liens, by the Transferor, and (ii) will
have the power and authority to transfer such [_] to the Owner Trust,
and upon execution and delivery of the Sale and Servicing Agreement by
the Owner Trust and the Transferor, the Owner
-4-
<PAGE>
Trust will have acquired ownership of all of the Company's right, title
and interest in and to the related [ ].
(x) At the Closing Date, the Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6 and Class B Certificates will be rated
not lower than "[_____]" by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P") and "[_____]" by
Moody's Investors Service, Inc. ("MOODY'S").
(xi) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the Transaction
Documents to which it is a party and the Notes have been paid or will be
paid at or prior to the Closing Date.
(b) Any certificate signed by any officer of the Company and
delivered to the Underwriters or their counsel shall be deemed a representation
and warranty by the Company to the Underwriters as to the matters covered
thereby.
SECTION 2. PURCHASE AND SALE.
Subject to the terms and conditions herein set forth and in
reliance upon the representations and warranties herein contained, the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price set
forth on Schedule A hereto, the principal amount of the Notes set forth on
Schedule A hereto.
SECTION 3. DELIVERY AND PAYMENT.
Payment of the purchase price for, and delivery of, the Notes to
be purchased by the Underwriters shall be made at the office of PaineWebber
Incorporated, 1285 Avenue of the Americas, New York, New York 10019, or at such
other place as shall be agreed upon by the Underwriters and the Company, at
10:00 A.M. New York City time, on [_____________] [___], 200[_], which date and
time may be postponed by agreement between you and the Company (such time and
date of payment and delivery being herein called the "CLOSING DATE"). Payment
shall be made to the Company in immediately available Federal funds wired to
such bank as may be designated by the Company, against delivery of the Notes or
with respect to payments to be made by PWI, at the Company's option, by
appropriate notation of an inter-company transfer between affiliates of
PaineWebber Group, Inc. The Notes shall be in such denominations and registered
in such names as you may request in writing at least two business days before
Closing Date. The Notes will be made available for examination and packaging by
you not later than 10:00 A.M. on the last business day prior to Closing Date.
SECTION 4. COVENANTS OF THE COMPANY. The Company covenants
with each of the Underwriters as follows:
(a) The Company will give the Underwriters notice of its
intention to file or prepare any amendment to the Registration Statement or any
amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use by the Underwriters in connection with the
offering of the Notes which differs from the prospectus on file at the
Commission at the time the Registration Statement becomes effective, whether or
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not such revised prospectus is required to be filed pursuant to Rule 424(b) of
the 1933 Act Regulations), will furnish the Underwriters with copies of any such
amendment or supplement a reasonable amount of time prior to such proposed
filing or use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which you shall reasonably object.
(b) The Company will cause the Prospectus to be transmitted to
the Commission for filing pursuant to Rule 424(b)(5) under the 1933 Act by means
reasonably calculated to result in filing with the Commission pursuant to said
rule.
(c) The Company will deliver to the Underwriters as many signed
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein) as the Underwriters may reasonably request and will also deliver to the
Underwriters a conformed copy of the Registration Statement as originally filed
and of each amendment thereto (without exhibits).
(d) The Company will furnish to each of the Underwriters, from
time to time during the period when the Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 ACT"), such
number of copies of the Prospectus (as amended or supplemented) as each of the
Underwriters may reasonably request for the purposes contemplated by the 1933
Act or the 1934 Act or the respective applicable rules and regulations of the
Commission thereunder.
(e) If during the period after the first date of the public
offering of the Notes in which a prospectus relating to the Notes is required to
be delivered under the 1933 Act, any event shall occur as a result of which it
is necessary, in the opinion of counsel for you, to amend or supplement the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, the Company
will forthwith amend or supplement the Prospectus (in form and substance
satisfactory to counsel for you) so that, as so amended or supplemented, the
Prospectus will not include an 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 existing at the time it is delivered to a purchaser,
not misleading, and the Company will furnish to the Underwriters a reasonable
number of copies of such amendment or supplement. Neither your consent to nor
your delivery of, any such amendment or supplement shall constitute a waiver of
any of the conditions set forth in Section 5 hereof.
(f) The Company will endeavor to arrange for the qualification of
the Notes for sale under the applicable securities laws of such states and other
jurisdictions of the United States as the Underwriters may designate; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation in any jurisdiction in which it is not so qualified. In each
jurisdiction in which the Notes have been so qualified, the Company will file
such statements and reports as may be required by the laws of such jurisdiction
to continue such qualification in effect for a period of not less than one year
from the effective date of the Registration Statement.
(g) If the transactions contemplated by this Agreement are
consummated, the Company will pay or cause to be paid all expenses incident to
the performance of the obligations
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of the Company under this Agreement, and will reimburse the Underwriters for any
reasonable expenses (including reasonable fees and disbursements of counsel)
reasonably incurred by them in connection with qualification of the Notes for
sale and determination of their eligibility for investment under the laws of
such jurisdictions as the Underwriters have reasonably requested and the
printing of memoranda relating thereto, for any fees charged by investment
rating agencies for the rating of the Notes, and for expenses incurred in
distributing the Prospectus (including any amendments and supplements thereto)
to the Underwriters. Except as herein provided, the Underwriters shall be
responsible for paying all costs and expenses incurred by each including the
fees and disbursements of counsel, in connection with the purchase and sale of
the Notes.
(h) If, during the period after the Closing Date in which a
prospectus relating to the Notes is required to be delivered under the 1933 Act,
the Company receives notice that a stop order suspending the effectiveness of
the Registration Statement or preventing the offer and sale of the Notes is in
effect, the Company will immediately advise the Underwriters of the issuance of
such stop order. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
Underwriters' obligation to purchase the Offered Certificates shall be subject
to the following conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for that purpose
shall be pending or, to the Company's knowledge, threatened by the Commission.
(b) At Closing Date the Underwriters shall have received:
(i) The favorable opinion, dated as of the Closing Date, of John
Fearey, Esq. General Counsel for the Company, in form and substance
satisfactory to the Underwriters.
(ii) The favorable opinion, dated as of the Closing Date, of
Cadwalader, Wickersham & Taft, counsel for the Company, in form and
substance satisfactory to the Underwriters.
(c) On the Closing Date, there shall not have been, since the
date hereof or since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company, whether or not arising in the ordinary course
of business, and the Underwriters shall have received a certificate of the
President or a Vice President of the Company, dated as of the Closing Date, to
the effect that (i) the representations and warranties in Section 1 hereof are
true and correct with the same force and effect as though expressly made at and
as of the Closing Date, (ii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
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the Closing Date, and (iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been initiated or threatened by the Commission.
(d) On the Closing Date counsel for the Underwriters shall have
been furnished with such other documents and opinions as counsel may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Notes as herein contemplated and related proceedings, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Notes as
herein contemplated shall be satisfactory in form and substance to the
Underwriters and counsel for the Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriters by notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party.
SECTION 6. INDEMNIFICATION. The Company and each of the
Underwriters agree that:
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant to
Rule 430A(b) of the 1933 Act Regulations, if applicable, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, the fees and disbursements of counsel chosen by you),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
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agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission (a) arising from
or included in the [________] Information, (b) made in the Underwriter
Statements or (c) arising out of or based upon the failure of any Underwriter to
comply with any provision of Section 9.
(b) Each Underwriter agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to (i) untrue statements or
omissions, or alleged untrue statements or omissions, made in the Underwriter
Statements or (ii) the failure of such Underwriter or any member of its selling
group to comply with any provision of Section 9. Only the Underwriter who failed
to comply with Section 9 shall have the foregoing obligations for such failure,
provided however, that each such Underwriter shall have the foregoing
obligations for any such failure by any member of its selling group.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have to any indemnified party otherwise than under
the provisions of Section 3 of the Indemnification and Contribution Agreement
unless and only to the extent that, such omission results in the forfeiture of
substantive rights or defenses by the indemnifying party. In case any such
action is brought against any indemnified party and it notifies the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, the indemnifying party elects to assume the defense thereof,
it may participate (jointly with any other indemnifying party similarly
notified) with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party or parties shall have
reasonably concluded that there may be legal defenses available to it or them
and/or other indemnified parties that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying party
to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of such counsel, the indemnifying
party shall not be liable to such indemnified party under this paragraph for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, unless (i) the indemnified party shall have
employed separate counsel (plus any local counsel) in connection with the
assertion of legal defenses in accordance with the proviso to the immediately
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
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a reasonable time after notice of commencement of the action, (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, or (iv) a conflict or potential
conflict exists (based on 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). Unless it shall assume the defense of any proceeding,
the indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party shall
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. If any indemnifying party assumes the defense of
any proceeding, it shall not settle, compromise or consent to the entry of any
judgment with respect thereto if indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes any unconditional release of each indemnified party from
all liability arising out of such proceeding and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) Each Underwriter will indemnify and hold harmless each other
Underwriter and each person, if any, who controls each such Underwriter within
the meaning of either the 1933 Act or the 1934 Act (a "NON-INDEMNIFYING
UNDERWRITER") from and against any and all losses, claims, damages or
liabilities, joint or several, to which such Non-Indemnifying Underwriter
becomes subject under the 1933 Act, the 1934 Act or other federal or state
statutory law or regulation, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon (i) any untrue statement of material fact contained in any
computational or other written materials developed by, mailed or otherwise
transmitted by such indemnifying Underwriter or any member of its selling group,
in connection with the Notes or in any revision or amendment thereof or
supplement thereto or (ii) the failure of such indemnifying Underwriter, or any
member of its selling group, to comply with any provision of Section 9, and
agrees to reimburse each such Non-Indemnifying Underwriter, as incurred for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
SECTION 7. CONTRIBUTION. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 6 hereof is for any reason held to be unenforceable by
the indemnified parties although applicable in accordance with its terms, the
Company and each Underwriter shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature contemplated by such
indemnity agreement incurred by the Company and each Underwriter, as incurred,
in such proportion as is appropriate to reflect not only the relative benefits
received by the Company on the one hand and each Underwriter on the other from
the offering of the Notes but also the relative fault of the Company on the one
hand and the Underwriter on the other in connection with the statements or
omissions which resulted on such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of each Underwriter on the other shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact relates to information supplied by the Company or
by such Underwriter, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided,
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however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) or willful failure to comply with
Section 9 shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation or failure to comply with Section 9 hereto,
as the case may be. For purposes of this Section, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as such Underwriter, and each director of
the Company, each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act shall have the same rights to contribution as the Company.
This indemnity agreement will be in addition to any liability that any
Underwriter may otherwise have. Notwithstanding the provisions of this Section
7, no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Notes underwritten by it and
distributed to the public were sold to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
SECTION 8. DEFAULT BY AN UNDERWRITER.
(a) If, on the Closing Date, any Underwriter defaults in the
performance of its obligations under this Agreement and the aggregate principal
amount of Notes that such defaulting Underwriter or Underwriters agreed but
failed to purchase does not exceed 10% of the total principal amount of Notes
that the Underwriters are obligated to purchase on the Closing Date, the
non-defaulting Underwriters may make arrangements for the purchase of the Notes
which such defaulting Underwriter agreed but failed to purchase by other persons
satisfactory to the Company and the non-defaulting Underwriters. If any
Underwriter or Underwriters so default and the aggregate principal amount of
Notes with respect to which such default or defaults occur exceeds 10% of the
total principal amount of Notes that the Underwriters are obligated to purchase
on such Closing Date and arrangements satisfactory to the non-defaulting
Underwriters and the Company for the purchase of such Notes by other persons are
not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of the non-defaulting Underwriter or the Company,
except that the Company will continue to be liable for the payment of expenses
to the extent set forth in Section 4(h) and except that the provisions of
Sections 6, 7 and 9 shall not terminate and shall remain in effect. As used in
this Agreement, the term "Underwriters" includes, for all purposes of this
Agreement unless the context otherwise requires, any party not listed in
Schedule 1 hereto that, pursuant to this Section 8 purchases Notes which a
defaulting Underwriter agreed but failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company or any non-defaulting
Underwriter for damages caused by its default. If other persons are obligated or
agree to purchase the Notes of a defaulting Underwriter, either the
non-defaulting Underwriters or the Company may postpone the Closing Date for up
to seven full business days in order to effect any changes that in the opinion
of the counsel for the Company or counsel for the Underwriters may be necessary
in the Registration Statement and/or the Prospectus or in any other document or
arrangement, and the Company agrees to promptly prepare any amendment or
supplement to the Registration Statement and/or the Prospectus that effects any
such changes.
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SECTION 9. COMPUTATIONAL MATERIALS AND ABS TERM SHEETS.
(a) The parties acknowledge that, subsequent to the date on which
the Registration Statement became effective and up to and including the date on
which the Prospectus with respect to the Notes is first made available to the
Underwriters, the Underwriters, including any member of its selling group, may
furnish to various potential investors in Notes, in writing: (i) "COMPUTATIONAL
MATERIALS," as defined in a no-action letter (the "KIDDER NO-ACTION LETTER")
issued by the staff of the Commission on May 20, 1994 to Kidder, Peabody
Acceptance Corporation I, et al., as modified by a no-action letter (the "FIRST
PSA NO-ACTION LETTER") issued by the staff of the Commission on May 27, 1994 to
the Public Securities Association (the "PSA") and as further modified by a
no-action letter (the "SECOND PSA NO-ACTION LETTER," and together with the
Kidder No-Action Letter and the First PSA No-Action Letter, the "NO-ACTION
LETTERS") issued by the staff of the Commission on February 17, 1995 to the PSA;
(ii) "STRUCTURAL TERM SHEETS," as defined in the Second PSA No-Action Letter
and/or (iii) "COLLATERAL TERM SHEETS," as defined in the Second PSA No-Action
Letter
(b) In connection with the Notes, each Underwriter shall furnish
to the Company, at least one business day prior to the time of filing of the
Prospectus pursuant to Rule 424 under the 1933 Act, all Computational Materials
used by such Underwriter, or any member of its selling group, and required to be
filed with the Commission in order for such Underwriter to avail itself of the
relief granted in the No-Action Letters (such Computational Materials, the
"FURNISHED COMPUTATIONAL MATERIALS").
(c) In connection with the Notes, each Underwriter shall furnish
to the Company, at least one business day prior to the time of filing of the
Prospectus pursuant to Rule 424 under the 1933 Act, all Structural Term Sheets
used by such Underwriter, or any member of its selling group, and required to be
filed with the Commission in order for such Underwriter to avail itself of the
relief granted in the No-Action Letters (such Structural Term Sheets, the
"FURNISHED STRUCTURAL TERM SHEETS").
(d) In connection with the Notes, each Underwriter shall furnish
to the Company, within one business day after the first use thereof, all
Collateral Term Sheets used by such Underwriter, or any member of its selling
group, and required to be filed with the Commission in order for such
Underwriter to avail itself of the relief granted in the No-Action Letters (such
Collateral Term Sheets, the "FURNISHED COLLATERAL TERM SHEETS" and together with
the Furnished Structural Term Sheets, the "FURNISHED TERM SHEETS") and shall
advise the Company of the date on which each such Collateral Term Sheet was
first used.
(e) The Company shall cause to be filed with the Commission one
or more current reports on Form 8-K (collectively, together with any amendments
and supplements thereto, the "8-KS," and each an "8-K") with respect to all
Furnished Computational Materials, Structural Term Sheets and Collateral Term
Sheets used by an Underwriter or any member of its selling group such that such
Underwriter may avail itself of the relief granted in the No-Action Letters. In
particular, the Company shall cause to be filed with the Commission (i) all of
the Furnished Computational Materials and all of the Furnished Structural Term
Sheets on an 8-K prior to or concurrently with the filing of the final
Prospectus with respect to the Notes pursuant
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to Rule 424 under the 1933 Act; and (ii) all of its Furnished Collateral Term
Sheets on an 8-K not later than two business days after the first use thereof.
(f) Each Underwriter represents and warrants to, and covenants
with, the Company that as presented in any Furnished Term Sheets, the
Underwriter Information (defined below) is not misleading and not inaccurate in
any material respect and that any Pool Information (defined below) contained in
any Furnished Term Sheets prepared by it which is not otherwise inaccurate in
any material respect is not presented in such Furnished Term Sheets prepared by
it in a way that is either misleading or inaccurate in any material respect.
Each Underwriter further covenants with the Company that if any Computational
Materials or ABS Term Sheets (as such term is defined in the Second PSA
No-Action Letter) contained in any Furnished Term Sheets are found to include
any information that is misleading or inaccurate in any material respect, such
Underwriter promptly shall inform the Company of such finding and provide the
Company with revised and/or corrected Computational Materials or ABS Term
Sheets, as the case may be and the Company shall cause to be delivered for
filing to the Commission in accordance herewith, an 8-K containing such revised
and/or corrected Computational Materials or ABS Term Sheets, as the case may be.
(g) Each Underwriter covenants that all Computational Materials
and ABS Term Sheets used by it shall contain the following legend:
"THE INFORMATION INCLUDED HEREIN IS PRODUCED AND PROVIDED
EXCLUSIVELY BY [UNDERWRITER] ("UNDERWRITER") AS UNDERWRITER FOR
THE ____________________________ TRUST 200[_]-[__], AND NOT BY OR
AS AGENT FOR ________________________ OR ANY OF ITS AFFILIATES
(COLLECTIVELY, THE "TRANSFEROR")."
(h) Each Underwriter covenants that all Collateral Term Sheets
used by it shall contain the following additional legend:
"THE INFORMATION HEREIN IS PRELIMINARY, AND WILL BE SUPERSEDED BY
THE APPLICABLE PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION
SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION."
(i) Each Underwriter covenants that all Collateral Term Sheets
(other than the initial Collateral Term Sheet) shall contain the following
additional legend:
"THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN
ALL PRIOR COLLATERAL TERM SHEETS, IF ANY."
(j) Notwithstanding the foregoing, subsection 9(g) will be
satisfied if all Computational Materials and ABS Term Sheets referred to therein
bear a legend in a form approved by the Company.
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(k) For purposes of this Agreement, the term "UNDERWRITER
INFORMATION" means such portion, if any, of the information contained in any
Furnished Term Sheets that is not Pool Information or Prospectus Information;
provided, however, that information contained in Furnished Term Sheets that is
not Pool Information or Prospectus Information shall not constitute Underwriter
Information to the extent such information is inaccurate or misleading in any
material respect directly as a result of it being based on Pool Information or
Prospectus Information that is inaccurate or misleading in any material respect.
"POOL INFORMATION" means the information furnished to the Underwriters by the
Company regarding the [ ] and "PROSPECTUS INFORMATION" means the information
contained in (but not incorporated by reference in) any Prospectus, provided,
however, that if any information that would otherwise constitute Pool
Information or Prospectus Information is presented in any Furnished Term Sheets
in a way that is either inaccurate or misleading in any material respect, such
information shall not be Pool Information or Prospectus Information.
SECTION 10. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Notes to the Underwriters.
SECTION 11. TERMINATION OF AGREEMENT.
(a) The Underwriters may terminate this Agreement, by notice to
the Company, at any time at or prior to the Closing Date without liability on
the part of any Underwriter to the Company, if, prior to delivery and payment
for the Notes, (i) there has occurred any material adverse change in the
financial markets in the United States or elsewhere or any outbreak of
hostilities or escalation thereof or other calamity or crisis the effect of
which is such as to make it, in the judgment of the Underwriters, impracticable
to market the Notes on the terms and in the manner contemplated by the
Prospectus, or (ii) if trading generally on either the American Stock Exchange
or the New York Stock Exchange has been suspended, or minimum or maximum prices
for trading have been fixed, or maximum ranges for prices for securities have
been required, by either of said Exchanges or by order of the Commission or any
other governmental authority, or if a banking moratorium has been declared by
either Federal or New York authorities.
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SECTION 12. NOTICES. All notices and other communications
hereunder shall be in writing and effective only on receipt and shall have been
duly given if mailed via the U.S. Postal Service and a reputable overnight
delivery service, hand delivered, sent by facsimile transmission or another
reasonable and standard form of telecommunication. Notices to PWI shall be
directed to PaineWebber Incorporated at 1285 Avenue of the Americas, New York,
New York 10019, Attention: John Fearey, Esq.; notices to [__________] shall be
directed to [____________________________], Attention: [_______________]; and
notices to the Company shall be directed to it at PaineWebber Asset Acceptance
Corporation, 1285 Avenue of the Americas, New York, New York 10019, attention of
the Secretary with a copy to the Treasurer; or, as to any party, such other
address as may hereafter be furnished by such party to the other parties in
writing.
SECTION 13. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Section 6 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters and the Company and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Notes from the Underwriters shall be deemed to be a
successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW; TIME; JURISDICTION; WAIVER OF
OBJECTION TO VENUE. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State. Specified times of day refer to New York City
time.
SECTION 15. EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION.
This Agreement may be executed in any number of counterparts, each of which
shall for all purposes be deemed to be an original and all of which when taken
together shall constitute but one and the same Agreement. In case any provision
in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and shall constitute entire Agreement among the parties
hereto with respect to the subject matter hereof, superseding all prior oral or
written understandings.
[SIGNATURE PAGE FOLLOWS]
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this Agreement, along with all counterparts, will become a binding agreement
among each of the Underwriters and the Company in accordance with its terms.
Very truly yours,
PAINEWEBBER ASSET
ACCEPTANCE CORPORATION
By:
Name: ______________________________
Title: _______________________________
CONFIRMED AND ACCEPTED, as of the date first above written:
PAINEWEBBER INCORPORATED
By:
Name: __________________________
Title: ___________________________
[___________________________]
By:
Name: __________________________
Title: ___________________________
-16-
<PAGE>
Exhibit 1.1
<TABLE>
SCHEDULE A
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Aggregate Principal Amount Purchase Price as a
Aggregate Principal Amount or Notional Amount of percentage
Class of Notes to be Purchased(1) Notes to be Purchased by of the Aggregate Principal
by PWI [__________] Amount of Notes to be
Purchased
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Class A-1 $ $ $
Class A-2 $ $ $
Class A-3 $ $ $
Class A-4 $ $ $
Class A-5 $ $ $
Class A-6 $ $ $
Class B $ $ $
- ------------------------------------------------------------------------------------------------------
<FN>
___________________
(1) Subject to a variance of plus or minus 5%.
</FN>
</TABLE>
Exhibit 1.2
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
$[_____________________]
(Approximate)
[___________________] Trust
Series 200[_]-[_]
FORM OF UNDERWRITING AGREEMENT
[_____________], 200[_]
PaineWebber Incorporated
[_____________]
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
PaineWebber Asset Acceptance Corporation, a Delaware corporation
(the "COMPANY"), proposes to cause to be issued Asset Backed Certificates,
Series [___], 200[_] (the "CERTIFICATES"), consisting of 9 classes designated as
the Class A-1, Class A-2, Class A-3, Class A-4, Class A-5, Class A-6, Class B,
Class R-I, Class R-II and Class R-III Certificates under a Pooling and Servicing
Agreement, dated as of [____________] [__], 200[_] (the "POOLING AND SERVICING
AGREEMENT"), among the Company, [_____________________], as master servicer and
transferor ("[___________]"), and [___________________________], as trustee (the
"TRUSTEE"), and proposes to sell the Class A-1, Class A-2, Class A-3, Class A-4,
Class A-5, Class A-6 and Class B Certificates (the "OFFERED CERTIFICATES") to
PaineWebber Incorporated ("PWI") and [________________] ("[__________]") and
together with PWI, the "UNDERWRITERS"), pursuant to this agreement
("AGREEMENT"). The Certificates will represent in the aggregate the entire
beneficial ownership interest in a trust fund (the "TRUST FUND") primarily
consisting of a pool of [_____________] evidenced by [_____________] and secured
primarily by [_____________] (the "[_____________]"). The [_____________] will
be purchased by the Company from [_______________] pursuant to the Receivables
Acquisition Agreement (the "RECEIVABLES ACQUISITION AGREEMENT"), by and between
the Company and [_______________], in exchange for immediately available funds.
The Certificates are described more fully in the Prospectus (as hereinafter
defined). The Pooling and Servicing Agreement, the Receivables Acquisition
Agreement, the Indemnification and Contribution Agreement and this Agreement are
collectively referred to herein as the "Transaction Documents." Only the Offered
Certificates are being sold pursuant to this Agreement.
The Company has filed with the Securities and Exchange Commission
(the "COMMISSION") a registration statement on Form S-3 (No. [________]) for the
registration of the Certificates under the Securities Act of 1933 (the "1933
ACT"), which registration statement has
<PAGE>
become effective and copies of which, as amended to the date hereof, have been
delivered to each of the Underwriters. The Company proposes to file with the
Commission pursuant to Rule 424(b)(5) under the rules and regulations of the
Commission under the Act (the "1933 ACT REGULATIONS") a prospectus supplement,
dated [___________________] [_], 200[_] (the "PROSPECTUS SUPPLEMENT"), to the
prospectus, dated [___________________] [_], 200[_], included in such
registration statement, relating to the Offered Certificates and the method of
distribution thereof. Such registration statement on Form S-3, including
exhibits thereto, as amended as of the date hereof, is hereinafter called the
"REGISTRATION STATEMENT"; and such prospectus, supplemented by the Prospectus
Supplement or further supplement relating to the Offered Certificates, is
hereinafter called the "PROSPECTUS".
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to the Underwriters as
follows:
(i) The Registration Statement, as amended as of the effective
date thereof (the "EFFECTIVE DATE") and the Prospectus, as of the date
thereof, complied in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations. The Registration Statement, as of
the Effective Date, did not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading. The Prospectus,
as of the date thereof, did not, and as of the Closing Date will not,
contain 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;
provided, however, that the representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or Prospectus (a) arising from or included in [ ]
Information (as defined in the Indemnification and Contribution
Agreement) or (b) made in reliance upon and in conformity with
information furnished to the Company in writing by each of the
Underwriters expressly for use in the Registration Statement or
Prospectus. The Company and the Underwriters hereby acknowledge that
only the statements set forth in the last paragraph of the cover of the
Prospectus Supplement, under the caption "Underwriting" in the
Prospectus Supplement (other than the last paragraph under such caption)
and the Underwriter Information (as defined in Section 9(k)) contained
in any Furnished Term Sheets (as defined in Section 9(d)), constitute
statements made in reliance upon and in conformity with information
furnished to the Company in writing by each of the Underwriters
expressly for use in the Registration Statement, or Prospectus (such
statements being collectively referred to as "UNDERWRITER STATEMENTS").
(ii) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, except as otherwise
stated therein, (A) there has been no material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company, whether or not arising in the
ordinary course of business, and (B) there have been no transactions
entered into by the Company, other than those in the ordinary course of
business, which are material with respect to the Company, in either case
which would materially and adversely affect
-2-
<PAGE>
the Company's ability to perform its obligations hereunder or under the
Transaction Documents to which it is a party.
(iii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with corporate power and authority to own, lease and operate
its properties and to conduct its business, as now conducted by it, and
to enter into and perform its obligations under the Transaction
Documents to which it is a party; and the Company is duly qualified as a
foreign corporation to transact business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a
material and adverse effect on the Company's ability to perform its
obligations hereunder or under any Transaction Document to which the
Company is a party.
(iv) The Company is not in violation of its charter or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any material contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which the Company is a party, or to which any of the property or assets
of the Company may be subject, or by which it or any of them may be
bound; and the issuance and sale of the Offered Certificates to each of
the Underwriters, the execution, delivery and performance of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated therein and compliance by the Company with its
obligations thereunder have been duly authorized by all necessary
corporate action and will not conflict with or constitute a breach of,
or default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company
pursuant to, any material contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company is a party or by
which it or any of them may be bound, or to which any of the property or
assets of the Company is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or
any applicable law, administrative regulation or administrative or court
decree.
(v) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened, against or affecting
the Company, which is required to be disclosed in the Registration
Statement (other than as disclosed therein), or which might materially
and adversely affect Company's ability to perform its obligations
hereunder or under the Transaction Documents to which it is a party; all
pending legal or governmental proceedings to which the Company is a
party or of which its property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business, are, considered in the aggregate,
not material.
(vi) No authorization, approval or consent of any court or
governmental authority or agency is necessary in connection with the
offering, issuance or sale of the Offered Certificates hereunder, except
such as have been, or as of the Closing Date will have been, obtained or
such as may otherwise be required under applicable state securities laws
in connection with the purchase and offer and sale of the Offered
Certificates by the Underwriters and any recordation of the
respective assignments of the
-3-
<PAGE>
[ ] to the Trustee pursuant to the Pooling and Servicing Agreement that
have not yet been completed.
(vii) The Company possesses all material licenses,
certificates, authorities or permits issued by the appropriate state,
federal or foreign regulatory agencies or bodies necessary to perform
its obligations hereunder or under any Transaction Document to which the
Company is a party, and the Company has not received any notice of
proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the ability of the Company to
perform its obligations hereunder or under the Transaction Documents.
(viii) Each of the Transaction Documents to which it is a party
has been duly authorized, executed and delivered by the Company and
constitutes a legal, valid and binding agreement enforceable against the
Company in accordance with its terms, except as enforceability may be
limited by (A) bankruptcy, insolvency, reorganization, receivership,
moratorium or other similar laws affecting the enforcement of the rights
of creditors generally, (B) general principles of equity, whether
enforcement is sought in a proceeding in equity or at law, and (C)
public policy considerations underlying the securities laws, to the
extent that such public policy considerations limit the enforceability
of the provisions of such Transaction Documents that purport to provide
indemnification from securities law liabilities.
(ix) At the time of the execution and delivery of the Pooling
and Servicing Agreement, the Company (i) will have good and marketable
title to the [ ] being transferred by it to the Trust Fund pursuant
thereto, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively
"LIENS"), to the extent good and marketable title to the [ ] is
transferred to the Company, free and clear of all Liens, by the
Transferor, and (ii) will have the power and authority to transfer such
[ ] to the Trust Fund, and upon execution and delivery of the Pooling
and Servicing Agreement by the Trust Fund and the Transferor, the Trust
Fund will have acquired ownership of all of the Company's right, title
and interest in and to the related [ ].
(x) At the Closing Date, the Class A-1, Class A-2, Class A-3,
Class A-4, Class A-5, Class A-6 and Class B Certificates will be rated
not lower than "[_____]" by [Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P")] and "[_____]" by
[Moody's Investors Service, Inc. ("MOODY'S")].
(xi) Any taxes, fees and other governmental charges in
connection with the execution, delivery and issuance of the Transaction
Documents to which it is a party and the Offered Certificates have been
paid or will be paid at or prior to the Closing Date.
(b) Any certificate signed by any officer of the Company and
delivered to each of the Underwriters or each of the Underwriters' respective
counsel shall be deemed a representation and warranty by the Company to each of
the Underwriters as to the matters covered thereby.
-4-
<PAGE>
SECTION 2. PURCHASE AND SALE.
Subject to the terms and conditions herein set forth and in
reliance upon the representations and warranties herein contained, the Company
agrees to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at a purchase price set
forth on Schedule A hereto, the principal amount of the Offered Certificates set
forth on Schedule A hereto.
SECTION 3. DELIVERY AND PAYMENT.
Payment of the purchase price for, and delivery of, the Offered
Certificates to be purchased by the Underwriters shall be made at the office of
PaineWebber Incorporated, 1285 Avenue of the Americas, New York, New York 10019,
or at such other place as shall be agreed upon by the Underwriters and the
Company, at 10:00 A.M. New York City time, on [_____________] [___], 200[_],
which date and time may be postponed by agreement between you and the Company
(such time and date of payment and delivery being herein called the "CLOSING
DATE"). Payment shall be made to the Company, in immediately available Federal
funds wired to such bank as may be designated by the Company, against delivery
of the Offered Certificates or with respect to payments to be made by PWI, at
the Company's option, by appropriate notation of an intercompany transfer
between affiliates of PaineWebber Group, Inc. The Offered Certificates shall be
in such denominations and registered in such names as you may request in writing
at least two business days before Closing Date. The Offered Certificates will be
made available for examination and packaging by you not later than 10:00 A.M. on
the last business day prior to Closing Date.
SECTION 4. COVENANTS OF THE COMPANY. The Company covenants
with each of the Underwriters as follows:
(a) The Company will give the Underwriters notice of its
intention to file or prepare any amendment to the Registration Statement or any
amendment or supplement to the Prospectus (including any revised prospectus
which the Company proposes for use by the Underwriters in connection with the
offering of the Offered Certificates which differs from the prospectus on file
at the Commission at the time the Registration Statement becomes effective,
whether or not such revised prospectus is required to be filed pursuant to Rule
424(b) of the 1933 Act Regulations), will furnish the Underwriters with copies
of any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such amendment
or supplement or use any such prospectus to which you shall reasonably object.
(b) The Company will cause the Prospectus to be transmitted to
the Commission for filing pursuant to Rule 424(b)(5) under the 1933 Act by means
reasonably calculated to result in filing with the Commission pursuant to said
rule.
(c) The Company will deliver to the Underwriters as many signed
copies of the Registration Statement as originally filed and of each amendment
thereto (including exhibits filed therewith or incorporated by reference
therein) as the Underwriters may reasonably request
-5-
<PAGE>
and will also deliver to the Underwriters a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without exhibits).
(d) The Company will furnish to each of the Underwriters, from
time to time during the period when the Prospectus is required to be delivered
under the 1933 Act or the Securities Exchange Act of 1934 (the "1934 ACT"), such
number of copies of the Prospectus (as amended or supplemented) as each of the
Underwriters may reasonably request for the purposes contemplated by the 1933
Act or the 1934 Act or the respective applicable rules and regulations of the
Commission thereunder.
(e) If during the period after the first date of the public
offering of the Offered Certificates in which a prospectus relating to the
Offered Certificates is required to be delivered under the 1933 Act, any event
shall occur as a result of which it is necessary, in the opinion of counsel for
you, to amend or supplement the Prospectus in order to make the Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, the Company will forthwith amend or supplement the
Prospectus (in form and substance satisfactory to counsel for you) so that, as
so amended or supplemented, the Prospectus will not include an 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 existing at the time
it is delivered to a purchaser, not misleading, and the Company will furnish to
the Underwriters a reasonable number of copies of such amendment or supplement.
(f) The Company will endeavor to arrange for the qualification of
the Offered Certificates for sale under the applicable securities laws of such
states and other jurisdictions of the United States as the Underwriters may
designate; provided, however, that the Company shall not be obligated to qualify
as a foreign corporation in any jurisdiction in which it is not so qualified. In
each jurisdiction in which the Offered Certificates have been so qualified, the
Company will file such statements and reports as may be required by the laws of
such jurisdiction to continue such qualification in effect for a period of not
less than one year from the effective date of the Registration Statement.
(g) If the transactions contemplated by this Agreement are
consummated, the Company will pay or cause to be paid all expenses incident to
the performance of the obligations of the Company under this Agreement, and will
reimburse the Underwriters for any reasonable expenses (including reasonable
fees and disbursements of counsel) reasonably incurred by each of them in
connection with qualification of the Offered Certificates for sale and
determination of their eligibility for investment under the laws of such
jurisdictions as the Underwriters have reasonably requested and the printing of
memoranda relating thereto, for any fees charged by investment rating agencies
for the rating of the Offered Certificates, and for expenses incurred by each of
them in distributing the Prospectus (including any amendments and supplements
thereto) to the Underwriters. Except as herein provided, the Underwriters shall
be responsible for paying all costs and expenses incurred by each of them
including the fees and disbursements of counsel, in connection with the purchase
and sale of the Offered Certificates.
(h) If, during the period after the Closing Date in which a
prospectus relating to the Offered Certificates is required to be delivered
under the 1933 Act, the Company receives notice that a stop order suspending the
effectiveness of the Registration Statement or preventing
-6-
<PAGE>
the offer and sale of the Offered Certificates is in effect, the Company will
immediately advise the Underwriters of the issuance of such stop order. The
Company will make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at the
earliest possible moment.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
Underwriters' obligation to purchase the Offered Certificates shall be subject
to the following conditions:
(a) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for that purpose
shall be pending or, to the Company's knowledge, threatened by the Commission.
(b) At Closing Date the Underwriters shall have received:
(i) The favorable opinion, dated as of the Closing Date, of
John Fearey, Esq. General Counsel for the Company, in form and
substance satisfactory to the Underwriters.
(ii) The favorable opinion, dated as of the Closing Date, of
Cadwalader, Wickersham & Taft, counsel for the Company, in form and
substance satisfactory to the Underwriters.
(c) On the Closing Date, there shall not have been, since the
date hereof or since the respective dates as of which information is given in
the Registration Statement and the Prospectus, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company, whether or not arising in the ordinary course
of business, and the Underwriters shall have received a certificate of the
President or a Vice President of the Company, dated as of the Closing Date, to
the effect that (i) the representations and warranties in Section 1 hereof are
true and correct with the same force and effect as though expressly made at and
as of the Closing Date, (ii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
the Closing Date, and (iii) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been initiated or threatened by the Commission.
(d) On the Closing Date counsel for the Underwriters shall have
been furnished with such other documents and opinions as counsel may reasonably
require for the purpose of enabling them to pass upon the issuance and sale of
the Offered Certificates as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Offered
Certificates as herein contemplated shall be satisfactory in form and substance
to the Underwriters and counsel for the Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Underwriters by notice to the Company at any time at or prior to the
Closing Date, and such termination shall be without liability of any party to
any other party.
-7-
<PAGE>
SECTION 6. INDEMNIFICATION. The Company and each of the
Underwriters agree that:
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter within the
meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant to
Rule 430A(b) of the 1933 Act Regulations, if applicable, or the omission
or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including, the fees and disbursements of counsel chosen by you),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under (i) or (ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission (a) arising from
or included in the [_________________] Information, (b) made in the Underwriter
Statements or (c) arising out of or based upon the failure of any Underwriter to
comply with any provision of Section 9.
(b) Each Underwriter agrees to indemnify and hold harmless the
Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act against any and all loss, liability, claim, damage
and expense described in the indemnity contained in subsection (a) of this
Section, as incurred, but only with respect to (i) untrue statements or
omissions, or alleged untrue statements or omissions, made in the Underwriter
Statements or (ii) the failure of such Underwriter or any member of its selling
group to comply with any provision of Section 9. Only the Underwriter who failed
to comply with Section 9 shall have the foregoing obligations for
-8-
<PAGE>
such failure, provided however, that each such Underwriter shall have the
foregoing obligations for any such failure by any member of its selling group.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability which it may have to any indemnified party otherwise than on
account of this indemnity agreement. In case any such action is brought against
any indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that, by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, the
indemnifying party elects to assume the defense thereof, it may participate
(jointly with any other indemnifying party similarly notified) with counsel
satisfactory to such indemnified party; provided, however, that if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have reasonably
concluded that there may be legal defenses available to it or them and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of such counsel, the indemnifying party shall not be
liable to such indemnified party under this paragraph for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof, unless (i) the indemnified party shall have employed separate
counsel (plus any local counsel) in connection with the assertion of legal
defenses in accordance with the proviso to the immediately preceding sentence,
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action, (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party, or (iv) a conflict or potential conflict exists (based
on 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).
Unless it shall assume the defense of any proceeding, the indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party shall indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. If any indemnifying party assumes the defense of any
proceeding, it shall not settle, compromise or consent to the entry of any
judgment with respect thereto if indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes any unconditional release of each indemnified party from
all liability arising out of such proceeding and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) Each Underwriter will indemnify and hold harmless each other
Underwriter and each person, if any, who controls each such Underwriter within
the meaning of
-9-
<PAGE>
either the 1933 Act or the 1934 Act (a "NON-INDEMNIFYING UNDERWRITER") from and
against any and all losses, claims, damages or liabilities, joint or several, to
which such Non-Indemnifying Underwriter becomes subject under the 1933 Act, the
1934 Act or other federal or state statutory law or regulation, common law or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) any untrue statement of
material fact contained in any computational or other written materials
developed by, mailed or otherwise transmitted by such indemnifying Underwriter
or any member of its selling group, in connection with the Offered Certificates
or in any revision or amendment thereof or supplement thereto or (ii) the
failure of such indemnifying Underwriter, or any member of its selling group, to
comply with any provision of Section 9, and agrees to reimburse each such
Non-Indemnifying Underwriter, as incurred for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action.
(e) CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 hereof is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and each
Underwriter shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company and such Underwriter, as incurred, in such proportion as
is appropriate to reflect not only the relative benefits received by the Company
on the one hand and such Underwriter on the other from the offering of the
Offered Certificates but also the relative fault of the Company on the one hand
and such Underwriter on the other in connection with the statements or omissions
which resulted on such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of each of the Underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact relates to information supplied by the Company or by such
Underwriter, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission; provided,
however, that no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) or willful failure to comply with
Section 9 shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation or failure to comply with Section 9 hereto,
as the case may be. For purposes of this Section, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the 1933 Act shall
have the same rights to contribution as such Underwriter, and each director of
the Company, each officer of the Company who signed the Registration Statement,
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act shall have the same rights to contribution as the Company.
This indemnity agreement will be in addition to any liability that any
Underwriter may otherwise have. Notwithstanding the provisions of this Section
7, no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Offered Certificates underwritten
by it and distributed to the public were sold to the public exceeds the amount
of any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
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<PAGE>
SECTION 7. DFAULT BY AN UNDERWRITER.
(a) If, on the Closing Date, any Underwriter defaults in the
performance of its obligations under this Agreement and the aggregate principal
amount of Offered Certificates that such defaulting Underwriter agreed but
failed to purchase does not exceed 10% of the total principal amount of Offered
Certificates that the Underwriters are obligated to purchase on the Closing
Date, the non-defaulting Underwriter may make arrangements for the purchase of
the Offered Certificates which such defaulting Underwriter agreed but failed to
purchase by other persons satisfactory to the Company and the non-defaulting
Underwriter. If any Underwriter so defaults and the aggregate principal amount
of Offered Certificates with respect to which such default or defaults occur
exceeds 10% of the total principal amount of Offered Certificates that the
Underwriters are obligated to purchase on such Closing Date and arrangements
satisfactory to the non-defaulting Underwriter and the Company for the purchase
of such Offered Certificates by other persons are not made within 36 hours after
such default, this Agreement shall terminate without liability on the part of
the non-defaulting Underwriter or the Company, except that the Company will
continue to be liable for the payment of expenses to the extent set forth in
Section 4(g) and except that the provisions of Sections 6, 7 and 9 shall not
terminate and shall remain in effect. As used in this Agreement, the term
"Underwriters" includes, for all purposes of this Agreement unless the context
otherwise requires, any party not listed in Schedule 1 hereto that, pursuant to
this Section 8 purchases Certificates which a defaulting Underwriter agreed but
failed to purchase.
(b) Nothing contained herein shall relieve a defaulting
Underwriter of any liability it may have to the Company or any non-defaulting
Underwriter for damages caused by its default. If other persons are obligated or
agree to purchase the Offered Certificates of a defaulting Underwriter, either
the non-defaulting Underwriter or the Company may postpone the Closing Date for
up to seven full business days in order to effect any changes that in the
opinion of the counsel for the Company or counsel for the non-defaulting
Underwriter may be necessary in the Registration Statement and/or the Prospectus
or in any other document or arrangement, and the Company agrees to promptly
prepare any amendment or supplement to the Registration Statement and/or the
Prospectus that effects any such changes.
SECTION 8. COMPUTATIONAL MATERIALS AND ABS TERM SHEETS.
(a) The parties acknowledge that, subsequent to the date on which the
Registration Statement became effective and up to and including the date on
which the Prospectus with respect to the Offered Certificates is first made
available to the Underwriters, the Underwriters, including any member of its
selling group, may furnish to various potential investors in Offered
Certificates, in writing: (i) "COMPUTATIONAL MATERIALS," as defined in a
no-action letter (the "KIDDER NO-ACTION LETTER") issued by the staff of the
Commission on May 20, 1994 to Kidder, Peabody Acceptance Corporation I, et al.,
as modified by a no-action letter (the "FIRST PSA NO-ACTION LETTER") issued by
the staff of the Commission on May 27, 1994 to the Public Securities Association
(the "PSA") and as further modified by a no-action letter (the "SECOND PSA
NO-ACTION LETTER," and together with the Kidder No-Action Letter and the First
PSA No-Action Letter, the "NO-ACTION LETTERS") issued by the staff of the
Commission on February 17, 1995 to the PSA; (ii) "STRUCTURAL TERM SHEETS," as
defined in the Second PSA No-
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<PAGE>
Action Letter and/or (iii) "COLLATERAL TERM SHEETS," as defined in the Second
PSA No-Action Letter.
(b) In connection with the Offered Certificates, each Underwriter shall
furnish to the Company, at least one business day prior to the time of filing of
the Prospectus pursuant to Rule 424 under the 1933 Act, all Computational
Materials used by such Underwriter, or any member of its selling group, and
required to be filed with the Commission in order for such Underwriter to avail
itself of the relief granted in the No-Action Letters (such Computational
Materials, the "FURNISHED COMPUTATIONAL MATERIALS").
(c) In connection with the Offered Certificates, each Underwriter
shall furnish to the Company, at least one business day prior to the time of
filing of the Prospectus pursuant to Rule 424 under the 1933 Act, all Structural
Term Sheets used by such Underwriter, or any member of its selling group, and
required to be filed with the Commission in order for such Underwriter to avail
itself of the relief granted in the No-Action Letters (such Structural Term
Sheets, the "FURNISHED STRUCTURAL TERM SHEETS").
(d) In connection with the Offered Certificates, each Underwriter
shall furnish to the Company, within one business day after the first use
thereof, all Collateral Term Sheets used by such Underwriter, or any member of
its selling group, and required to be filed with the Commission in order for
such Underwriter to avail itself of the relief granted in the No-Action Letters
(such Collateral Term Sheets, the "FURNISHED COLLATERAL TERM SHEETS" and
together with the Furnished Structural Term Sheets, the "FURNISHED TERM SHEETS")
and shall advise the Company of the date on which each such Collateral Term
Sheet was first used.
(e) The Company shall cause to be filed with the Commission one
or more current reports on Form 8-K (collectively, together with any amendments
and supplements thereto, the "8-KS," and each an "8-K") with respect to all
Furnished Computational Materials and Furnished Term Sheets used by an
Underwriter or any member of its selling group such that such Underwriter may
avail itself of the relief granted in the No-Action Letters. In particular, the
Company shall cause to be filed with the Commission (i) all of the Furnished
Computational Materials and all of the Furnished Structural Term Sheets on an
8-K prior to or concurrently with the filing of the final Prospectus with
respect to the Certificates pursuant to Rule 424 under the 1933 Act; and (ii)
all of its Furnished Collateral Term Sheets on an 8-K not later than two
business days after the first use thereof.
(f) Each Underwriter represents and warrants to, and covenants
with, the Company that as presented in any Furnished Term Sheets, the
Underwriter Information (defined below) is not misleading and not inaccurate in
any material respect and that any Pool Information (defined below) contained in
any Furnished Term Sheets prepared by it which is not otherwise inaccurate in
any material respect is not presented in such Furnished Term Sheets prepared by
it in a way that is either misleading or inaccurate in any material respect.
Each Underwriter further covenants with the Company that if any Computational
Materials or ABS Term
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<PAGE>
Sheets (as such term is defined in the Second PSA No-Action Letter) contained in
any Furnished Term Sheets are found to include any information that is
misleading or inaccurate in any material respect, such Underwriter promptly
shall inform the Company of such finding and provide the Company with revised
and/or corrected Computational Materials or ABS Term Sheets, as the case may be
and the Company shall cause to be delivered for filing to the Commission in
accordance herewith, an 8-K containing such revised and/or corrected
Computational Materials or ABS Term Sheets, as the case may be.
(g) Each Underwriter covenants that all Computational Materials
and ABS Term Sheets used by it shall contain the following legend:
"THE INFORMATION INCLUDED HEREIN IS PRODUCED AND PROVIDED
EXCLUSIVELY BY [UNDERWRITER] ("UNDERWRITER") AS UNDERWRITER FOR
THE [_] TRUST 200[_]-[_], AND NOT BY OR AS AGENT FOR [_] OR ANY
OF ITS AFFILIATES (COLLECTIVELY, THE "TRANSFEROR")."
(h) Each Underwriter covenants that all Collateral Term Sheets
used by it shall contain the following additional legend:
"THE INFORMATION HEREIN IS PRELIMINARY, AND WILL BE SUPERSEDED BY
THE APPLICABLE PROSPECTUS SUPPLEMENT AND BY ANY OTHER INFORMATION
SUBSEQUENTLY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION."
(i) Each Underwriter covenants that all Collateral Term Sheets
(other than the initial Collateral Term Sheet) shall contain the following
additional legend:
"THE INFORMATION CONTAINED HEREIN SUPERSEDES THE INFORMATION IN
ALL PRIOR COLLATERAL TERM SHEETS, IF ANY."
(j) Notwithstanding the foregoing, subsection 9(g) will be
satisfied if all Computational Materials and ABS Term Sheets referred to therein
bear a legend in a form approved by the Company.
(k) For purposes of this Agreement, the term "UNDERWRITER
INFORMATION" means such portion, if any, of the information contained in any
Furnished Term Sheets that is not Pool Information or Prospectus Information (as
those terms are defined below); provided, however, that information contained in
Furnished Term Sheets that is not Pool Information or Prospectus Information
shall not constitute Underwriter Information to the extent such information is
inaccurate or misleading in any material respect directly as a result of it
being based on Pool Information or Prospectus Information that is inaccurate or
misleading in any material respect. "POOL INFORMATION" means the information
furnished to the Underwriters by the Company regarding the [_] and "PROSPECTUS
INFORMATION" means the information contained in (but not incorporated by
reference in) any Prospectus, provided, however, that if any information that
would otherwise constitute Pool Information or Prospectus Information is
presented in any Furnished Term Sheets in a way that is either inaccurate or
misleading in any material respect, such information shall not be Pool
Information or Prospectus Information.
-13-
<PAGE>
SECTION 9. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement, or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Offered Certificates to the Underwriters.
SECTION 10. TERMINATION OF AGREEMENT.
(a) The Underwriters may terminate this Agreement, by notice to
the Company, at any time at or prior to the Closing Date without liability on
the part of any Underwriter to the Company, if, prior to delivery and payment
for the Offered Certificates, (i) there has occurred any material adverse change
in the financial markets in the United States or elsewhere or any outbreak of
hostilities or escalation thereof or other calamity or crisis the effect of
which is such as to make it, in the judgment of the Underwriters, impracticable
to market the Offered Certificates on the terms and in the manner contemplated
by the Prospectus, or (ii) if trading generally on either the American Stock
Exchange or the New York Stock Exchange has been suspended, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices for
securities have been required, by either of said Exchanges or by order of the
Commission or any other governmental authority, or if a banking moratorium has
been declared by either Federal or New York authorities.
SECTION 11. NOTICES. All notices and other communications
hereunder shall be in writing and effective only on receipt and shall have been
duly given if mailed via the U.S. Postal Service and a reputable overnight
delivery service, hand delivered, sent by facsimile transmission or another
reasonable and standard form of telecommunication. Notices to PWI shall be
directed to PaineWebber Incorporated at 1285 Avenue of the Americas, New York,
New York 10019, Attention: John Fearey, Esq.; notices to [__________] shall be
directed to [____________________________], Attention: [_______________]; and
notices to the Company shall be directed to it at PaineWebber Asset Acceptance
Corporation, 1285 Avenue of the Americas, New York, New York 10019, attention of
the Secretary with a copy to the Treasurer; or, as to any party, such other
address as may hereafter be furnished by such party to the other parties in
writing.
SECTION 12. PARTIES. This Agreement shall inure to the benefit of
and be binding upon the Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Section 6 and their heirs and
legal representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters and the Company and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Offered Certificates from the Underwriters shall be
deemed to be a successor by reason merely of such purchase.
-14-
<PAGE>
SECTION 13. GOVERNING LAW; TIME; JURISDICTION; WAIVER OF
OBJECTION TO VENUE. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and to be performed in said State. Specified times of day refer to New York City
time.
SECTION 14. EXECUTION IN COUNTERPARTS; SEVERABILITY; INTEGRATION.
This Agreement may be executed in any number of counterparts, each of which
shall for all purposes be deemed to be an original and all of which when taken
together shall constitute but one and the same Agreement. In case any provision
in or obligation under this Agreement shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. This
Agreement contains the final and complete integration of all prior expressions
by the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and shall constitute entire Agreement among the parties
hereto with respect to the subject matter hereof, superseding all prior oral or
written understandings.
[SIGNATURE PAGE FOLLOWS]
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this Agreement, along with all counterparts, will become a binding agreement
among each of the Underwriters and the Company in accordance with its terms.
Very truly yours,
PAINEWEBBER ASSET
ACCEPTANCE CORPORATION
By:
Name: ______________________________
Title: _______________________________
CONFIRMED AND ACCEPTED, as of the date first above written:
PAINEWEBBER INCORPORATED
By:
Name: __________________________
Title: ___________________________
[_______________________________]
By:
Name: __________________________
Title: ___________________________
-15-
<PAGE>
Exhibit 1.2
SCHEDULE A
- -------------------------------------------------------------------------
Aggregate Principal Purchase Price as
Aggregate Amount or Notional a percentage of
Principal Amount Amount of the Aggregate
Class or Notional Amount Certificates to be Principal Amount
of Certificates to Purchased by of Certificates to
be Purchased by PWI [__________] be Purchased
- -------------------------------------------------------------------------
Class A-1 $ $ $
Class A-2 $ $ $
Class A-3 $ $ $
Class A-4 $ $ $
Class A-5 $ $ $
Class A-6 $ $ $
Class B $ $ $
- -------------------------------------------------------------------------
SCHEDULE A-1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
PaineWebber Asset Acceptance Corporation
A DELAWARE CORPORATION
Organized pursuant to Subchapter I of the
-----------------------------------------
General Corporation Law of the State of Delaware
------------------------------------------------
I, the undersigned, for the purpose of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST: The name of the corporation (hereinafter referred
to as the "Corporation") is: PaineWebber Asset Acceptance
Corporation.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle,
Delaware 19805. The name of the Corporation's registered agent at such address
is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware, including, but not limited to, engaging in a
general financial service business.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,000 shares, to consist of one
class only, with a par value of $1.00 each. Such shares are hereby designated
Common Stock.
FIFTH: The name and mailing address of the incorporator is:
Name: Mailing Address:
---- ---------------
Juliet F. Buck 1285 Avenue of the Americas
New York, New York 10019
<PAGE>
SIXTH: For the management of the business and for the conduct of the
affairs of the Corporation, it is further provided that the Board of Directors
of the Corporation is expressly authorized to adopt, amend or repeal the By-Laws
of the Corporation.
SEVENTH: Unless and except to the extent that the By-Laws
of the Corporation so require, the election of directors of the
Corporation need not be by written ballot.
EIGHTH: To the fullest extent that the General Corporation Law of the
State of Delaware as it exists on the date hereof or as it may hereafter be
amended permits the limitation or elimination of the liability of directors, no
director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. No
amendment to or repeal of this Article shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
NINTH: The Corporation reserves the right at any time and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation; and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article.
IN WITNESS WHEREOF, I, the undersigned, being the incorporator
hereinabove named, do hereby execute this Certificate of Incorporation this 19th
day of April, 2000.
/s/ Juliet F. Buck
--------------------------
Juliet F. Buck
- --------------------------------------------------------------------------------
BY-LAWS
OF
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
--------------
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
--------------
AS ADOPTED ON MAY 3, 2000
- --------------------------------------------------------------------------------
<PAGE>
BY-LAWS
OF
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
--------------
ARTICLE I
OFFICES
SECTION 1.01. REGISTERED OFFICE. The registered office of PaineWebber
Asset Acceptance Corporation (the "Corporation") in the State of Delaware shall
be at Corporation Service Company, 1013 Centre Road, City of Wilmington, County
of New Castle, Delaware 19805, and the registered agent in charge thereof shall
be Corporation Service Company.
SECTION 1.02. OTHER OFFICES. The Corporation may also have an office or
offices at any other place or places within or without the State of Delaware.
ARTICLE II
MEETINGS OF STOCKHOLDERS, STOCKHOLDERS'
CONSENT IN LIEU OF MEETING
SECTION 2.01. ANNUAL MEETINGS. The annual meeting of the stockholders for
the election of directors, and for the transaction of such other business as may
properly come before the meeting, shall be held at such place, date and hour as
shall be fixed by the Board of Directors (hereinafter called the Board) and
designated in the notice or waiver of notice thereof; except that no annual
meeting need be held if all actions, including the election of directors,
required by the General Corporation Law of the State of Delaware to be taken at
a stockholders' annual meeting are taken by written consent in lieu of meeting
pursuant to Section 2.03 of this Article.
SECTION 2.02. SPECIAL MEETINGS. A special meeting of the stockholders
for any purpose or purposes may be called by the Board, the Chairman of the
Board, the Vice Chairman, the President or the Secretary of the Corporation or a
stockholder or stockholders holding of record at least a majority of the shares
of Common Stock of the Corporation issued and outstanding, such meeting to be
held at such place, date and hour as shall be designated in the notice or waiver
of notice thereof.
SECTION 2.03. STOCKHOLDERS' CONSENT IN LIEU OF MEETING. Any action
required by the laws of the State of Delaware to be taken at any annual or
special meeting of the stockholders of the Corporation, or any action which may
be taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by all the
stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate of Incorporation directed or
required to be exercised or done by the stockholders.
SECTION 3.02. NUMBER AND TERM OF OFFICE. The number of directors
which shall constitute the whole Board shall be fixed from time to time by a
vote of a majority of the whole Board. The term "whole Board" is used herein to
refer to the number of directors from time to time authorized to be on the Board
regardless of the number of directors then in office. Directors need not be
stockholders. Each director shall hold office until his successor is elected and
qualified, or until his earlier death or resignation or removal in the manner
hereinafter provided.
SECTION 3.03. RESIGNATION, REMOVAL AND VACANCIES. Any director may
resign at any time by giving written notice of his resignation to the Board, the
Chairman of the Board, the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein or, if the time be
not specified, upon receipt thereof; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Any director or the entire Board may be removed, with or without
cause, at any time by the holders of a majority of the shares then entitled to
vote at an election of directors or by written consent of the stockholders
pursuant to Section 2.03 of Article II hereof.
Vacancies in the Board and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director.
SECTION 3.04. MEETINGS. (A) ANNUAL MEETINGS. As soon as practicable
after each annual election of directors, the Board shall meet for the purpose of
organization and the transaction of other business, unless it shall have
transacted all such business by written consent pursuant to Section 3.05 of this
Article.
(B) OTHER MEETINGS. Other meetings of the Board shall be held at such
times and places as the Board, the Chairman of the Board or the President shall
from time to time determine.
(C) NOTICE OF MEETINGS. The Secretary shall give notice to each
director of each meeting, including the time, place and purpose of such meeting.
Notice of each such meeting shall be mailed to each director, addressed to him
at his residence or usual place of business, at least fourteen days before the
day on which such meeting is to be held, or shall be sent to him at such place
by telegraph, cable, wireless or other form of recorded communication, or be
delivered personally or by telephone not later than the day before the day on
which such meeting is to be held, but notice need not be given to any director
who shall attend such meeting. A written waiver of notice, signed by the person
entitled thereto, whether before or after the time of the meeting stated
therein, shall be deemed equivalent to notice.
(D) PLACE OF MEETINGS. The Board may hold its meetings at such place
or places within or without the State of Delaware as the Board may from time to
time determine, or as shall be designated in the respective notices or waivers
of notice thereof.
(E) QUORUM AND MANNER OF ACTING. A majority of the total number of
directors then in office (but not less than two) shall be present in person at
any meeting of the Board in order to constitute a quorum for the transaction of
business at such meeting, and the vote of a majority of those directors present
at any such meeting at which a quorum is present shall be necessary for the
passage of any resolution or act of the Board, except as otherwise expressly
required by law or these By-laws. In the absence of a quorum for any such
meeting, a majority of the directors present thereat may adjourn such meeting
from time to time until a quorum shall be present.
(F) ORGANIZATION. At each meeting of the Board, one of the following
shall act as chairman of the meeting and preside, in the following order of
precedence:
(i) the Chairman of the Board;
(ii) the President; or
(iii) any director chosen by a majority of the directors present. The
Secretary or, in the case of his absence, any person (who shall be an Assistant
Secretary, if an Assistant Secretary is present) whom the Chairman shall appoint
shall act as secretary of such meeting and keep the minutes thereof.
SECTION 3.05. DIRECTORS' CONSENT IN LIEU OF MEETING. Action required
or permitted to be taken at any meeting of the Board, or of any committee
thereof, may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of the proceedings of the Board or
committee.
SECTION 3.06. ACTION BY MEANS OF CONFERENCE TELEPHONE OR SIMILAR
COMMUNICATIONS EQUIPMENT. Any one or more members of the Board, or any committee
designated by the Board, may participate in a meeting of the Board or any such
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person
at such meeting.
ARTICLE IV
COMMITTEES OF THE BOARD
SECTION 4.01. APPOINTMENT OF EXECUTIVE COMMITTEE. The Board may from
time to time by resolution passed by a majority of the whole Board designate
from its members an Executive Committee to serve at the pleasure of the Board.
The Chairman of the Executive Committee shall be designated by the Board. The
Board may designate one or more directors as alternate members of the Executive
Committee, who may replace any absent or disqualified member or members at any
meeting of the Executive Committee. The Board shall have power at any time to
change the membership of the Executive Committee, to fill all vacancies in it
and to discharge it, either with or without cause.
SECTION 4.02. PROCEDURES OF EXECUTIVE COMMITTEE. The Executive
Committee, by a vote of a majority of its members, shall fix by whom its
meetings may be called and the manner of calling and holding its meetings, shall
determine the number of its members requisite to constitute a quorum for the
transaction of business and shall prescribe its own rules of procedure, no
change in which shall be made except by a majority vote of its members or by the
Board.
SECTION 4.03. POWERS OF EXECUTIVE COMMITTEE. During the intervals
between the meetings of the Board, unless otherwise determined from time to time
by resolution passed by the whole Board, the Executive Committee shall possess
and may exercise all the powers and authority of the Board in the management and
direction of the business and affairs of the Corporation, including the power to
declare a dividend to its stockholders, and may authorize the seal of the
Corporation to be affixed to all papers which may require it, except that the
Executive Committee shall not have power or authority in reference to:
(a) amending the Certificate of Incorporation;
(b) adopting an agreement of merger or consolidation;
(c) recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's property and
assets;
(d) recommending to the stockholders a dissolution of
the Corporation or a revocation of a dissolution;
(e) amending the By-laws; or
(f) authorizing the issuance of stock or adopting a
certificate of ownership and merger under Section 253 of the General
Corporation Law of Delaware.
SECTION 4.04. REPORTS OF EXECUTIVE COMMITTEE. The Executive Committee
shall keep regular minutes of its proceedings, and all action by the Executive
Committee shall be reported promptly to the Board. Such action shall be subject
to review by the Board, provided that no rights of third parties shall be
affected by such review.
SECTION 4.05. OTHER COMMITTEES. The Board, by resolution adopted by a
majority of the whole Board, may designate from among its members one or more
other committees, each of which shall have such authority of the Board as may be
specified in the resolution of the Board designating such committee; provided,
however, that any such committee so designated shall not have any powers not
allowed to the Executive Committee under Section 4.03 of this Article IV. The
Board shall have power at any time to change the members of any such committee,
designate alternate members of any such committee and fill vacancies therein;
and any such committee shall serve at the pleasure of the Board.
ARTICLE V
OFFICERS
SECTION 5.01. EXECUTIVE OFFICERS. The executive officers of the
Corporation shall be a President, a Secretary and a Treasurer and may include a
Chairman of the Board, one or more Vice Chairmen of the Board, one or more Vice
Presidents or one or more Assistant Secretaries or Assistant Treasurers. Any two
or more offices may be held by the same person.
SECTION 5.02. AUTHORITY AND DUTIES. All officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided in these By-laws
or, to the extent not so provided, by the Board.
SECTION 5.03. TERM OF OFFICE, RESIGNATION AND REMOVAL. All officers
shall be elected or appointed by the Board and shall hold office for such term
as may be prescribed by the Board. The Chairman of the Board, if any, and the
President shall be elected or appointed from among the members of the Board.
Each officer shall hold office until his successor has been elected or appointed
and qualified or his earlier death or resignation or removal in the manner
hereinafter provided. The Board may require any officer to give security for the
faithful performance of his duties.
Any officer may resign at any time by giving written notice to the
President or the Secretary of the Corporation, and such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective is not specified therein, at the time it is accepted by action of the
Board. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
All officers and agents elected or appointed by the Board shall be
subject to removal at any time by the Board or by the stockholders of the
Corporation with or without cause.
SECTION 5.04. VACANCIES. If an office becomes vacant for any reason,
the Board shall fill such vacancy. Any officer so appointed or elected by the
Board shall serve only until such time as the unexpired term of his predecessor
shall have expired unless reelected or reappointed by the Board.
SECTION 5.05. CHAIRMAN OF THE BOARD; VICE CHAIRMAN OF THE BOARD. (a)
If there shall be a Chairman of the Board, he shall preside at meetings of the
Board and of the stockholders at which he is present, and shall give counsel and
advice to the Board and the officers of the Corporation on all subjects touching
the welfare of the Corporation and the conduct of its business. He shall perform
such other duties as the Board may from time to time determine. Except as
otherwise provided by resolution of the Board he shall be ex-officio a member of
all committees of the Board.
(b) The Vice Chairman, or if there be more than one, the Vice
Chairmen, shall be a member of the Board of Directors and shall perform such
duties and have such powers as may from time to time be assigned to them by the
Board of Directors or the Chairman of the Board.
SECTION 5.06. THE PRESIDENT. The President shall be the Chief
Executive Officer of the Corporation and unless the Chairman of the Board be
present or the Board has provided otherwise by resolution, he shall preside at
all meetings of the Board and the stockholders at which he is present. He shall
have general and active management and control of the business, affairs and
officers of the Corporation subject to the control of the Board and the
Executive Committee, if any, and shall see that all orders and resolutions of
the Board and the Executive Committee, if any, are carried into effect.
SECTION 5.07. MANAGING DIRECTOR. The Managing Director or, if there
be more than one, the Managing Directors, shall perform such duties and have
such powers as may, from time to time, be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
or a division President. Except where required by law the signature of the
President is required, a Managing Director shall possess the power to sign
certificates, contracts, obligations and other instruments on behalf of the
Corporation.
SECTION 5.08. VICE PRESIDENTS. The Vice President or, if there be
more than one, the Vice Presidents, shall perform such duties and have such
powers as may, from time to time, be assigned to them by the Board of Directors,
the Executive Committee, the Chairman of the Board or the President or a
division President. Except where required by law the signature of the President
is required, a Vice President shall possess the power to sign certificates,
contracts, obligations and other instruments on behalf of the Corporation.
SECTION 5.09. THE SECRETARY. The Secretary shall, to the extent
practicable, attend all meetings of the Board and all meetings of the
stockholders and shall record all votes and the minutes of all proceedings in a
book to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board, and shall perform such other
duties as may be prescribed by the Board or the President, under whose
supervision he shall act. He shall keep in safe custody the seal of the
Corporation and affix the same to any duly authorized instrument requiring it
and, when so affixed, it shall be attested by his signature or by the signature
of the Treasurer or an Assistant Secretary or Assistant Treasurer. He shall keep
in safe custody the certificate books and stockholder records and such other
books and records as the Board may direct and shall perform all other duties as
from time to time may be assigned to him by the Chairman of the Board, the
President or the Board.
SECTION 5.10. ASSISTANT SECRETARIES. The Assistant Secretaries, if
any, in order of their seniority or in any other order determined by the Board
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform and may exercise such
authority and perform such other duties, including, but not limited to, those
involving regulatory agency registration and compliance matters, as the
President or Secretary shall prescribe.
SECTION 5.11. THE TREASURER. The Treasurer shall have the care and
custody of the corporate funds and other valuable effects, including securities,
and shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation, and shall deposit all monies and other valuable
effects to the name and to the credit of the Corporation in such depositories as
may be designated by the Board. The Treasurer shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the President and directors, at the regular
meetings of the Board or whenever they may require it, a statement of his
accounts and of the financial condition of the Corporation; and, in general,
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to him by the President or the Board.
SECTION 5.12. ASSISTANT TREASURERS. The Assistant Treasurers, if any,
in the order of their seniority or in any other order determined by the Board,
shall in the absence or disability of the Treasurer perform the duties and
exercise the powers of the Treasurer and shall perform such other duties as the
Board or the Treasurer shall prescribe.
ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
SECTION 6.01. EXECUTION OF DOCUMENTS. The Board shall designate the
officers, employees and agents of the Corporation who shall have power to
execute and deliver deeds, contracts, mortgages, bonds, debentures, checks,
drafts and other orders for the payment of money and other documents for and in
the name of the Corporation, and may authorize such officers, employees and
agents to delegate such power (including authority to redelegate) by written
instrument to other officers, employees or agents of the Corporation; and,
unless so designated or expressly authorized by these By-laws, no officer or
agent or employee shall have any power or authority to bind the Corporation by
any contract or engagement or to pledge its credit or to render it liable
pecuniarily for any purpose or to any amount.
SECTION 6.02. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board or Treasurer or any other officer of the Corporation
to whom power in this respect shall have been given by the Board shall select.
SECTION 6.03. PROXIES IN RESPECT OF STOCK OR OTHER SECURITIES OF
OTHER CORPORATIONS. The President shall designate the officers of the
Corporation who shall have authority from time to time to appoint an agent or
agents of the Corporation to exercise in the name and on behalf of the
Corporation the powers and rights which the Corporation may have as the holder
of stock or other securities in any other corporation, and to vote or consent in
respect of such stock or securities; such designated officers may instruct the
person or persons so appointed as to the manner of exercising such powers and
rights; and such designated officers may execute or cause to be executed in the
name and on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, powers of attorney or other instruments as they
may deem necessary or proper in order that the Corporation may exercise its said
powers and rights.
ARTICLE VII
SHARES AND THEIR TRANSFER; FIXING RECORD DATE
SECTION 7.01. CERTIFICATES FOR SHARES. Every owner of stock of the
Corporation shall be entitled to have a certificate certifying the number and
class of shares owned by him in the Corporation, which shall otherwise be in
such form as shall be prescribed by the Board. Certificates of each class shall
be issued in consecutive order and shall be numbered in the order of their
issue, and shall be signed by or in the name of the Corporation by the Chairman
of the Board, the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer.
SECTION 7.02. RECORD. A record (herein called the stock record) in
one or more counterparts shall be kept of the name of the person, firm or
corporation owning the shares represented by each certificate for stock of the
Corporation issued, the number of shares represented by each such certificate,
the date thereof and, in the case of cancellation, the date of cancellation.
Except as otherwise expressly required by law, the person in whose name shares
of stock stand on the stock record of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation.
SECTION 7.03. TRANSFER AND REGISTRATION OF STOCK. (a) The transfer of
stock and certificates of stock which represent the stock of the Corporation
shall be governed by Article 8 of Subtitle 1 of Title 6 of the Delaware Code
(the Uniform Commercial Code), as amended from time to time.
(b) Registration of transfers of shares of the Corporation shall be
made only on the books of the Corporation upon request of the registered holder
thereof, or of his attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary of the Corporation, and upon the surrender
of the certificate or certificates for such shares properly endorsed or
accompanied by a stock power duly executed.
SECTION 7.04. ADDRESSES OF STOCKHOLDERS. Each stockholder shall
designate to the Secretary of the Corporation an address at which notices of
meetings and all other corporate notices may be served or mailed to him, and, if
any stockholder shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his post office address, if any, as
the same appears on the share record books of the Corporation or at his last
known post office address.
SECTION 7.05. LOST, DESTROYED AND MUTILATED CERTIFICATES. The Board
or a committee designated thereby with power so to act may, in its discretion,
cause to be issued a new certificate or certificates for stock of the
Corporation in place of any certificate issued by it and reported to have been
lost, destroyed or mutilated, upon the surrender of the mutilated certificates
or, in the case of loss or destruction of the certificate, upon satisfactory
proof of such loss or destruction, and the Board or such committee may, in its
discretion, require the owner of the lost or destroyed certificate or his legal
representative to give the Corporation a bond in such sum and with such surety
or sureties as it may direct to indemnify the Corporation against any claim that
may be made against it on account of the alleged loss or destruction of any such
certificate.
SECTION 7.06. REGULATIONS. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these By-laws,
concerning the issue, transfer and registration of certificates for stock of the
Corporation.
SECTION 7.07. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
or any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for purpose of any other lawful action, the
Board may fix, in advance, a record date, which shall not be more than 60 nor
less than 10 days before the date of such meeting, nor more than 60 days prior
to any other action. A determination of stockholders entitled to notice of or to
vote at a meeting of the stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
adjourned meeting.
ARTICLE VIII
SEAL
The Board shall provide a corporate seal, which shall be in the form
of a circle and shall bear the full name of the Corporation and the words and
figures "Corporate Seal 2000 Delaware".
ARTICLE IX
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of
the Board.
ARTICLE X
INDEMNIFICATION
SECTION 10.1. RIGHT TO INDEMNIFICATION. The Corporation shall to the
fullest extent permitted by applicable law as then in effect, indemnify any
person (the "Indemnitee") who is or was a director or officer of the Corporation
or is or was involved in any manner (including, without limitation, as a party
or a witness) or is threatened to be made so involved in any threatened, pending
or completed investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative (including without limitation, any
action, suit or proceeding by or in the right of the Corporation to procure a
judgment in its favor) (a "Proceeding") by reason of the fact that such person
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise (including, without
limitation, any employee benefit plan) against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such Proceeding. Such
indemnification shall be a contract right and shall include the right to receive
payment in advance of any expenses incurred by the Indemnitee in connection with
such Proceeding, consistent with the provisions of applicable law as then in
effect.
SECTION 10.2. INSURANCE, CONTRACTS AND FUNDING. The Corporation may
purchase and maintain insurance to protect itself and any person entitled to
indemnity under this Article X against any expenses, judgments, fines and
amounts paid in settlement as specified in the first section of this Article or
incurred by any such person in connection with any Proceeding referred to in
this Article X, to the fullest extent permitted by applicable law as then in
effect. The Corporation may enter into contracts with any person entitled to
indemnity under this Article X in furtherance of the provisions of this Article
X and may create a trust fund, grant a security interest or use other means
(including, without limitation, a letter of credit) to ensure the payment of
such amounts as may be necessary to effect indemnification as provided in this
Article.
SECTION 10.3. INDEMNIFICATION; NOT EXCLUSIVE RIGHT. The right of
indemnification provided in this Article X shall not be exclusive of any other
rights to which those seeking indemnification may otherwise be entitled, and the
provisions of this Article X shall inure to the benefit of the heirs and legal
representatives of any person entitled to indemnity under this Article X and
shall be applicable to Proceedings commenced or continuing after the adoption of
this Article X, whether arising from acts or omissions occurring before or after
such adoption.
SECTION 10.4. ADVANCEMENT OF EXPENSES; PROCEDURES; PRESUMPTIONS AND
EFFECT OF CERTAIN PROCEEDINGS; REMEDIES. In furtherance, but not in limitation
of the foregoing provisions, the following procedures, presumptions and remedies
shall apply with respect to advancement of expenses and the right to
indemnification under this Article X:
(A) ADVANCEMENT OF EXPENSES. All reasonable expenses incurred by or on
behalf of the Indemnitee in connection with any Proceeding shall be advanced to
the Indemnitee by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the expenses incurred by the Indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an undertaking by or on
behalf of the Indemnitee to repay the amounts advanced if it should ultimately
be determined that the Indemnitee is not entitled to be indemnified against such
expenses pursuant to this Article X.
(B) PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION. (i) to
obtain indemnification under this Article X, an Indemnitee shall submit to the
Secretary of the Corporation a written request, including such documentation and
information as is reasonably available to the Indemnitee and reasonably
necessary to determine whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The determination of the
Indemnitee's entitlement to indemnification shall be made not later than 60 days
after receipt by the Corporation of the written request for indemnification
together with the Supporting Documentation. The Secretary of the Corporation
shall, promptly upon receipt of such a request for indemnification, advise the
Board of Directors in writing that the Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to indemnification under this Article X
shall be determined in one of the following ways: (A) by a majority vote of the
Disinterested Directors (as hereinafter defined), if they constitute a quorum of
the Board of directors; (B) by a written opinion of Independent Counsel (as
hereinafter defined) if a quorum of the Board of Directors consisting of
Disinterested Directors is not obtainable or, even if obtainable, a majority of
such Disinterested Directors so directs; (C) by the stockholders of the
Corporation (but only if a majority of the Disinterested Directors, if they
constitute a quorum of the Board of Directors, presents the issue of entitlement
to indemnification to the stockholders for their determination); or (D) as
provided in Section 4(c).
(iii) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 4(b)(ii), a majority of
the Disinterested Directors shall select the Independent Counsel, but only an
Independent Counsel to which the Indemnitee does not reasonably object. If no
Independent Counsel is so selected to act as provided in Section 4(b)(ii), the
Indemnitee shall be entitled to seek adjudication to indemnification in an
appropriate court of the State of Delaware or any other court of competent
jurisdiction.
(C) PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS. If the person or
persons empowered under Section 4(b) to determine entitlement to indemnification
shall not have been appointed or shall not have made a determination within 60
days after receipt by the Corporation of the request therefor together with the
Supporting Documentation, the Indemnitee shall be deemed to be entitled to
indemnification and the Indemnitee shall be entitled to such indemnification
unless (A) the Indemnitee misrepresented or failed to disclose a material fact
in making the request for indemnification or in the Supporting Documentation or
(B) such indemnification is prohibited by law. The termination of any Proceeding
described in Section 1, or of any claim, issue or matter therein, by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, adversely affect the right of the Indemnitee
to indemnification or create a presumption that the Indemnitee did not act in
good faith and in a manner which the Indemnitee reasonably believed to be in or
not opposed to the best interests of the Corporation or, with respect to any
criminal Proceeding, that the Indemnitee had reasonable cause to believe that
his conduct was unlawful.
(D) REMEDIES OF INDEMNITEE. (i) In the event that a determination is made
pursuant to Section 4(b) that the Indemnitee is not entitled to indemnification
under this Article X, (A) the Indemnitee shall be entitled to seek an
adjudication of his entitlement to such indemnification either, at the
Indemnitee's sole option, in an appropriate court of the State of Delaware or
any other court of competent jurisdiction; (B) any such judicial proceeding
shall be de novo and the Indemnitee shall not be prejudiced by reason of such
adverse determination.
(ii) If a determination shall have been made or deemed to have been made,
pursuant to Section 4(b) or (c), that the Indemnitee is entitled to
indemnification, the Corporation shall be obligated to pay the amounts
constituting such indemnification within five days after such determination has
been made or deemed to have been made and shall be conclusively bound by such
determination unless (A) the Indemnitee misrepresented or failed to disclose a
material fact in making the request for indemnification or in the Supporting
Documentation or (B) such indemnification is prohibited by law. In the event
that (x) advancement of expenses is not timely made pursuant to Section 4(a) or
(y) payment of indemnification is not made within five days after a
determination of entitlement to indemnification has been made or deemed to have
been made pursuant to section 4(b) or (c), the Indemnitee shall be entitled to
seek judicial enforcement of the Corporation's obligation to pay to the
Indemnitee such advancement of expenses or indemnification. Notwithstanding the
foregoing, the Corporation may bring an action, in an appropriate court in the
State of Delaware or any other court of competent jurisdiction, contesting the
right of the Indemnitee to receive indemnification hereunder due to the
occurrence of an event described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"); provided, however, that in any such action the
Corporation shall have the burden of proving the occurrence of such
Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to this Section 4(d) that the procedures and
presumptions of this Article X are not valid, binding and enforceable and shall
stipulate in any such court that the Corporation is bound by all the provisions
of this Article X.
(iv) In the event that the Indemnitee, pursuant to this Section 4(d),
seeks a judicial adjudication to enforce his rights under, or to recover damages
for breach of, this Article X, the Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation against, any
expenses actually and reasonably incurred by the Indemnitee if the Indemnitee
prevails in such judicial adjudication. If it shall be determined in such
judicial adjudication that the Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with such judicial adjudication shall
be prorated accordingly.
(E) DEFINITIONS. For purposes of this Section 4: (i) "Disinterested
Director" means a director of the Corporation who is not or was not a party to
the Proceeding in respect of which indemnification is sought by the Indemnitee;
(ii) "Independent Counsel" means a law firm or a member of a law firm
that neither presently is, nor in the past five years has been, retained to
represent: (A) the Corporation or the Indemnitee in any matter material to
either such party or (B) any other party to the Proceeding giving rise to a
claim for indemnification under this Article X. Notwithstanding the foregoing,
the term "Independent Counsel" shall not include any person who, under the
applicable standards of professional conduct then prevailing under the law of
the State of Delaware, would have conflict of interest in representing either
the Corporation or the Indemnitee in an action to determine the Indemnitee's
rights under this Article X.
SECTION 10.5. SEVERABILITY. If any provision or provisions of this
Article X shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Article X containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible, the provisions of this Article X (including,
without limitation, all portions of any section of this Article X containing any
such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
SECTION 10.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS. Notwithstanding
any other provision or provisions of this Article X, the Corporation may
indemnify (including, without limitation, by direct payment) any person (other
than a director or officer of the Corporation) who is or was involved in any
manner (including, without limitation, as a party or witness) or is threatened
to be made so involved in any Proceeding by reason of the fact that such person
is or was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (including,
without limitation, any employee benefit plan), against any or all expenses
(including attorneys' fees), judgments, fines amounts paid in settlement
incurred in connection with such Proceeding.
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice whatever is required to be given by these By-Laws
or the Certificates of Incorporation of the Corporation or the laws of the State
of Delaware, the person entitled thereto may, in person or by attorney thereunto
authorized, in writing or by telegraph, cable or other form of recorded
communication, waive such notice, whether before or after the meeting or other
matter in respect of which such notice is given, and in such event such notice
need not be given to such person and such waiver shall be deemed equivalent to
such notice.
ARTICLE XII
AMENDMENTS
Any By-Law (including these By-Laws) may be adopted, amended or
repealed by the Board in any manner not inconsistent with the laws of the State
of Delaware or the Certificate of Incorporation.
===============================================================================
Exhibit 4.1
FORM OF POOLING AND SERVICING AGREEMENT
RELATING TO
[___________________] TRUST 200[_]-[_]
among
PAINEWEBBER ASSET ACCEPTANCE CORPORATION
as Depositor
[NAME OF SERVICER]
as Servicer
and
[NAME OF TRUSTEE/ BACKUP SERVICER]
as Trustee and as Backup Servicer
Dated as of [_____], 200[_]
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Definitions....................................................1
Section 1.2 Usage of Terms................................................17
Section 1.3 Calculations..................................................18
Section 1.4 Section References............................................18
Section 1.5 Action by or Consent of Certificateholders....................18
Section 1.6 No Recourse...................................................18
Section 1.7 Material Adverse Effect.......................................18
ARTICLE II
CREATION OF TRUST
Section 2.1 Creation of Trust.............................................18
ARTICLE III
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 3.1 Conveyance of Receivables.....................................19
Section 3.2 Custody Matters...............................................19
Section 3.3 Conditions to Acceptance by Trustee...........................20
Section 3.4 Representations, Warranties and Covenants of Depositor........21
Section 3.5 [Reserved]....................................................23
Section 3.6 Repurchase of Receivables Upon Breach of Representation
and Warranty.................................................23
Section 3.7 Nonpetition Covenant..........................................23
Section 3.8 Collecting Lien Certificates Not Delivered on the Closing
Date.........................................................24
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1 Duties of the Servicer........................................24
Section 4.2 Collection of Receivable Payments; Modification and
Amendment of Receivables.....................................25
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<PAGE>
Section 4.3 Realization Upon Receivables..................................26
Section 4.4 Insurance.....................................................27
Section 4.5 Maintenance of Security Interests in Vehicles.................28
Section 4.6 Covenants, Representations and Warranties of Servicer.........29
Section 4.7 Purchase of Receivables Upon Breach of Covenant or
Representation and Warranty..................................31
Section 4.8 Total Servicing Fee; Payment of Compensating Interest;
Payment of Certain Expenses by Servicer......................32
Section 4.9 Servicer's Certificate........................................32
Section 4.10 Annual Statement as to Compliance; Notice of Servicer
Termination Event............................................33
Section 4.11 Annual Independent Accountants' Report........................33
Section 4.12 Access to Certain Documentation and Information Regarding
Receivables..................................................34
Section 4.13 Monthly Tape..................................................34
Section 4.14 Retention and Termination of Servicer.........................35
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 5.1 Accounts......................................................36
Section 5.2 Collections...................................................36
Section 5.3 Application of Collections....................................37
Section 5.4 Additional Deposits...........................................38
Section 5.5 Distributions.................................................38
Section 5.6 Net Deposits..................................................40
Section 5.7 Statements to Certificateholders..............................40
Section 5.8 Optional Deposits by the Certificate Insurer..................41
ARTICLE VI
THE SPREAD ACCOUNT AND THE POLICY
Section 6.1 Spread Account................................................42
Section 6.2 Policy........................................................42
Section 6.3 Withdrawals from Spread Account...............................42
Section 6.4 Claims Under Policy...........................................42
Section 6.5 Preference Claims; Direction of Proceedings...................44
Section 6.6 Surrender of Policy...........................................44
Section 6.7 Seller as Agent of the Reversionary Holders...................44
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ARTICLE VII
THE CERTIFICATES
Section 7.1 The Certificates..............................................45
Section 7.2 Initial Issuance of Certificates..............................47
Section 7.3 Registration of Transfer and Exchange of Certificates.........47
Section 7.4 Mutilated, Destroyed, Lost or Stolen Certificates.............48
Section 7.5 Persons Deemed Owners.........................................48
Section 7.6 Access to List of Certificateholders' Names and Addresses.....48
ARTICLE VIII
THE DEPOSITOR
Section 8.1 Liability of Depositor........................................49
Section 8.2 Limitation on Liability of Depositor..........................49
ARTICLE IX
THE SERVICER
Section 9.1 Liability of Servicer; Indemnities............................49
Section 9.2 Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Backup Servicer..............50
Section 9.3 Limitation on Liability of Servicer, Backup Servicer and
Others.......................................................51
Section 9.4 Delegation of Duties..........................................52
Section 9.5 Resignation of Servicer and Backup Servicer...................52
ARTICLE X
SERVICER TERMINATION EVENTS
Section 10.1 Servicer Termination Event....................................53
Section 10.2 Consequences of a Servicer Termination Event..................54
Section 10.3 Appointment of Successor......................................55
Section 10.4 Notification to Certificateholders............................56
Section 10.5 Waiver of Past Defaults.......................................56
Section 10.6 Effect of Servicer Termination Event on Sub-Servicer..........57
ARTICLE XI
THE TRUSTEE
Section 11.1 Duties of Trustee.............................................57
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<PAGE>
Section 11.2 Trustee's Assignment of Administrative Receivables and
Warranty Receivables.........................................58
Section 11.3 Certain Matters Affecting the Trustee.........................59
Section 11.4 Trustee Not Liable for Certificates or Receivables............60
Section 11.5 Trustee May Own Certificates..................................60
Section 11.6 Trustee's Fees and Expenses; Indemnification..................60
Section 11.7 Eligibility Requirements for Trustee..........................61
Section 11.8 Resignation or Removal of Trustee.............................61
Section 11.9 Successor Trustee.............................................62
Section 11.10 Merger or Consolidation of Trustee............................63
Section 11.11 Appointment of Co-Trustee or Separate Trustee.................63
Section 11.12 Representations and Warranties of Trustee and Backup
Servicer.....................................................64
Section 11.13 Tax Returns...................................................64
Section 11.14 Trustee May Enforce Claims Without Possession of
Certificates.................................................65
Section 11.15 Suit for Enforcement..........................................65
Section 11.16 Rights to Direct Trustee......................................65
ARTICLE XII
TERMINATION
Section 12.1 Termination of the Trust......................................65
Section 12.2 Optional Purchase of All Receivables..........................66
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 Amendment.....................................................67
Section 13.2 Protection of Title to Trust..................................68
Section 13.3 Limitation on Rights of Certificateholders....................70
Section 13.4 Governing Law.................................................71
Section 13.5 Severability of Provisions....................................71
Section 13.6 Assignment....................................................71
Section 13.7 Certificates Nonassessable and Fully Paid.....................71
Section 13.8 Third-Party Beneficiaries.....................................71
Section 13.9 Financial Security as Controlling Party.......................72
Section 13.10 Counterparts..................................................72
Section 13.11 Notices.......................................................72
Section 13.12 Successors and Assigns........................................72
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SCHEDULES
Schedule A Schedule of Receivables
EXHIBITS
Exhibit A Form of Class A Certificate
Exhibit B Form of Class B Certificate
Exhibit C Form of Class C Certificate
Exhibit D Form of Spread Account Agreement
Exhibit E Form of Servicer's Certificate
Exhibit F Form of Policy
Exhibit G Form of Unaffiliated Seller's Agreement
Exhibit H Form of Purchase Agreement and Assignment
Exhibit I Servicer's Request for Release
Exhibit J Form of Deficiency Notice
Exhibit K Form of Notice
Exhibit L Form of Investment Letter
Exhibit M Servicer's Request For Permanent Release
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THIS POOLING AND SERVICING AGREEMENT (this "AGREEMENT"), dated as of
[_____][_], 200[_], is made with respect to the formation of [_____________]
Trust 200[_]-[_], among PaineWebber Asset Acceptance Corporation, as depositor
(the "DEPOSITOR"), [Name of Servicer], as servicer (the "SERVICER") and [Name of
Trustee/ Backup Servicer], as trustee (in such capacity, the "TRUSTEE") and as
backup servicer (in such capacity, the "BACKUP SERVICER").
WHEREAS, the Depositor wishes to establish a trust and provide for
the allocation and sale of the beneficial interests therein and the maintenance
and distribution of the trust estate;
WHEREAS, the Servicer has agreed to service the Receivables,
which constitute the principal assets of the trust estate;
WHEREAS, all things necessary to make the Certificates, when
executed and authenticated by the Trustee, valid instruments, and to make this
Agreement a valid agreement, in accordance with their and its terms, have been
done; and
WHEREAS, [_____________________] is willing to serve in the capacity
of Trustee and Backup Servicer hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the Depositor, the Servicer, the Trustee and the
Backup Servicer hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. All terms defined in the Spread Account
Agreement (as defined below) shall have the same meaning in this Agreement.
Whenever capitalized and used in this Agreement, the following words and
phrases, unless the context otherwise requires, shall have the following
meanings:
ACCOUNTANTS' REPORT: The report of [Name of Independent Accountants]
or a firm of nationally recognized independent accountants described in SECTION
4.11.
ADMINISTRATIVE RECEIVABLE: With respect to any Collection Period, a
Receivable which the Servicer is required to purchase pursuant to SECTION 4.7.
AFFILIATE: With respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect 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 voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
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AGGREGATE PRINCIPAL BALANCE: With respect to any Determination Date,
the sum of the Principal Balances (computed as of the related Record Date) for
all Receivables (other than (i) any Receivable that became a Liquidated
Receivable during the related Collection Period and (ii) any Receivable that
became a Purchased Receivable on the immediately preceding Deposit Date).
AMOUNT AVAILABLE: With respect to any Distribution Date, the sum of
(i) the Available Funds for the immediately preceding Determination Date, plus
(ii) the actual amount received by the Trustee with respect to any Deficiency
Notice relating to such Distribution Date, plus (iii) the Policy Claim Amount,
if any, received by the Trustee with respect to such Distribution Date.
AMOUNT FINANCED: With respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of automobile installment sale contracts or promissory notes,
and related costs.
ANNUAL PERCENTAGE RATE OR APR: With respect to a Receivable, the
rate per annum of finance charges stated in such Receivable as the "annual
percentage rate" (within the meaning of the Federal Truth-in-Lending Act). If
after the Closing Date, the rate per annum with respect to a Receivable as of
the Closing Date is reduced as a result of (i) an insolvency proceeding
involving the Obligor or (ii) pursuant to the Soldiers' and Sailors' Civil
Relief Act of 1940, Annual Percentage Rate or APR shall refer to such reduced
rate.
ANNUAL TRUSTEE'S FEE: Shall have the meaning set forth in
SECTION ___.
AVAILABLE FUNDS: With respect to any Determination Date, the sum of
(i) the Collected Funds for such Determination Date, (ii) all Purchase Amounts
deposited in the Collection Account on the related Deposit Date and (iii) any
Compensating Interest actually deposited by the Servicer on such Deposit Date.
AVERAGE DEFAULT RATE: With respect to any Distribution Date, the
arithmetic average of the Default Rate for such Distribution Date and the
Default Rates for the two immediately preceding Distribution Dates.
AVERAGE DELINQUENCY RATIO: With respect to any Distribution Date,
the arithmetic average of the Delinquency Ratio for such Distribution Date and
the Delinquency Ratios for the two immediately preceding Distribution Dates.
AVERAGE NET LOSS RATE: With respect to any Distribution Date, the
arithmetic average of the Net Loss Rates for the three immediately preceding
Collection Periods.
BASIC SERVICING FEE: With respect to any Collection Period, the fee
payable to the Servicer for services rendered during such Collection Period,
which shall be equal to one-twelfth
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of the Basic Servicing Fee Rate multiplied by the Aggregate Principal Balance as
of the first day of the Collection Period.
BASIC SERVICING FEE RATE: [___]% per annum, payable monthly at
one- twelfth of the annual rate.
BUSINESS DAY: Any day other than a Saturday, Sunday, legal holiday
or other day on which banking institutions or trust companies in New York,
[____________] or any other location of any successor Servicer, successor
Trustee or successor Spread Account Trustee are authorized or obligated by law,
executive order or governmental decree to be closed.
CALENDAR QUARTER: The three-month period ending on the last day
of March, June, September or December.
CERTIFICATE: Any one of the Class A Certificates, Class B
Certificates or Class C Certificates executed by the Trustee on behalf of the
Trust in substantially the form set forth in Exhibit A, B or C, respectively.
CERTIFICATE INSURER: [___________________], a [_______________]
incorporated under the laws of the State of [___________], or any successor
thereto, as issuer of the Policy.
CERTIFICATE MAJORITY: Holders of Class A Certificates and Class B
Certificates representing greater than fifty (50%) percent of the sum of the
Class A Certificate Balance and the Class B Certificate Balance, or if there are
no Class A Certificates outstanding, holders of Class B Certificates
representing greater than fifty (50%) percent of the Class B Certificate
Balance.
CERTIFICATEHOLDER OR HOLDER: The Person in whose name a Certificate
is registered in the Certificate Register.
CERTIFICATE REGISTER: The register maintained pursuant to SECTION
7.3 hereof.
CLAIM AMOUNT: Shall have the meaning described in SECTION 6.4(A).
CLASS: A class of Certificates.
CLASS A CERTIFICATE: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit A hereto.
CLASS A CERTIFICATE BALANCE: Initially, the Class A Percentage of
the Original Aggregate Principal Balance and, thereafter, the initial Class A
Certificate Balance reduced by all amounts distributed to the Class A
Certificateholders and allocable to principal.
CLASS A CERTIFICATE FACTOR: As of any Distribution Date, a
seven-digit decimal figure equal to the Class A Certificate Balance as of the
close of business on such Distribution Date divided by the initial Class A
Certificate Balance as of the Cut-Off Date.
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CLASS A DISTRIBUTABLE AMOUNT: On any Distribution Date, the sum
of the Class A Principal Distributable Amount and the Class A Interest
Distributable Amount.
CLASS A INTEREST CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date, the excess of the Class A Interest Distributable Amount
for such Distribution Date plus any outstanding Class A Interest Carryover
Shortfall from the preceding Distribution Date plus interest on such outstanding
Class A Interest Carryover Shortfall, to the extent permitted by law, at the
Class A Pass-Through Rate from such preceding Distribution Date through the
current Distribution Date, over the amount of interest that the holders of the
Class A Certificates actually received on such current Distribution Date.
CLASS A INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of (i) thirty (30) days of interest, calculated on
the basis of a 360-day year consisting of twelve 30-day months, at the Class A
Pass-Through Rate on the Class A Certificate Balance as of the close of business
on the last day of the preceding Collection Period and (ii) any outstanding
Class A Interest Carryover Shortfall.
CLASS A PASS-THROUGH RATE: [____]% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
CLASS A PERCENTAGE: [___]%.
CLASS A PERCENTAGE INTEREST: The interest in the Class A Portion of
the Trust that is evidenced by a Class A Certificate and that is set forth on
the face of such Certificate; PROVIDED, HOWEVER, that the Trustee shall only
issue Class A Certificates evidencing in the aggregate Class A Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class A Certificates constitute indebtedness, all references in this
Agreement to Holders of Class A Certificates owning a specified percentage of
the outstanding Class A Certificate Balance shall be construed to mean Holders
of Class A Certificates evidencing such specified percentage of the then
outstanding indebtedness.
CLASS A PORTION: The aggregate interest in the Trust evidenced
by the Class A Certificates.
CLASS A PRINCIPAL CARRYOVER SHORTFALL: As of the close of business
on any Distribution Date, the excess of the Class A Principal Distributable
Amount plus any outstanding Class A Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal that the holders of the
Class A Certificates actually received on such current Distribution Date.
CLASS A PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, without duplication, the sum of the Class A Percentage of (i)
the principal portion of all Collected Funds received during the immediately
preceding Collection Period (other than Liquidated Receivables and Purchased
Receivables), (ii) the Principal Balance of all Receivables that became
Liquidated Receivables during the related Collection Period (other than
Purchased Receivables), (iii) the principal portion of the Purchase Amount of
all Receivables that became Purchased Receivables as of the immediately
preceding Record Date, plus, in the sole discretion of the Certificate Insurer,
the Principal Balance allocable to the Class A Certificates as of the
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immediately preceding Record Date of all the Receivables that were required to
be purchased pursuant to SECTIONS 3.6 and 4.7 as of the immediately preceding
Record Date but were not so purchased and (iv) the aggregate amount of Cram Down
Losses that shall have occurred during the related Collection Period.
CLASS B CERTIFICATE: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit B hereto.
CLASS B CERTIFICATE BALANCE: Initially, the Class B Percentage of
the Original Aggregate Principal Balance and, thereafter, the initial Class B
Certificate Balance, reduced by (x) all amounts distributed to Class B
Certificateholders and allocable to principal and (y) on any Distribution Date
on which (i) the sum of the Class A Certificate Balance and the Class B
Certificate Balance as of such Distribution Date and after taking into account
all distributions to be made on such Distribution Date exceeds (ii) the
Aggregate Principal Balance with respect to the immediately preceding Collection
Period, the amount of such excess.
CLASS B CERTIFICATE FACTOR: As of any Distribution Date, a
seven-digit decimal figure equal to the Class B Certificate Balance as of the
close of business on such Distribution Date divided by the initial Class B
Certificate Balance.
CLASS B DISTRIBUTABLE AMOUNT: On any Distribution Date, the sum
of the Class B Principal Distributable Amount and the Class B Interest
Distributable Amount.
CLASS B INTEREST CARRYOVER SHORTFALL: As of the close of business on
any Distribution Date, the excess of the Class B Interest Distributable Amount
for such Distribution Date plus any outstanding Class B Interest Carryover
Shortfall from the preceding Distribution Date plus interest on such outstanding
Class B Interest Carryover Shortfall, to the extent permitted by law, at the
Class B Pass-Through Rate from such preceding Distribution Date through the
current Distribution Date, over the amount of interest that the holders of the
Class B Certificates actually received on such current Distribution Date.
CLASS B INTEREST DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, the sum of (i) thirty (30) days of interest calculated on the
basis of a 360-day year consisting of twelve 30-day months, at the Class B
Pass-Through Rate on the Class B Certificate Balance as of the close of business
on the last day of the preceding Collection Period and (ii) any outstanding
Class B Interest Carryover Shortfall.
CLASS B PASS-THROUGH RATE: [____]% per annum, calculated on the
basis of a 360-day year consisting of twelve 30-day months.
CLASS B PERCENTAGE: [__]%.
CLASS B PERCENTAGE INTEREST: The interest in the Class B Portion of
the Trust that is evidenced by a Class B Certificate and that is set forth on
the face of such Certificate; PROVIDED, HOWEVER, that the Trustee shall only
issue Class B Certificates evidencing in the aggregate Class B Percentage
Interests totaling 100%. To the extent that, for federal income tax purposes,
the Class B Certificates constitute indebtedness, all references in this
Agreement to Holders of Class B Certificates owning a specified percentage of
the outstanding Class B
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Certificate Balance shall be construed to mean Holders of Class B Certificates
evidencing such specified percentage of the then outstanding indebtedness.
CLASS B PORTION: The aggregate interest in the Trust evidenced
by the Class B Certificates.
CLASS B PRINCIPAL CARRYOVER SHORTFALL: As of the close of business
on any Distribution Date, the excess of the Class B Principal Distributable
Amount plus any outstanding Class B Principal Carryover Shortfall from the
preceding Distribution Date over the amount of principal that the holders of the
Class B Certificates actually received on such current Distribution Date.
CLASS B PRINCIPAL DISTRIBUTABLE AMOUNT: With respect to any
Distribution Date, without duplication, the sum of the Class B Percentage of:
(i) the principal portion of all Collected Funds received during the immediately
preceding Collection Period (other than Liquidated Receivables and Purchased
Receivables) including the principal portion of all prepayments, (ii) the
Principal Balance of all Receivables that became Liquidated Receivables during
the related Collection Period (other than Purchased Receivables), (iii) the
principal portion of the Purchase Amount of all Receivables that became
Purchased Receivables as of the immediately preceding Record Date and (iv) the
aggregate amount of Cram Down Losses that shall have occurred during the related
Collection Period.
CLASS C CERTIFICATE: Any one of the Certificates executed by the
Trust and authenticated by the Trustee in substantially the form set forth in
Exhibit C.
CLASS C PERCENTAGE INTEREST: The interest in the Class C Portion of
the Trust that is evidenced by a Class C Certificate and that is set forth on
the face of such Certificate; PROVIDED, HOWEVER, that the Trustee on behalf of
the Trust shall only issue Class C Certificates evidencing in the aggregate
Class C Percentage Interests totaling 100%.
CLASS C PORTION: The aggregate interest in the Trust evidenced
by the Class C Certificates.
CLOSING DATE: [_______][_], 200[_].
COLLECTED FUNDS: With respect to any Determination Date, the amount
of funds in the Collection Account representing collections on the Receivables
during the related Collection Period, including all Liquidation Proceeds
collected during the related Collection Period (but excluding any Purchase
Amounts).
COLLECTION ACCOUNT: The account designated as the Collection
Account in, and which is established and maintained pursuant to, SECTION 5.1.
COLLECTION PERIOD: With respect to a Determination Date or a
Distribution Date, the calendar month preceding the month in which such
Determination Date or Distribution Date occurs (such calendar month being
referred to as the "related" Collection Period with respect to such
Determination Date or Distribution Date).
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COLLECTION RECORDS: All manually prepared or computer generated
records relating to collection efforts or payment histories with respect to
the Receivables.
COMPENSATING INTEREST: shall have the meaning set forth in
SECTION 4.8(B) hereof.
COMPUTER TAPE OR LISTING: The computer tape or listing generated on
behalf of the Depositor which provides information relating to the Receivables
and which was used by the Depositor, the Seller and the Originators in selecting
the Receivables conveyed to the Trust hereunder.
CORPORATE TRUST OFFICE: The principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at the Closing Date is located at [Address], Attention:
[____________________] or such other office as the Trustee may designate from
time to time by notice to the Certificateholders. The telecopy number for the
Corporate Trust Office on the Closing Date is [________________].
CRAM DOWN LOSS: With respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
the scheduled payments to be made on a Receivable, an amount equal to the excess
of the principal balance of such Receivable immediately prior to such order over
the principal balance of such Receivable as so reduced or the net present value
(using as the discount rate the higher of the APR on such Receivable or the rate
of interest, if any, specified by the court in such order) of the scheduled
payments as so modified or restructured. A "Cram Down Loss" shall be deemed to
have occurred on the date of issuance of such order.
CUT-OFF DATE: The close of business on [________][_], 200[_].
DEALER: A seller of [_________________] that originated one or
more of the Receivables and sold the respective Receivable, directly or
indirectly, to either Originator.
DEALER AGREEMENT: An agreement by and among either Originator and a
Dealer relating to the sale of retail installment sale contracts and installment
notes to either Originator and all documents and instruments relating thereto.
DEALER ASSIGNMENT: With respect to a Receivable, the executed
assignment executed by a Dealer conveying such Receivable to either
Originator.
DEFAULT RATE: With respect to any Distribution Date and based on
such information provided in the Servicer's Certificate under SECTION 4.9(B),
the product of (x) twelve and (y) a fraction (i) the numerator of which is the
sum of (a) the aggregate Principal Balance (as of the related Record Date) of
all Receivables which became Defaulted Receivables during the related Collection
Period and (b) the aggregate Principal Balance (as of the related repurchase
date) of Receivables that became Purchased Receivables during the related
Collection Period that were 30 days or more delinquent with respect to more than
ten percent of a Scheduled Payment at the time of such repurchase hereunder and
(ii) the denominator of which is a fraction (a) the numerator of which is the
sum of (1) the Aggregate Principal Balance of the Receivables as of the first
day of the related Collection Period and (2) the Aggregate Principal Balance of
the
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Receivables as of the last day of the related Collection Period and (b) the
denominator of which is two.
DEFAULTED RECEIVABLE: With respect to any Distribution Date, a
Receivable with respect to which: (i) more than ten percent of a Scheduled
Payment is 90 or more days delinquent, (ii) the Servicer has repossessed the
related [_________] (and any applicable redemption period has expired) or (iii)
such Receivable is in default and the Servicer has determined in good faith that
payments thereunder are not likely to be resumed; PROVIDED, however, that a
Receivable shall not be a Defaulted Receivable if the Servicer has determined in
good faith that insurance proceeds with respect to such Receivable are likely to
be paid.
DEFICIENCY CLAIM AMOUNT: Shall have the meaning set forth in
SECTION 6.3(A).
DEFICIENCY CLAIM DATE: With respect to any Distribution Date,
the [_______] Business Day immediately preceding such Distribution Date.
DEFICIENCY NOTICE: Shall have the meaning set forth in SECTION
6.3(A).
DEFINITIVE CERTIFICATE: Shall have the meaning set forth in
SECTION 7.3(C).
DELINQUENCY RATIO: With respect to any Distribution Date, a fraction
(a) the numerator of which is equal to the aggregate Principal Balance (as of
the related Record Date) of all Receivables that were 30 or more days delinquent
with respect to more than ten percent of a Scheduled Payment and (b) the
denominator of which is equal to the Aggregate Principal Balance of the
Receivables as of the related Record Date.
DEPOSIT DATE: With respect to any Collection Period, the
Business Day immediately preceding the related Determination Date.
DEPOSITOR: shall have the meaning set forth in the first
paragraph of this Agreement.
DEPOSITORY: The Depository Trust Company, 55 Water Street, New
York, New York 10041 and any successor Depository hereafter named.
DETERMINATION DATE: With respect to any Collection Period, the
ninth Business Day preceding the Distribution Date in the next calendar month.
DISTRIBUTION AMOUNT: With respect to a Distribution Date, the sum of
(i) the Available Funds for such Distribution Date, plus (ii) the Deficiency
Claim Amount, if any, received by the Trustee with respect to such Distribution
Date.
DISTRIBUTION DATE: With respect to a Collection Period, the [____]
day of the next succeeding calendar month, or if such [____] day is not a
Business Day, the next succeeding Business Day, commencing [_____], 200[_].
DRAW DATE: With respect to any Distribution Date, the [____]
Business Day immediately preceding such Distribution Date.
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ELECTRONIC LEDGER: The electronic master record of the
installment sales contracts or installment loans of the Servicer.
ELIGIBLE ACCOUNT: (i) A segregated trust account that is maintained
with a depository institution acceptable to the Certificate Insurer (so long as
an Insurer Default shall not have occurred and be continuing), (ii) a segregated
direct deposit account maintained 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 [____] by [___________] and
[____] by [___________] and (so long as an Insurer Default shall not have
occurred and be continuing) acceptable to the Certificate Insurer, or (iii) a
segregated trust account with the corporate trust department of the initial
Trustee. In either case, such depository institution or trust company shall have
been approved by the Controlling Party (as defined in the Spread Account
Agreement), acting in its discretion, by written notice to the Spread Account
Trustee.
ELIGIBLE INVESTMENTS: Any one or more of the following types of
investments:
(i) (a) direct interest-bearing obligations of, and interest-bearing
obligations guaranteed as to timely payment of principal and interest by,
the United States or any agency or instrumentality of the United States
the obligations of which are backed by the full faith and credit of the
United States; and (b) direct interest-bearing obligations of, and
interest-bearing obligations guaranteed as to timely payment of principal
and interest by, the Federal National Mortgage Association or the Federal
Home Loan Mortgage Corporation, but only if, at the time of investment,
such obligations are rated AAA by [___________] and Aaa by [___________];
(ii) demand or time deposits in, certificates of deposit of, or
bankers' acceptances issued by any depository institution or trust company
organized under the laws of the United States or any State and subject to
supervision and examination by federal and/or State banking authorities
(including, if applicable, the Trustee or any agent of the Trustee acting
in their respective commercial capacities); provided that the short-term
unsecured debt obligations of such depository institution or trust company
at the time of such investment, or contractual commitment providing for
such investment, are rated [____] by [___________] and [____] by
[___________];
(iii) repurchase obligations pursuant to a written agreement (1)
with respect to any obligation described in clause (i) above, where the
Trustee has taken actual or constructive delivery of such obligation in
accordance with SECTION 5.1, and (2) entered into with a depository
institution or trust company organized under the laws of the United States
or any State thereof, the deposits of which are insured by the Federal
Deposit Insurance Corporation and the short-term unsecured debt
obligations of which are rated "[____]" by [______________] and "[____]"
by [___________] (including, if applicable, the Trustee or any agent of
the Trustee acting in their respective commercial capacities);
(iv) securities bearing interest or sold at a discount rated
"[____]" by [______________] and "[____]" by [___________] issued by any
corporation incorporated under the laws of the United States or any State
whose long-term unsecured
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debt obligations are rated AAA by [___________] and Aaa by [___________]
at the time of such investment or contractual commitment providing for
such investment; PROVIDED, HOWEVER, that securities issued by any
particular corporation will not be Eligible Investments to the extent that
an investment therein will cause the then outstanding principal amount of
securities issued by such corporation and held as part of the Collection
Account to exceed [_____]% of the Eligible Investments held in the
Collection Account (with Eligible Investments held in the Collection
Account valued at par);
(v) commercial paper that (1) is payable in United States
dollars and (2) is rated "[____]" by [___________] and "[____]" by
[___________];
(vi) money market mutual funds registered under the Investment
Company Act of 1940, as amended, having a rating, at the time of such
investment, from each of the Rating Agencies in the highest investment
category granted thereby and acceptable to the Certificate Insurer; and
(vii) any other demand or time deposit, obligation, security or
investment as may be acceptable to the Certificate Insurer, as evidenced
by the prior written consent of the Certificate Insurer, as may from time
to time be confirmed in writing to the Trustee by the Certificate Insurer.
ELIGIBLE SERVICER: The Servicer, the Backup Servicer or another
Person which at the time of its appointment as Servicer, (i) is servicing a
portfolio of motor vehicle installment sales contracts and/or motor vehicle
installment loans, (ii) is legally qualified and has the capacity to service the
Receivables, (iii) has demonstrated the ability professionally and competently
to service a portfolio of motor vehicle installment sales contracts and/or motor
vehicle installment loans similar to the Receivables with reasonable skill and
care, and (iv) is qualified and entitled to use, pursuant to a license or other
written agreement, and agrees to maintain the confidentiality of, the software
which the Servicer uses in connection with performing its duties and
responsibilities under this Agreement or otherwise has available software which
is adequate to perform its duties and responsibilities under this Agreement.
[____________]: Collectively, [____________________], the Seller
and the Originators.
[____________] BANKS: Depository institutions named by the Servicer
and, so long as an Insurer Default shall not have occurred and be continuing,
acceptable to the Certificate Insurer, or, if an Insurer Default shall have
occurred and be continuing, a Certificate Majority.
[____________] COLLECTION ACCOUNTS: The segregated accounts
maintained on behalf of the Trustee by the [____________] Banks pursuant to
SECTION 4.2(D).
FINAL SCHEDULED DISTRIBUTION DATE: [_________][_], 200[_].
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FINANCED VEHICLE: A new or used automobile or light duty truck, van
or mini-van together with all accessories thereto, securing or purporting to
secure an Obligor's indebtedness under a Receivable.
FRACTIONAL UNDIVIDED INTEREST: The fractional undivided interest
in the Trust that is evidenced by a Certificate.
INDEMNIFICATION AGREEMENT: The Indemnification Agreement among
the Certificate Insurer, [____________], the Depositor and the Underwriter.
INDEPENDENT ACCOUNTANTS: shall have the meaning set forth in
SECTION 4.11(A).
INSURANCE AGREEMENT: The Insurance and Indemnity Agreement among
the Depositor, [____________], the Certificate Insurer, and the Seller.
INSURANCE AGREEMENT EVENT OF DEFAULT: An "Event of Default" as
defined in the related Insurance Agreement.
INSURANCE POLICY: With respect to a Receivable, any insurance policy
(including the insurance policies described in SECTION 3.02(W) of the
Unaffiliated Seller's Agreement benefiting the holder of the Receivable
providing loss or physical damage, credit life, credit disability, theft,
mechanical breakdown or similar coverage with respect to the Financed Vehicle or
the Obligor.
INSURER DEFAULT: The occurrence and continuance of any of the
following events:
(a) the Certificate Insurer shall have failed to make a payment
required under the Policy in accordance with its terms;
(b) the Certificate Insurer shall have (i) filed a petition or
commenced any case or proceeding under any provision or chapter of the United
States Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a final and
nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Certificate Insurer or for all or any material portion
of its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Certificate Insurer (or the taking of
possession of all or any material portion of the property of the Certificate
Insurer).
LIEN: Any security interest, lien, charge, pledge, preference,
equity or encumbrance of any kind, including tax liens, mechanics' liens and any
liens that attach by operation of law.
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LIEN CERTIFICATE: With respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
LIQUIDATED RECEIVABLE: With respect to any Collection Period, a
Receivable as to which (i) 60 days have elapsed since the Servicer repossessed
the Financed Vehicle, (ii) the Servicer has determined in good faith that all
amounts it expects to recover have been received, (iii) more than ten percent of
a Scheduled Payment shall have become 180 or more days delinquent or (iv) the
Financed Vehicle has been sold and the proceeds received. Any Receivable that
becomes a Purchased Receivable on or before the related Deposit Date shall not
be a Liquidated Receivable.
LIQUIDATION PROCEEDS: With respect to a Liquidated Receivable, all
amounts realized with respect to such Receivable (other than amounts withdrawn
from the Spread Account and drawings under the Policy) net of amounts that are
required to be refunded to the Obligor on such Receivable less reasonable
Servicer out-of-pocket costs including repossession and resale expenses not
already deducted from such amounts; PROVIDED, HOWEVER, that the Liquidation
Proceeds with respect to any Receivable shall in no event be less than zero.
LOCAL BANKS: Depository institutions named by the Servicer and, so
long as an Insurer Default shall not have occurred and be continuing, acceptable
to the Certificate Insurer, or, if an Insurer Default shall have occurred and be
continuing, a Certificate Majority.
LOCAL COLLECTION ACCOUNTS: The segregated accounts maintained on
behalf of the Trust by the Local Banks pursuant to SECTION 4.2(D).
[___________]: [________________], or any successor thereto.
NET LOSS RATE: For any Collection Period, the product, expressed as
a percentage, of twelve multiplied by a fraction, the numerator of which is
equal to (i) the sum of (a) the aggregate of the Principal Balances as of the
related Record Date of all Receivables that became Liquidated Receivables during
the related Collection Period and (b) the amount of any Cram Down Losses less
(ii) the Liquidation Proceeds received by the Trust with respect to Receivables
which became Liquidated Receivables in prior Collection Periods, and the
denominator of which is equal to the average of the Aggregate Principal Balance
as of the related Record Date and the Aggregate Principal Balance as of the
first day of the related Collection Period.
NOTICE OF CLAIM: A written or telecopied notice from the Trustee to
the Certificate Insurer, substantially in the form of Exhibit A to the Policy.
OBLIGOR: The purchaser or the co-purchasers of the Financed
Vehicle and any other Person or Persons who are primarily or secondarily
obligated to make payments under a Receivable.
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OFFICER'S CERTIFICATE: A certificate signed by the chairman of the
board, the vice chairman, the president, the chief financial officer, the
treasurer, the assistant treasurer, the controller or any executive vice
president.
OPINION OF COUNSEL: A written opinion of counsel acceptable in form
and substance to the Trustee and, if such opinion or a copy thereof is required
by the provisions of this Agreement to be delivered to the Certificate Insurer,
to the Certificate Insurer.
ORIGINAL AGGREGATE PRINCIPAL BALANCE: $[_____________]
ORIGINATORS: [___________________], a [______________]
corporation and [__________________], a [_______________] corporation.
ORIGINATOR'S UNDERWRITING GUIDE: means the respective underwriting
manuals used by each Originator in the origination or purchase of Receivables as
amended from time to time.
PARTICIPANT: Any broker-dealer, bank or other financial institution
for which the Depository holds Class A Certificates from time to time as a
securities depository.
PERSON: Any legal person, including any individual, corporation,
partnership, joint venture, estate, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof, or any other entity.
POLICY: The financial guaranty insurance policy number [______]
issued by the Certificate Insurer to the Trustee for the benefit of the Class A
Certificateholders, including any endorsements thereto.
POLICY CLAIM AMOUNT: Shall have the meaning set forth in SECTION
6.4(A).
POLICY PAYMENTS ACCOUNT: The account designated as the Policy
Payments Account in, and which is established and maintained pursuant to,
SECTION 5.1.
POOL FACTOR: With respect to any Distribution Date, a seven digit
decimal figure equal to, as applicable, the Class A Certificate Balance as of
such Distribution Date (after giving effect to distributions on such date)
divided by the Class A Certificate Balance as of the Closing Date, or the Class
B Certificate Balance as of such Distribution Date (after giving effect to
distributions on such date) divided by the Class B Certificate Balance as of the
Closing Date.
PREFERENCE CLAIM: Shall have the meaning set forth in SECTION
6.5(B).
PREPAYMENT: Any payment in full made by an Obligor of the
principal of a Receivable which is received by the Servicer in advance of the
scheduled maturity date for such Receivable.
PRINCIPAL BALANCE: With respect to any Receivable, as of any date,
the Amount Financed minus (i) that portion of all amounts received on or prior
to
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such date and allocable to principal in accordance with the terms of the
Receivable, and (ii) any Cram Down Loss in respect of such Receivable.
PURCHASE AGREEMENT: The Purchase Agreement and Assignment dated as
of [_____], 200[_] between the Originators, the Seller and
[____________________] relating to the purchase by the Seller from the
Originators of the Receivables, as set forth in Exhibit H.
PURCHASE AMOUNT: With respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable as of the date
of purchase.
PURCHASED RECEIVABLE: As of any Record Date, any Receivable that
became a Warranty Receivable or Administrative Receivable as of such Record Date
(or which the Seller, the Originators or the Servicer has elected to purchase as
of an earlier Record Date, as permitted hereunder) and as to which the Purchase
Amount has been deposited in the Collection Account by the Seller, the
Originators, [____________________] or the Servicer, as applicable, on or before
the related Deposit Date.
RATING AGENCY: Each of [___________] and [______________], so long
as such Persons maintain a rating on the Certificates; and if either
[___________] or [___________] no longer maintains a rating on the Certificates,
such other nationally recognized statistical rating organization selected by the
Depositor and (so long as an Insurer Default shall not have occurred and be
continuing) acceptable to the Certificate Insurer.
RECEIVABLE: An installment sale contract or promissory note (and
related security agreement) for a new or used automobile or light duty truck,
van or mini-van (and all accessories thereto) that is included in the Schedule
of Receivables, and all rights and obligations under such a contract, but not
including (i) any Liquidated Receivable (other than for purposes of calculating,
as applicable, the Class A Principal Distributable Amount and the Class B
Principal Distributable Amount hereunder) or (ii) any Purchased Receivable on or
after the Record Date immediately preceding the Deposit Date on which payment of
the Purchase Amount is made in connection therewith pursuant to SECTION 5.4.
RECEIVABLE FILE: The documents, electronic entries, instruments
and writings listed in SECTION 3.2 pertaining to a particular Receivable.
RECORD DATE: With respect to any Determination Date or Distribution
Date, the last day of the immediately preceding calendar month, except that with
respect to the initial Determination Date or Distribution Date, the Closing
Date.
REGISTRAR OF TITLES: With respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
RELATED DOCUMENTS: The Certificates, the Purchase Agreement, the
Indemnification Agreement, the Spread Account Agreement, the Insurance Agreement
and the Unaffiliated Seller's Agreement. The Related Documents to be executed by
any party are referred to herein as "such party's Related Documents," "its
Related Documents" or by a similar expression.
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REPRESENTATION LETTER: Letters to, or agreements with, the
Depository to effectuate a book entry system with respect to the Class A
Certificates registered in the Certificate Register under the nominee of the
Depository.
REPURCHASE EVENTS: The occurrence of a breach of any of
[____________]'s representations or warranties in the Unaffiliated Seller's
Agreement and the Purchase Agreement or the Servicer's representations and
warranties in this Agreement which requires the repurchase of a Receivable by
[____________] or the Servicer.
REQUIRED DEPOSIT RATING: A rating on short-term unsecured debt
obligations of at least "[____]" by [___________] and at least "[____]" by
[___________] (or such other rating as may be acceptable to the Rating Agencies
and, so long as an Insurer Default shall not have occurred and be continuing,
the Certificate Insurer) so as to not affect the rating on the Certificates.
REQUISITE AMOUNT: shall have the meaning set forth in the Spread
Account Agreement.
RESPONSIBLE OFFICER: When used with respect to the Trustee, any
officer within the Corporate Trust Office of the Trustee, including any Vice
President, Assistant Vice President, Assistant Treasurer, Assistant Secretary,
Managing Director or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge of and familiarity with the
particular subject. When used with respect to any other Person that is not an
individual, the President, any Vice-President, Assistant Vice-President,
Treasurer, Assistant Treasurer or the Controller of such Person, or any other
officer or employee having similar functions.
RULE OF 78'S METHOD: means the method under which a portion of a
payment allocated to earned interest and the portion allocable to principal is
determined according to the sum of the month's digits or any equivalent method
commonly referred to as the "Rule of 78's."
RULE OF 78'S RECEIVABLES: means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Rule of 78's Method.
SCHEDULE OF RECEIVABLES: The schedule of all installment sales
contracts and promissory notes originally held as part of the Trust which is
attached as Schedule A.
SCHEDULED PAYMENT: With respect to any Collection Period for any
Receivable, the amount set forth in such Receivable as required to be paid by
the Obligor in such Collection Period. If after the Closing Date, the Obligor's
obligation under a Receivable with respect to a Collection Period has been
modified so as to differ from the amount specified in such Receivable as a
result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Soldiers' and Sailors' Civil Relief Act of 1940 or
(iii) modifications or extensions of the Receivable permitted by SECTION 4.2(B),
the Scheduled Payment with respect to such Collection Period shall refer to the
Obligor's payment obligation with respect to such Collection Period as so
modified.
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SELLER: [____________], a special-purpose finance vehicle
incorporated in [________] and a subsidiary of the Originators.
SERIES: The Certificates issued pursuant to this Agreement.
SERVICER: shall have the meaning set forth in the first
paragraph of this Agreement.
SERVICER EXTENSION NOTICE: The notice delivered pursuant to
SECTION 4.14.
SERVICING PROCEDURES MANUAL: means the servicing manual used by
the Servicer (or the Sub-Servicers with respect to the Sub-Serviced
Receivables) in the servicing of the Receivables as amended from time to time.
SERVICER TERMINATION EVENT: An event described in SECTION 10.1.
SERVICER'S CERTIFICATE: With respect to each Determination Date, a
certificate, completed by and executed on behalf of the Servicer, in accordance
with SECTION 4.9, substantially in the form attached hereto as Exhibit E.
SIMPLE INTEREST METHOD: The method of allocating a fixed level
payment on an obligation between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is equal to the product of
the fixed rate of interest on such obligation multiplied by the period of time
(expressed as a fraction of a year, based on the actual number of days in the
calendar month and 365 days in the calendar year) elapsed since the preceding
payment under the obligation was made.
SIMPLE INTEREST RECEIVABLE: A Receivable under which the portion of
the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
SPREAD ACCOUNT: The Spread Account established and maintained
pursuant to the Spread Account Agreement. The Spread Account is not part of
the Trust Property.
SPREAD ACCOUNT AGREEMENT: The Master Spread Account Agreement among
the Seller, [____________________], the Originators, the Certificate Insurer and
the Trustee as Trustee and Spread Account Trustee substantially in the form
attached hereto as Exhibit D, as the same may be amended, supplemented or
otherwise modified in accordance with the terms thereof.
SPREAD ACCOUNT TRUSTEE: The Spread Account Trustee named in the
Spread Account Agreement, and any successor thereto pursuant to the terms of the
Spread Account Agreement.
[___________]: [___________] Ratings Services, a division of the
[_________________], or any successor thereto.
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SUB-SERVICED RECEIVABLES: Those Receivables sub-serviced by the
[___________________].
SUB-SERVICERS: [______________], with respect to Receivables
originated by it and [______________]. with respect to Receivables originated
by it.
SUPPLEMENTAL SERVICING FEE: With respect to any Collection Period
(i) all administrative fees, expenses and charges paid by or on behalf of
Obligors, including late fees, prepayment fees and liquidation fees collected on
the Receivables during such Collection Period and (ii) the net realized earnings
on all investments of funds deposited in the Collection Account.
TOTAL SERVICING FEE: The sum of the Basic Servicing Fee and the
Supplemental Servicing Fee.
TRIGGER EVENT: shall have the meaning set forth in the Spread
Account Agreement.
TRUST: shall have the meaning set forth in SECTION 2.1.
TRUST PROPERTY: The property and proceeds of every description
conveyed pursuant to SECTION 3.1 hereof, together with certain monies paid on or
after the Cut-Off Date, the Policy, the Collection Account (including all
Eligible Investments therein and all proceeds therefrom), collections on the
Receivables held at any time in the [____________] Collection Accounts,
collections on the Receivables held at any time in the Local Collection Accounts
and certain other rights under this Agreement. The Spread Account is not a part
of or otherwise includable in the Trust or the Trust Property.
TRUSTEE: shall have the meaning set forth in the first paragraph
of this Agreement.
UCC: The Uniform Commercial Code as in effect in the relevant
jurisdiction.
UNAFFILIATED SELLER'S AGREEMENT: The Unaffiliated Seller's Agreement
between the Depositor, the Seller, [____________________] and the Originators,
dated as of [_____], 200[_] pursuant to which the Seller will sell the
Receivables to the Depositor.
UNDERWRITER: PaineWebber Incorporated.
WARRANTY RECEIVABLE: With respect to any Collection Period, a
Receivable which [____________] has become obligated to repurchase pursuant
to SECTION 3.6.
Section 1.2 USAGE OF TERMS. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
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Section 1.3 CALCULATIONS. All calculations of the amount of interest
accrued on the Certificates and all calculations of the amount of the Basic
Servicing Fee shall be made on the basis of a 360-day year consisting of twelve
30-day months. All references to the Principal Balance of a Receivable as of a
Record Date shall refer to the close of business on such day.
Section 1.4 SECTION REFERENCES. All references to Articles,
Sections, paragraphs, subsections, exhibits and schedules shall be to such
portions of this Agreement unless otherwise specified.
Section 1.5 ACTION BY OR CONSENT OF CERTIFICATEHOLDERS. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller or any Affiliate thereof shall be deemed not to be outstanding and
the Fractional Undivided Interest evidenced thereby shall not be taken into
account in determining whether the requisite Fractional Undivided Interest
necessary to effect any such action or consent has been obtained; PROVIDED,
HOWEVER, that, solely for the purpose of determining whether the Trustee is
entitled to rely upon any such action or consent, only Certificates which a
Responsible Officer of the Trustee actually knows to be so owned shall be so
disregarded.
Section 1.6 NO RECOURSE. No recourse may be taken, directly or
indirectly, under this Agreement or any certificate or other writing delivered
in connection herewith or therewith, against any stockholder, officer, or
director, as such, of the Depositor, the Seller, the Originators, the Servicer
or the Trustee or of any predecessor or successor of the Depositor, the Seller,
the Originators, the Servicer or the Trustee.
Section 1.7 MATERIAL ADVERSE EFFECT. Whenever a determination is to
be made under this Agreement as to whether a given event, action, course of
conduct or set of facts or circumstances could or would have a material adverse
effect on the Trust or the Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
insurance provided by the Policy.
ARTICLE II
CREATION OF TRUST
Section 2.1 CREATION OF TRUST. The Depositor does hereby create and
establish, pursuant to the laws of the State of New York and this Agreement a
trust (the "TRUST"), which for convenience shall be known as
"[__________________] Trust 200[_]-[_]."
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ARTICLE III
CONVEYANCE OF RECEIVABLES; ACCEPTANCE BY TRUSTEE;
ORIGINAL ISSUANCE OF CERTIFICATES
Section 3.1 CONVEYANCE OF RECEIVABLES. (a) Subject to the terms and
conditions of this Agreement, the Depositor hereby sells, transfers, assigns,
and otherwise conveys to the Trustee, in trust for the benefit of the
Certificateholders, without recourse (but without limitation of its obligations
in this Agreement), all of the right, title and interest of the Depositor in and
to the Receivables, all monies at any time paid or payable thereon or in respect
thereof after the Cut-Off Date (including amounts due on or before the Cut-Off
Date but received by the Depositor, the Seller or the Originators after the
Cut-Off Date), an assignment of security interests of the Originators in the
Financed Vehicles, the Insurance Policies and any proceeds from any Insurance
Policies relating to the Receivables, the Obligors or the Financed Vehicles,
including rebates of premiums, rights of the Originators against Dealers with
respect to the Receivables under the Dealer Agreements and the Dealer
Assignments, all items contained in the Receivable Files, any and all other
documents that the Originators keep on file in accordance with their customary
procedures relating to the Receivables, the Obligors or the Financed Vehicles,
property (including the right to receive future Liquidation Proceeds) that
secures a Receivable and that has been acquired by or on behalf of the Trust
pursuant to liquidation of such Receivable, and all proceeds of the foregoing.
It is the intention of the Depositor and the Seller that the transfer and
assignment contemplated by this Agreement shall constitute a sale of the
Receivables and other Trust Property from the Depositor to the Trust and the
beneficial interest in and title to the Receivables and the other Trust Property
shall not be part of the Depositor's or the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Depositor or the Seller under
any bankruptcy law. In the event that, notwithstanding the intent of the
Depositor or the Seller, the transfer and assignment contemplated hereby is held
not to be a sale, this Agreement shall constitute a grant of a security interest
in the property referred to in this SECTION 3.1 for the benefit of the
Certificateholders. The execution and delivery of this Agreement shall
constitute an acknowledgment by the Depositor, the Seller and the Trustee on
behalf of the Certificateholders that they intend to establish (for Federal tax
purposes) a trust, rather than an association taxable as a corporation. The
powers granted and obligations undertaken in this Agreement shall be construed
so as to further such intent.
(b) The Depositor hereby directs the Trustee to, and the Trustee
does hereby, accept the Trust Property conveyed by the Depositor pursuant to
this SECTION 3.1. The Trustee declares that the Trustee shall hold such Trust
Property upon the trusts herein set forth for the benefit of all present and
future Certificateholders, subject to the terms and provisions of this
Agreement. The Depositor hereby appoints the Trustee as the Depositor's
attorney-in-fact with all power independently to enforce all of the Depositor's
rights against the Seller, the Originators and [____________________] under the
Unaffiliated Seller's Agreement directs the Trustee to enforce such rights. The
Trustee hereby accepts such appointment and agrees to enforce such rights.
Section 3.2 CUSTODY MATTERS. (a) In connection with the sale,
transfer and assignment of the Receivables and the other Trust Property to the
Trust pursuant to this Agreement, the Depositor shall deliver to the Trustee the
following documents or instruments in
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its possession which shall be delivered to the Trustee on or before the Closing
Date (or in the case of the Lien Certificate, within 180 days after the Closing
Date) with respect to each Receivable:
(i) the fully executed original of the Receivable (together with
any agreements modifying the Receivable, including without limitation any
extension agreements); and
(ii) the Lien Certificate, or, if not yet received, such
documents, if any, that the related Originator keeps on file in accordance
with its customary procedures indicating that the Financed Vehicle is
owned by the Obligor and subject to the interest of the related Originator
as first lienholder or secured party.
(b) Upon payment in full on any Receivable, the Servicer will
notify the Trustee by an Officer's Certificate (which certification shall
include a statement to the effect that all amounts received in connection with
such payments which are required to be deposited in the Collection Account
pursuant to SECTION 3.1 have been so deposited) and shall request delivery of
the Receivable and Receivable File to the Servicer. From time to time as
appropriate for servicing and enforcing any Receivable, the Trustee shall, upon
written request of an officer of the Servicer and delivery to the Trustee of a
receipt signed by such officer in the form of Exhibit I attached hereto, cause
the original Receivable and the related Receivable File to be released to the
Servicer. The Trustee may conclusively rely and shall be protected when acting
or refraining from acting upon any certificate, request or receipt under this
Section. The Servicer's receipt of a Receivable and/or Receivable File shall
obligate the Servicer to return the original Receivable and the related
Receivable File to the Trustee when its need by the Servicer has ceased unless
the Receivable shall be liquidated or repurchased as described in SECTION 3.6 or
4.7.
Section 3.3 CONDITIONS TO ACCEPTANCE BY TRUSTEE. As conditions to
the execution and delivery of the Certificates by the Trustee on the Closing
Date, the Trustee shall have received the following on or before the Closing
Date:
(a) The Schedule of Receivables certified by the President,
Controller or Treasurer of the Depositor;
(b) Copies of resolutions of the Board of Directors of the
Depositor approving the execution, delivery and performance of this Agreement
and the transactions contemplated hereby, certified by a Secretary or an
Assistant Secretary of the Depositor;
(c) Copies of resolutions of the Board of Directors of the
Servicer approving the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, certified by a Secretary or an Assistant
Secretary of the Servicer;
(d) Evidence that 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 Trustee a first priority
perfected lien on, or ownership interest in, the Receivables and the other Trust
Property have been made, taken or performed;
(e) An executed copy of the Policy and Spread Account
Agreement; and
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(f) A computer tape and a diskette in a format acceptable to the
Trustee containing the information with respect to the Receivables.
Section 3.4 REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEPOSITOR.
The Depositor hereby makes the following representations, warranties and
covenants to the Trustee, the Certificate Insurer and the Certificateholders on
which the Trustee relies in accepting the Receivables in trust and in
authenticating the Certificates. Such representations, warranties and covenants
are made as of the Closing Date and shall survive the sale, transfer and
assignment of the Receivables to the Trustee, until the Certificates have been
paid in full. The Depositor represents and warrants, as to itself:
(i) ORGANIZATION AND GOOD STANDING. 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 currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own and
sell the Receivables and the other property transferred to the Trust.
(ii) DUE QUALIFICATION. 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 its property or the conduct of its business requires
such qualification.
(iii) POWER AND AUTHORITY. The Depositor has the power and
authority to execute and deliver this Agreement and the Related Documents
to which it is a party and to carry out its terms and their terms,
respectively; the Depositor has full power and authority to sell and
assign the Trust Property to be sold and assigned to and deposited with
the Trustee by it and has duly authorized such sale and assignment to the
Trustee by all necessary corporate action; and the execution, delivery and
performance of this Agreement and the Related Documents to which it is a
party have been duly authorized by the Depositor by all necessary
corporate action.
(iv) VALID SALE; BINDING OBLIGATIONS. This Agreement, when duly
executed and delivered, shall effect a valid sale, transfer and assignment
of the Receivables and the other Trust Property, enforceable against the
Depositor and creditors of and purchasers from the Depositor; and this
Agreement and the Related Documents to which it is a party, when duly
executed and delivered, shall constitute legal, valid and binding
obligations of the Depositor enforceable in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(v) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the Related Documents to which it is a
party and the fulfillment of the terms of this Agreement and the Related
Documents to which it is a party shall not conflict with, result in any
breach of any of the terms and provisions of or constitute
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(with or without notice, lapse of time or both) a default under, the
certificate of incorporation or by-laws of the Depositor, or any
indenture, agreement, mortgage, deed of trust or other instrument to which
the Depositor is a party or by which it is bound or result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust or other
instrument, other than this Agreement, or violate any law, 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 any of its
properties.
(vi) NO PROCEEDINGS. There are no material proceedings or
investigations pending or, to the Depositor's knowledge, threatened
against the Depositor, before any court, regulatory body, administrative
agency or other tribunal or governmental instrumentality having
jurisdiction over the Depositor or its properties (i) asserting the
invalidity of this Agreement or any of the Related Documents, (ii) seeking
to prevent the issuance of the Certificates or the consummation of any of
the transactions contemplated by this Agreement or any of the Related
Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by the Depositor of its obligations
under, or the validity or enforceability of, this Agreement or any of the
Related Documents, (iv) involving the Depositor and which might adversely
affect the federal income tax or other federal, state or local tax
attributes of the Certificates, or (v) that could have a material adverse
effect on the Receivables.
(vii) APPROVALS. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection
with the execution and delivery by the Depositor of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date.
(viii) REGISTRATION. The Depositor's Registration Statement
relating to the Class A Certificates has been declared effective under the
Securities Act of 1933, as amended; such Registration Statement complies
as to form with all requirements of such Act. The statements contained in
the Registration Statement which describe the Depositor or matters or
activities for which the Depositor is responsible or which are attributed
to the Depositor therein are true and correct in all material respects,
and the Registration Statement does not contain any untrue statement of a
material fact with respect to the Depositor or omit to state a material
fact required to be stated therein or necessary in order to make the
statements contained therein with respect to the Depositor not misleading.
To the best of the Depositor's knowledge and belief, the Registration
Statement does not contain any untrue statement of a material fact
required to be stated therein or omit to state any material fact required
to be stated therein or necessary to make the statements contained therein
not misleading.
(ix) CHIEF EXECUTIVE OFFICE. The chief executive office
of the Depositor is located at [Address].
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(x) NO GRANT OF A SECURITY INTEREST. The Depositor has not
pledged, assigned or transferred to any creditor, lender or any other
entity a security interest in the Depositor's right, title and interest in
and to the Receivables and Other Conveyed Property (as defined in and
pursuant to the Unaffiliated Seller's Agreement) which right, title and
interest was conveyed to the Trust pursuant to SECTION 3.1 hereof, other
than a security interest in favor of the Trustee on behalf of the
Certificateholders pursuant to this Agreement. Nor have any UCC financing
statements been filed or signed by or agreed to by the Depositor as debtor
in respect of the Depositor's right, title and interest in and to the
Receivables and the Other Conveyed Property (as defined in the
Unaffiliated Seller's Agreement), other than the security interest granted
to the Trustee on behalf of the Certificateholders pursuant to this
Agreement.
Section 3.5 [Reserved].
Section 3.6 REPURCHASE OF RECEIVABLES UPON BREACH OF REPRESENTATION
AND WARRANTY. The Servicer or the Trustee, as the case may be, shall inform the
other parties to this Agreement and the Certificate Insurer promptly, in
writing, upon the discovery (or, in the case of the Trustee, upon actual
knowledge by a Responsible Officer of the Trustee), of any breach of the
Seller's representations and warranties pursuant to the Unaffiliated Seller's
Agreement; PROVIDED, HOWEVER, that the failure to give any such notice shall not
derogate from any obligation of [____________] and, PROVIDED FURTHER, that the
Trustee and the Backup Servicer shall have no duty to inquire into or to
investigate the breach of any such representations and warranties.
[____________], pursuant to the Unaffiliated Seller's Agreement and the Purchase
Agreement, shall either cure the breach by the Deposit Date of the first full
calendar month following the discovery by or notice to [____________] of the
breach or repurchase any Receivable materially and adversely affected by such
breach. The Trustee shall (provided that it either has actual knowledge of such
breach or has received such written notice thereof) enforce such obligation of
[____________] to repurchase any Receivable materially and adversely affected by
the breach. If [____________] shall fail to so repurchase any Receivable, the
Trustee shall promptly notify the Certificate Insurer, in writing, of such
failure. In consideration of the purchase of the Receivable, [____________]
shall remit the Purchase Amount in the manner specified in SECTION 5.4. The sole
remedy of the Trustee, the Trust, or the Certificateholders with respect to a
breach of the Seller's representations and warranties pursuant to the
Unaffiliated Seller's Agreement shall be to require [____________] to repurchase
such Receivables pursuant to the Unaffiliated Seller's Agreement or the Purchase
Agreement.
In addition to the foregoing, [____________] shall, pursuant to the
Unaffiliated Seller's Agreement or the Purchase Agreement, as the case may be,
indemnify the Trustee, the Backup Servicer, the Depositor, the Spread Account
Trustee, the Certificate Insurer, the Trust and the Certificateholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third-party claims arising out of the
events or facts giving rise to a breach of the representations and warranties
set forth in the Unaffiliated Seller's Agreement or the Purchase Agreement.
Section 3.7 NONPETITION COVENANT. Until one year plus one day shall
have elapsed since the termination of the Trust in accordance with SECTION 12.1,
none of the
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Depositor, the Seller, the Servicer, the Trustee, nor the Originators shall
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Depositor or the
Trust under any federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Depositor or the Trust or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Depositor or the Trust.
Section 3.8 COLLECTING LIEN CERTIFICATES NOT DELIVERED ON THE
CLOSING DATE. In the case of any Receivable in respect of which written evidence
from an Originator or a Dealer selling the related Financed Vehicle that the
Lien Certificate for such Financed Vehicle showing the related Originator as
first lienholder has been applied for from the Registrar of Titles, the Servicer
shall use its best efforts to collect such Lien Certificate from the Registrar
of Titles as promptly as practicable. If such Lien Certificate showing the
related Originator as first lienholder is not received by the Trustee within 180
days after the Closing Date and, notwithstanding the Servicer's continued
efforts to obtain such Lien Certificate, a loss occurs as a result of the
failure to receive the Lien Certificate within 180 days, then the representation
and warranty in SECTION 3.02(Q) of the Unaffiliated Seller's Agreement in
respect of such Receivable shall be deemed to have been incorrect in a manner
that materially and adversely affects such Receivable, the Certificateholders,
the Certificate Insurer and the Trust, and the Receivable must be repurchased by
the Seller, the Originators or [____________] pursuant to SECTION 3.6 hereof.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1 DUTIES OF THE SERVICER. (a) The Servicer is hereby
authorized to act as agent for the Trust and in such capacity shall manage,
service, administer and make collections on the Receivables, and perform the
other actions required by the Servicer under this Agreement. The Servicer shall
follow its customary standards, policies, and procedures in performing its
duties as Servicer; PROVIDED, that with respect to the Sub-Serviced Receivables
and for so long as the Sub-Servicers are sub-servicing the Sub-Serviced
Receivables, the Servicer shall follow each Sub-Servicer's respective customary
standards, policies and procedures; PROVIDED, FURTHER, that the Servicer and the
Sub-Servicers will be subject to no less degree of care and skill that would be
exercised by a prudent servicer of non-prime motor vehicle installment sale
contracts. The Servicer's duties shall include, without limitation, collection
and posting of all payments, responding to inquiries of Obligors on the
Receivables, investigating delinquencies, reporting any required tax information
to Obligors, policing the collateral, accounting for collections and furnishing
monthly and annual statements to the Trustee and the Certificate Insurer with
respect to distributions, monitoring the status of Insurance Policies with
respect to the Financed Vehicles and performing the other duties specified
herein. The Servicer shall also administer and enforce all rights and
responsibilities of the holder of the Receivables provided for in the Dealer
Agreements (and shall maintain possession of the Dealer Agreements, to the
extent it is necessary to do so), the Dealer Assignments and the Insurance
Policies, to the extent that such Dealer Agreements, Dealer Assignments and
Insurance Policies relate to the Receivables, the Financed Vehicles or the
Obligors. To the extent consistent with the standards, policies and procedures
otherwise required hereby, the Servicer shall follow its customary
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standards, policies, and procedures and shall have full power and authority,
acting alone, to do any and all things in connection with such managing,
servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered by the Trustee to execute and deliver, on behalf
of the Certificateholders and the Trustee or any of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Receivables
and with respect to the Financed Vehicles; PROVIDED, HOWEVER, that
notwithstanding the foregoing, the Servicer shall not, except pursuant to an
order from a court of competent jurisdiction, release an Obligor from payment of
any unpaid amount under any Receivable or waive the right to collect the unpaid
balance of any Receivable from the Obligor, except that the Servicer may forego
collection efforts if the amount subject to collection is de minimis and if it
would forego collection in accordance with its customary procedures. The
Servicer is hereby authorized to commence, in its own name or in the name of the
Trustee on behalf of the Trust (provided the Servicer has obtained the Trustee's
consent, which consent shall not be unreasonably withheld), a legal proceeding
to enforce a Receivable pursuant to SECTION 4.3 or to commence or participate in
any other legal proceeding (including, without limitation, a bankruptcy
proceeding) relating to or involving a Receivable, an Obligor or a Financed
Vehicle. If the Servicer commences or participates in such a legal proceeding in
its own name, the Trustee shall thereupon be deemed to have automatically
assigned such Receivable to the Servicer solely for purposes of commencing or
participating in any such proceeding as a party or claimant, and the Servicer is
authorized and empowered by the Trustee to execute and deliver in the Servicer's
name any notices, demands, claims, complaints, responses, affidavits or other
documents or instruments in connection with any such proceeding. The Trustee
shall furnish the Servicer with any powers of attorney and other documents which
the Servicer may reasonably request in writing and which the Servicer deems
necessary or appropriate and take any other steps which the Servicer may deem
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties under this Agreement.
Section 4.2 COLLECTION OF RECEIVABLE PAYMENTS; MODIFICATION AND
AMENDMENT OF RECEIVABLES. (a) Consistent with the standards, policies and
procedures required by this Agreement, the Servicer shall make reasonable
efforts to collect all payments called for under the terms and provisions of the
Receivables as and when the same shall become due, and shall follow such
collection procedures as it follows with respect to all comparable automobile
receivables that it services for itself or others and otherwise act with respect
to the Receivables, the Dealer Agreements, the Dealer Assignments, the Insurance
Policies and the other Trust Property in such manner as will, in the reasonable
judgment of the Servicer, maximize the amount to be received by the Trust with
respect thereto. The Servicer is authorized in its discretion to waive any
prepayment charge, late payment charge or any other similar fees that may be
collected in the ordinary course of servicing any Receivable.
(b) The Servicer may at any time agree to a modification or
amendment of a Receivable in order to (i) change the Obligor's regular due date
to a date within 30 days in which such due date occurs, (ii) re-amortize the
scheduled payments on the Receivable following a partial prepayment of principal
or (iii) convert a Rule of 78s Receivable to a Simple Interest Receivable.
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(c) The Servicer may grant payment extensions on, or other
modifications or amendments to, a Receivable (including those modifications
permitted by SECTION 4.2(B)) in accordance with its customary procedures if the
Servicer believes in good faith that such extension, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Trust with respect to such Receivable, and is otherwise in
the best interests of the Trust; PROVIDED, HOWEVER, that:
(i) The aggregate period of all extensions on a Receivable
shall not exceed 6 months;
(ii) In no event may a Receivable be extended by the
Servicer beyond the Collection Period immediately preceding the Final
Scheduled Distribution Date;
(iii) So long as an Insurer Default shall not have occurred and
be continuing, the Servicer shall not amend or modify a Receivable (except
as provided in SECTION 4.2(B) and this SECTION 4.2(C)) without the written
consent of the Certificate Insurer;
(iv) As of any Record Date the number of Receivables the term of
which have been extended during the preceding 12-month period shall not
exceed [_____]% of the number of Receivables which comprise the pool of
Receivables underlying the Class A Certificate Balance and the Class B
Certificate Balance at the beginning of the preceding 12-month period;
(v) No such extension, modification or amendment shall be granted
more than 90 days after the Closing Date if such action would have the
effect of causing such Receivable to be deemed to have been exchanged for
another Receivable within the meaning of Section 1001 of the Internal
Revenue Code of 1986, as amended, or any proposed, temporary or final
Treasury Regulations issued thereunder; and
(vi) So long as an Insurer Default shall not have occurred and be
continuing, the term of each Receivable may not be extended more than
twice in a twelve month period.
(d) Any payments on the Receivables received by the Servicer shall
be deposited directly into one or more Local Collection Accounts, and the
Servicer shall cause the Local Banks to deposit all such payments on the
Receivables into [____________] Collection Accounts no later than the first
Business Day after receipt of such payments. The Servicer shall then cause the
[____________] Banks to deposit all such payments on the Receivables into the
Collection Account no later than the first Business Day after receipt of such
payments by the [____________] Banks.
Section 4.3 REALIZATION UPON RECEIVABLES. (a) Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall use its best efforts to repossess (or otherwise comparably convert the
ownership of) and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer has determined that payments thereunder are not
likely to be resumed, as soon as is practicable after default on such Receivable
but in no event later than the date on which more than ten percent of a
Scheduled Payment has become 180 or more days delinquent. The Servicer is
authorized to follow such customary
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practices and procedures as it shall deem necessary or advisable, consistent
with the standard of care required by SECTION 4.1, which practices and
procedures may include reasonable efforts to realize upon any recourse to
Dealers, selling the related Financed Vehicle at public or private sale, the
submission of claims under an Insurance Policy and other actions by the Servicer
in order to realize upon such a Receivable. The foregoing is subject to the
provision that, in any case in which the Financed Vehicle shall have suffered
damage, the Servicer shall not expend funds in connection with any repair or
towards the repossession of such Financed Vehicle unless it shall determine in
its discretion that such repair and/or repossession shall increase the proceeds
of liquidation of the related Receivable by an amount greater than the amount of
such expenses. All amounts received upon liquidation of a Financed Vehicle shall
be remitted by the Servicer to the Collection Account as soon as practicable,
but in no event later than two Business Days after receipt thereof, and the
Servicer shall notify the Trustee, in writing, of the amount and date of such
deposit. The Servicer shall be entitled to recover all reasonable expenses
incurred by it in the course of repossessing and liquidating a Financed Vehicle,
but only out of the cash proceeds of such Financed Vehicle, any deficiency
obtained from the Obligor or any amounts received from the related Dealer, which
amounts may be retained by the Servicer (and shall not be required to be
deposited in the Collection Account) to the extent of such expenses. The
Servicer shall recover such reasonable expenses based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date. The Servicer shall pay on behalf of the Trust any personal property taxes
assessed on repossessed Financed Vehicles; the Servicer shall be entitled to
reimbursement of any such tax from Liquidation Proceeds with respect to such
Receivable.
(b) If the Servicer elects to commence a legal proceeding to
enforce a Dealer Agreement or Dealer Assignment, the act of commencement shall
be deemed to be an automatic assignment from the Trustee to the Servicer of the
rights under such Dealer Agreement and Dealer Assignment for purposes of
collection only. If, however, in any enforcement suit or legal proceeding, it is
held that the Servicer may not enforce a Dealer Agreement or Dealer Assignment
on the grounds that it is not a real party in interest or a Person entitled to
enforce the Dealer Agreement or Dealer Assignment, the Trustee, at the
Servicer's expense, shall take such steps as the Servicer deems necessary and
which the Trustee has received written notice thereof to enforce the Dealer
Agreement or Dealer Assignment, including bringing suit in its name or of the
Trustee for the benefit of the Certificateholders. All amounts recovered shall
be remitted by the Servicer to the Collection Account as soon as practicable,
but in no event later than two Business Days after receipt thereof.
Section 4.4 INSURANCE. (a) The Servicer shall monitor the status of
the insurance policies referred to in Section 3.02(w) of the Unaffiliated
Seller's Agreement in accordance with its customary servicing procedures. If the
Servicer shall determine that an Obligor has failed to obtain or maintain a
physical loss and damage insurance policy covering the related Financed Vehicle
which satisfies the conditions set forth in clause (i) of Section 3.02(w) of the
Unaffiliated Seller's Agreement (including during the repossession of such
Financed Vehicle) the Servicer shall be diligent in carrying on its customary
servicing procedures to enforce the rights of the holder of the Receivable
thereunder to ensure that the Obligor obtains such physical loss and damage
insurance.
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(b) The Servicer may sue to enforce or collect upon the Insurance
Policies, in its own name, if possible, or as agent of the Trust. If the
Servicer elects to commence a legal proceeding to enforce an Insurance Policy,
the act of commencement shall be deemed to be an automatic assignment of the
rights of the Trust under such Insurance Policy 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 an Insurance Policy on the grounds that
it is not a real party in interest or a holder entitled to enforce the Insurance
Policy, the Trustee, on behalf of the Trust, at the Servicer's expense, shall
take such steps as the Servicer deems necessary and which the Trustee has
received written notice thereof to enforce such Insurance Policy, including
bringing suit in its name or the name of the Trustee for the benefit of the
Certificateholders.
Section 4.5 MAINTENANCE OF SECURITY INTERESTS IN VEHICLES. (a)
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle on
behalf of the Trust, including but not limited to obtaining the execution by the
Obligors and the recording, registering, filing, re-recording, re-filing, and
re-registering of all security agreements, financing statements and continuation
statements as are necessary to maintain the security interest granted by the
Obligors under the respective Receivables. The Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to
re-perfect such security interest on behalf of the Trust as necessary because of
the relocation of a Financed Vehicle or for any other reason. In the event that
the assignment of a Receivable to the Trustee on behalf of the Trust is
insufficient, without a notation on the related Financed Vehicle's certificate
of title, or without fulfilling any additional administrative requirements under
the laws of the state in which the Financed Vehicle is located, to perfect a
security interest in the related Financed Vehicle in favor of the Trust, the
parties hereto agree that the related Originator's designation as the secured
party on the certificate of title is, with respect to each secured party, as
applicable, in its capacity as agent of the Trust.
(b) So long as an Insurer Default shall not have occurred and be
continuing, upon the occurrence of an Insurance Agreement Event of Default, the
Certificate Insurer may instruct, in writing, the Trustee and the Servicer to
take or cause to be taken such action as may, in the opinion of counsel to the
Certificate Insurer, be necessary or desirable to perfect or re-perfect the
security interests in the Financed Vehicles securing the Receivables in the name
of the Trustee on behalf of the Trust by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Certificate Insurer, be
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necessary or prudent. If an Insurer Default shall have occurred and be
continuing, upon the occurrence of a Servicer Termination Event, the Trustee
(upon actual knowledge of such Servicer Termination Event by a Responsible
Officer) and the Servicer shall take or cause to be taken such action as may, in
the opinion of counsel to the Trustee, be necessary to perfect or re-perfect the
security interests in the Financed Vehicles securing the Receivables in the name
of the Trustee on behalf of the Trust by amending the title documents of such
Financed Vehicles or by such other reasonable means as may, in the opinion of
counsel to the Certificate Insurer, be necessary or prudent. The Servicer hereby
agrees to pay all expenses related to such perfection or re-perfection and to
take all action necessary therefor. In addition, prior to the occurrence of an
Insurance Agreement Event of Default, the Certificate Insurer may (unless an
Insurer Default shall have occurred and be continuing) instruct, in writing, the
Trustee and the Servicer to take or cause to be taken such action as may, in the
opinion of counsel to the Certificate Insurer, be necessary to perfect or
re-perfect the security interests in the Financed Vehicles underlying the
Receivables in the name of the Trustee on behalf of the Trust, including by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Certificate Insurer,
be necessary or prudent; PROVIDED, however, that (unless an Insurer Default
shall have occurred and be continuing) if the Certificate Insurer requests that
the title documents be amended prior to the occurrence of an Insurance Agreement
Event of Default, the out-of-pocket expenses of the Servicer or the Trustee in
connection with such action shall be reimbursed to the Servicer or the Trustee,
as applicable, by the Certificate Insurer.
Section 4.6 COVENANTS, REPRESENTATIONS AND WARRANTIES OF Servicer.
The Servicer hereby makes the following covenants to the other parties hereto
and the Certificate Insurer on which the Trustee shall conclusively rely in
accepting the Receivables in trust and issuing the Certificates and on which the
Certificate Insurer shall rely in issuing the Policy.
(a) The Servicer covenants as follows:
(i) LIENS IN FORCE. The Financed Vehicle securing each Receivable
shall not be released in whole or in part from the security interest
granted by the Receivable, except upon payment in full of the Receivable
or, in the event that more than one Financed Vehicle was originally
pledged to secure such Receivable, upon the payment of an allowable
portion of such Receivable, one or more such Financed Vehicles may be so
released or as otherwise contemplated herein;
(ii) NO IMPAIRMENT. The Servicer shall do nothing to impair the
rights of the Trust or the Certificateholders in the Receivables, the
Dealer Agreements, the Dealer Assignments, the Insurance Policies or the
other Trust Property;
(iii) NO AMENDMENTS. The Servicer shall not extend or otherwise
amend the terms of any Receivable, except in accordance with SECTION 4.2;
and
(iv) SERVICING OF RECEIVABLES. The Servicer shall service the
Receivables (and shall require the Sub-Servicers to service the
Sub-Serviced Receivables) as required by the terms of this Agreement and
in material compliance with the current Servicing Procedures Manual.
(b) The Servicer represents and warrants to the Depositor, the
Trustee, the Certificate Insurer, the Backup Servicer and the Certificateholders
as of the Closing Date as to itself:
(i) ORGANIZATION AND GOOD STANDING. The Servicer has been duly
organized and is validly existing and in good standing under the laws of
its jurisdiction of organization, with power, authority and legal right to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to enter
into and perform its obligations under this Agreement;
(ii) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and
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approvals, in all jurisdictions in which the ownership or lease of
property or the conduct of its business (involving the servicing of the
Receivables as required by this Agreement) requires or shall require such
qualification;
(iii) POWER AND AUTHORITY. The Servicer has the power and
authority to execute and deliver this Agreement and its Related Documents
and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Servicer's
Related Documents have been duly authorized by the Servicer by all
necessary corporate action;
(iv) BINDING OBLIGATION. This Agreement and the Servicer's
Related Documents shall constitute legal, valid and binding obligations of
the Servicer enforceable in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(v) NO VIOLATION. The consummation by the Servicer of the
transactions contemplated by this Agreement and the Servicer's Related
Documents, and the fulfillment by the Servicer of the terms of this
Agreement and the Servicer's Related Documents, 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 articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound or any of its properties are subject, or
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement, or
violate any law, order, rule or regulation applicable to the Servicer of
any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the
Servicer or any of its properties, or in any way materially adversely
affect the interest of the Certificateholders or the Trust in any
Receivable, or affect the Servicer's ability to perform its obligations
under this Agreement;
(vi) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the Servicer,
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties (A) asserting the invalidity of this Agreement or any of
the Related Documents, (B) seeking to prevent the issuance of the
Certificates or the consummation of any of the transactions contemplated
by this Agreement or any of the Related Documents, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement or any of the Related Documents, (D)
including the Servicer and which might adversely affect the federal income
tax or other federal, state or local tax attributes of the Certificates,
or (E) that could have a material adverse effect on the Receivables. To
the Servicer's knowledge, there are no proceedings or investigations
pending or threatened against the Servicer,
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before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Servicer or
its properties relating to the Servicer which might adversely affect the
federal income tax or other federal, state or local tax attributes of the
Certificates;
(vii) APPROVALS. All approvals, authorizations, consents, orders
or other actions of any person, corporation or other organization, or of
any court, governmental agency or body or official, required in connection
with the execution and delivery by the Servicer of this Agreement and the
consummation of the transactions contemplated hereby have been or will be
taken or obtained on or prior to the Closing Date;
(viii) NO CONSENTS. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, 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
(ix) CHIEF EXECUTIVE OFFICE. The chief executive office
of the Servicer is located at 15 South Main Street, Suite 750,
Greenville, South Carolina 29601.
Section 4.7 PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT OR
REPRESENTATION AND WARRANTY. The Servicer or the Trustee, as the case may be,
shall inform the other parties to this Agreement and the Certificate Insurer
promptly, in writing, upon the discovery (or, in the case of the Trustee, upon
actual knowledge by a Responsible Officer of the Trustee) of any breach of the
Servicer's covenants pursuant to SECTIONS 4.5(A) or 4.6(A); PROVIDED, HOWEVER,
that the failure to give any such notice shall not derogate from any obligation
of the Servicer, hereunder to repurchase any Receivable; PROVIDED FURTHER that,
the Trustee or the Backup Servicer shall have no duty to inquire into or to
investigate the breach of any such representations and warranties. The Servicer,
and so long as [____________________] is the Servicer, [____________], shall
either cure any breach by the Deposit Date of the first full calendar month
following the discovery by or notice to the Servicer of the breach or repurchase
any Receivable materially and adversely affected by the breach. The Trustee
shall (provided that it either has such actual knowledge or has received such
notice thereof) enforce such repurchase obligation of the Servicer and, so long
as [____________________] is the Servicer, [____________]. The Trustee shall
notify the Certificate Insurer promptly, in writing, of any failure by the
Servicer (or [____________], if applicable) to so repurchase any Receivable. In
consideration of the purchase of the Receivable, the Servicer (or
[____________], if applicable) shall remit the Purchase Amount in the manner
specified in SECTION 5.4.
In addition to the foregoing and notwithstanding whether the related
Receivable shall have been purchased by the Servicer (or [____________], if
applicable), the Servicer (or [____________], if applicable) shall indemnify the
Depositor, the Trustee, the Backup Servicer, the Spread Account Trustee, the
Certificate Insurer, the Trust and the Certificateholders and any of their
directors, officers, agents, employees or custodians against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of a breach of the covenants or
representations and warranties set forth in SECTIONS 4.5(A) or 4.6(A).
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Section 4.8 TOTAL SERVICING FEE; PAYMENT OF COMPENSATING INTEREST;
PAYMENT OF CERTAIN EXPENSES BY SERVICER. (a) On each Distribution Date, the
Servicer shall be entitled to receive out of the Collection Account the Basic
Servicing Fee and any Supplemental Servicing Fee for the related Collection
Period pursuant to SECTION 5.5.
(b) On or prior to each Determination Date, the Servicer shall
deposit in the Collection Account with respect to any Prepayment received on a
Receivable during the related Collection Period, out of its own funds without
any right of reimbursement therefor, an amount equal to the difference between
(x) 30 days' interest at an interest rate equal to the sum of the Class A
Pass-Through Rate and the Class B Pass-Through Rate on the Principal Balance of
such Receivable as of the first day of the related Collection Period and (y) the
interest actually paid by the Obligor with respect to the Receivable during such
Collection Period (any such amount paid by the Servicer, "COMPENSATING
INTEREST"). The Servicer shall in no event be required to pay Compensating
Interest with respect to any Collection Period in an amount in excess of the
aggregate Basic Servicing Fee received by the Servicer with respect to all
Receivables for the related Collection Period.
(c) The Servicer shall be required to pay all expenses incurred by
it in connection with its activities under this Agreement (including taxes
imposed on the Servicer, expenses incurred in connection with distributions and
reports to Certificateholders and the Certificate Insurer and all other fees and
expenses of the Trust including taxes levied or assessed against the Trust, and
claims against the Trust in respect of indemnification not expressly stated
under this Agreement to be for the account of the Trust). The Servicer shall be
liable for the fees and expenses of the Trustee, the Backup Servicer, the Spread
Account Trustee and the Independent Accountants.
Section 4.9 SERVICER'S CERTIFICATE. (a) No later than 10:00 a.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Trustee, the Backup Servicer, the Certificate Insurer, the Spread Account
Trustee, the Depositor and each Rating Agency a Servicer's Certificate executed
by a Responsible Officer of the Servicer containing, among other things, (i) all
information necessary to enable the Trustee to make any withdrawal and deposit
required by SECTION 6.3, to give any notice required by SECTIONS 6.3 or 6.4 and
make the distributions required by SECTION 5.5, (ii) a listing of all Warranty
Receivables and Administrative Receivables purchased as of the related Deposit
Date, identifying the Receivables so purchased, and (iii) all information set
forth in SECTION 5.7 hereof. Receivables purchased by the Seller, the
Originators, [____________] or the Servicer on the related Deposit Date and each
Receivable which became a Liquidated Receivable or which was paid in full during
the related Collection Period shall be identified by account number (as set
forth in the Schedule of Receivables). A copy of such Servicer's Certificate may
be obtained by any Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office.
(b) In addition to the information required by SECTION 4.9(A), the
Servicer shall include in the Servicer's Certificate delivered to the
Certificate Insurer and the Trustee (i) the Delinquency Ratio, Average
Delinquency Ratio, Default Rate, Average Default Rate, Net Loss Rate and Average
Net Loss Rate for such Determination Date, (ii) whether any Trigger Event has
occurred as of such Determination Date, (iii) whether any Trigger Event that may
have occurred as of a prior Determination Date is deemed cured as of such
Determination Date, and
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(iv) whether to the knowledge of the Servicer an Insurance Agreement Event of
Default has occurred.
Section 4.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF SERVICER
TERMINATION EVENT. (a) The Servicer shall deliver to the Trustee, the Backup
Servicer, the Certificate Insurer, the Certificateholders and each Rating
Agency, on or before [______] [_] of each year, beginning [_______] [_], 200[_]
an Officer's Certificate, dated as of [________][_] of such year, stating that
(i) a review of the activities of the Servicer during the preceding 12-month
period (or such other period as shall have elapsed from the Closing Date to the
date of the first such certificate) and of its performance under this Agreement
has been made under such officer's supervision, and (ii) to such officer's
knowledge, based on such review, the Servicer has fulfilled all its obligations
under this Agreement throughout such period, or, if there has been a default in
the fulfillment of any such obligation, specifying each such default known to
such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trustee, the Backup
Servicer, the Certificate Insurer, the Spread Account Trustee, the Depositor,
the Certificateholders and each Rating Agency, promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under SECTION 10.1(A). The Servicer shall deliver to the Trustee, the Backup
Servicer, the Certificate Insurer, the Spread Account Trustee, the Depositor,
the Certificateholders and each Rating Agency promptly after having obtained
knowledge thereof, but in no event later than two Business Days thereafter,
written notice in an Officer's Certificate of any event which with the giving of
notice or lapse of time, or both, would become a Servicer Termination Event
under any other clause of SECTION 10.1.
Section 4.11 ANNUAL INDEPENDENT ACCOUNTANTS' REPORT. (a) The
Servicer shall, at its expense, cause [Name of Independent Accountants] or a
firm of nationally recognized independent certified public accountants (the
"INDEPENDENT ACCOUNTANTS"), who may also render other services to the Servicer,
to deliver to the Trustee, the Backup Servicer, the Certificate Insurer, the
Depositor, the Certificateholders and each Rating Agency, for the first two
calendar months after the Closing Date and if exceptions or errors that are
required by generally accepted auditing standards to be reported exists, for
each month thereafter until reports for two such consecutive months indicate no
exceptions or errors that are required by generally accepted auditing standards
to be reported, a statement (the "ACCOUNTANT'S REPORT") addressed to the Board
of Directors of the Servicer, to the Trustee, to the Backup Servicer, to the
Depositor and to the Certificate Insurer, to the effect that such firm has
audited the financial statements 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 automobile installment sales contracts under pooling and
servicing agreements substantially similar one to 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 the Servicer's
portfolio of automobile installment sales contracts; and (4) except as described
in the statement, disclosed no
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exceptions or errors in the records relating to automobile and light truck loans
serviced for others that, in the firm's opinion, generally accepted auditing
standards requires such firm to report. The Accountants' Report shall further
state that (1) except as disclosed in the Report, no exceptions or errors in the
Servicer's Certificates so examined were found; and (2) the delinquency and loss
information relating to the Receivables contained in the Servicer's Certificates
were found to be accurate. In addition, the Accountant's Report must also be
submitted on or before [_______][_] of each year, beginning on [_______][_],
200[_] with respect to the twelve months ended the immediately preceding
December 31. The Accountant's Report to be submitted on an annual basis shall
also indicate that a review in accordance with agreed upon procedures was made
of three randomly selected Servicer's Certificates for the Trust.
(b) The Accountants' Report shall also indicate that the firm is
independent of the Servicer within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
(c) A copy of the Accountants' Report may be obtained by any
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
Section 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide (and shall require the
Sub-Servicers to provide) to representatives of the Trustee, the Backup Servicer
and the Certificate Insurer reasonable access to the documentation regarding the
Receivables. The Servicer will permit any authorized representative or agent
designated by the Trustee or the Backup Servicer to visit and inspect any of the
properties of the Servicer, to examine the corporate books and financial records
of the Servicer, its records relating to the Receivables, and make copies
thereof or extracts therefrom and to discuss the affairs, finances, and accounts
of the Servicer with its principal officers and its independent accountants. Any
expense incident to the exercise by the Trustee and the Backup Servicer of any
right under this SECTION 4.12 shall be borne by the Servicer. The Servicer shall
provide such access to any Certificateholder only in such cases where the
Servicer is required by applicable statutes or regulations (whether applicable
to the Servicer or to such Certificateholder) to permit such Certificateholder
to review such documentation. In each case, such access shall be afforded
without charge but only upon reasonable request and during normal business
hours. Nothing in this SECTION 4.12 shall derogate from the obligation of the
Servicer to observe any applicable law prohibiting disclosure of information
regarding the Obligors, and the failure of the Servicer to provide access as
provided in this SECTION 4.12 as a result of such obligation shall not
constitute a breach of this SECTION 4.12. Any Certificateholder, by its
acceptance of a Certificate (or by acquisition of its beneficial interest
therein), shall be deemed to have agreed to keep confidential and not to use for
its own benefit any information obtained by it pursuant to this SECTION 4.12,
except as may be required by applicable law.
Section 4.13 MONTHLY TAPE. On or before the fourth Business Day, but
in no event later than the fifth calendar day, of each month, the Servicer will
deliver to the Backup Servicer a computer tape and a diskette (or any other
electronic transmission acceptable to the Backup Servicer) in a format
acceptable to the Backup Servicer, containing the information with respect to
the Receivables as of the preceding Record Date necessary for preparation of the
Servicer's Certificate relating to the immediately succeeding Determination Date
and necessary
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to determine the application of collections as provided in SECTION 5.3. The
Backup Servicer shall use such tape or diskette (or other electronic
transmission acceptable to the Trustee and the Backup Servicer) to verify the
Servicer's Certificate delivered by the Servicer. The Backup Servicer shall
notify the Servicer and the Certificate Insurer of any discrepancies on or
before the second Business Day after the Determination Date. In the event that
the Backup Servicer reports any discrepancies, the Servicer and the Backup
Servicer shall attempt to reconcile such discrepancies prior to the related
Deficiency Claim Date, but in the absence of a reconciliation, the Servicer's
Certificate shall control for the purpose of calculations and distributions with
respect to the related Distribution Date. In the event that the Backup Servicer
and the Servicer are unable to reconcile discrepancies with respect to a
Servicer's Certificate by the related Distribution Date, the Servicer shall
cause the Independent Accountants, at the Servicer's expense, to audit the
Servicer's Certificate and, prior to the fourth Business Day, but in no event
later than the fifth calendar day, of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected in
the Servicer's Certificate for such next succeeding Determination Date.
In addition, the Servicer shall, if so requested by the Certificate
Insurer (unless an Insurer Default shall have occurred and be continuing)
deliver to the Backup Servicer its Collection Records within two Business Days
of demand therefor and a computer tape containing as of the close of business on
the date of demand or the following day all of the data maintained by the
Servicer in computer format in connection with servicing the Receivables. Unless
an Insurer Default shall have occurred and be continuing, the Backup Servicer
shall have no obligation to act in respect of such Collection Records delivered
pursuant to this paragraph.
Other than the duties specifically set forth in this Agreement, the
Backup Servicer shall have no obligations hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer. The Backup Servicer shall 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 Backup
Servicer. In addition, the Backup 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 Controlling Party or the Trustee
or for any inaccuracy or omission in a notice or communication received by the
Backup Servicer from any third party or (ii) which is due to or results from the
invalidity, unenforceability of any Receivable or non-compliance of the
underlying installment sale contract with applicable law or the breach or the
inaccuracy of any representation or warranty made pursuant to the Unaffiliated
Seller's Agreement and the Purchase Agreement with respect to any Receivable.
The duties and obligations of the Backup Servicer shall be determined solely by
the express provisions of this Agreement and no implied covenants or obligations
shall be read into this Agreement against the Backup Servicer.
Section 4.14 RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on [_______][_], 200[_], which
term shall be extendible by the Certificate Insurer for successive quarterly
terms ending on each successive September 30, December 31, March 31 and June 30
(or, pursuant to revocable written standing instructions from time to time to
the Servicer, the Trustee and the Backup Servicer for any specified number of
terms greater than one), until the termination of the Trust. Each such notice
(including each
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notice pursuant to standing instructions, which shall be deemed delivered at the
end of successive quarterly terms for so long as such instructions are in
effect) (a "SERVICER EXTENSION NOTICE") shall be delivered by the Certificate
Insurer to the Trustee, the Servicer and the Backup Servicer. The Servicer
hereby agrees that, as of the date hereof and upon its receipt of any such
Servicer Extension Notice, the Servicer shall become bound, for the initial term
beginning on the date hereof and for the duration of the term covered by such
Notice, to continue as the Servicer subject to and in accordance with the other
provisions of this Agreement. Until such time as an Insurer Default shall have
occurred and be continuing, the Trustee agrees that if as of the fifteenth day
prior to the last day of any term of the Servicer the Trustee shall not have
received any Servicer Extension Notice from the Certificate Insurer, the Trustee
will, within five days thereafter, give written notice of such non-receipt to
the Certificate Insurer, the Backup Servicer (or any alternate successor
servicer appointed by the Certificate Insurer pursuant to SECTION 10.3(B)) and
the Servicer and the Servicer's term shall not be extended unless a Servicer
Extension Notice is received on or before the last day of such term.
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 5.1 ACCOUNTS. The Servicer shall establish the Collection
Account in the name of the Trustee for the benefit of the Certificateholders.
The Servicer shall also establish the Policy Payments Account in the name of the
Trustee for the benefit of the Class A Certificateholders. Each of the
Collection Account and the Policy Payments Account shall be an Eligible Account
and initially shall be a segregated trust account established with the Trustee
and maintained with the Trustee. All amounts held in the Collection Account
shall, to the extent permitted by applicable laws, rules and regulations, be
invested, as directed in writing by the Servicer, in Eligible Investments that
mature not later than one Business Day prior to the Distribution Date for the
Collection Period to which such amounts relate. Any such written direction shall
certify that any such investment is authorized by this SECTION 5.1. Investments
in Eligible Investments shall be made in the name of the Trustee on behalf of
the Trust, and such investments shall not be sold or disposed of prior to their
maturity. The Trustee may trade with itself or an Affiliate in the purchase or
sale of Eligible Investments. Any investment of funds in the Collection Account
shall be made in Eligible Investments. 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 and distributed on the next
Distribution Date pursuant to SECTION 5.5. The Servicer shall deposit in the
Collection Account an amount equal to any net loss on such investments
immediately as realized. Amounts in the Policy Payments Account shall not be
invested. On the Closing Date, the Servicer shall deposit in the Collection
Account (i) all Scheduled Payments and prepayments of Receivables received by
the Local Banks after the Cut-Off Date and prior to the Closing Date and (ii)
all Liquidation Proceeds and proceeds of Insurance Policies realized in respect
of a Financed Vehicle and applied by the Servicer after the Cut-Off Date and any
Compensating Interest.
Section 5.2 COLLECTIONS. (a) The Servicer shall remit all payments
by or on behalf of the Obligors received by the Servicer with respect to the
Receivables (other than Purchased Receivables) and all Liquidation Proceeds
directly into the Local Collection Accounts
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on the Business Day of receipt, and the Local Banks shall deposit all such
payments on the Receivables into the [____________] Collection Accounts no later
than the Business Day following receipt of such payments. The [____________]
Collection Banks shall deposit all such payments on the Receivables into the
Collection Account one Business Day following receipt of such payments. Within
one Business Day of the initial issuance of the Certificates, the Local Banks
shall deposit into the [____________] Collection Accounts the foregoing amounts
received during the current Collection Period through such date of issuance and
the [____________] Banks shall deposit the foregoing amounts no later than the
Business Day after receipt of such payments into the Collection Account. On the
Closing Date, the Servicer, the Originators, the Seller or the Depositor shall
deposit into the Local Collection Accounts all payments by or on behalf of the
Obligors on the Receivables and any Liquidation Proceeds received by the
Originators, the Seller, the Depositor or the Servicer after the Cut-Off Date
and any Compensating Interest on or prior to the second Business Day immediately
preceding the Closing Date. The Local Banks shall deposit all such payments on
the Receivables and any Compensating Interest into the [____________] Collection
Accounts no later than the Business Day after receipt of such payments and the
[____________] Banks shall deposit all such payments into the Collection Account
no later than the Business Day after receipt of such payments.
(b) The Servicer will be entitled to be reimbursed from amounts on
deposit in the Collection Account with respect to a Collection Period for
amounts previously deposited in the Collection Account but later determined by
the Servicer to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Distribution Date pursuant to SECTION
5.5(B)(I) upon certification by the Servicer of such amounts and the provision
of such information to the Trustee and the Certificate Insurer as may be
necessary in the opinion of the Trustee and the Certificate Insurer to verify
the accuracy of such certification. In the event that the Certificate Insurer
has not received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this SECTION 5.2(B), the Certificate Insurer shall
(unless an Insurer Default shall have occurred and be continuing) give the
Trustee written notice to such effect, following receipt of which the Trustee
shall not make a distribution to the Servicer in respect of such amount pursuant
to SECTION 5.5, or if the Servicer prior thereto has been reimbursed pursuant to
SECTION 5.5 or SECTION 5.6, the Trustee shall withhold such amounts from amounts
otherwise distributable to the Servicer on the next succeeding Distribution
Date.
Section 5.3 APPLICATION OF COLLECTIONS. For the purposes of this
Agreement, all collections for a Collection Period shall be applied by the
Servicer as follows:
(a) With respect to each Receivable (other than a Purchased
Receivable), payments by or on behalf of the Obligor (other than of Supplemental
Servicing Fees with respect to such Receivable, to the extent collected) shall
be applied, in the case of a Rule of 78s Receivable, first, to the Scheduled
Payment of such Rule of 78s Receivable and, second, to any late fees accrued
with respect to such Rule of 78s Receivable and, in the case of a Simple
Interest Receivable, to interest and principal in accordance with the Simple
Interest Method. With respect to any Rule of 78s Receivable, any remaining
excess shall be applied to prepay the Receivable. With respect to Simple
Interest Receivables, any prepayment of principal during
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each Collection Period shall be immediately applied to reduce the principal
balance of the Receivable during such Collection Period.
(b) With respect to each Receivable that has become a Purchased
Receivable on any Deposit Date, the Purchase Amount shall be applied, for
purposes of this Agreement only, to interest and principal on the Receivable in
accordance with the terms of the Receivable as if the Purchase Amount had been
paid by the Obligor on the Record Date. The Servicer shall not be entitled to
any Supplemental Servicing Fees with respect to such a Receivable. Nothing
contained herein shall relieve any Obligor of any obligation relating to any
Receivable.
(c) All amounts collected that are payable to the Servicer as
Supplemental Servicing Fees hereunder shall be deposited in the Collection
Account and paid to the Servicer in accordance with SECTION 5.5(B)(I).
(d) All payments by or on behalf of an Obligor received with
respect to any Purchased Receivable after the Record Date immediately preceding
the Deposit Date on which the Purchase Amount was paid by the Seller, the
Originators, [____________] or the Servicer shall be paid to the Seller, the
Originators, [____________] or the Servicer, respectively, and shall not be
included in the Available Funds.
Section 5.4 ADDITIONAL DEPOSITS. On or before each Deposit Date, the
Seller, the Originators or the Servicer shall deposit into the Collection
Account the aggregate Purchase Amounts with respect to Administrative
Receivables and Warranty Receivables, respectively. All such deposits of
Purchase Amounts shall be made in immediately available funds. On or before each
Draw Date, the Trustee shall remit to the Collection Account any amounts
delivered to the Trustee by the Spread Account Trustee.
Section 5.5 DISTRIBUTIONS. (a) [Reserved]
(b) On each Distribution Date, the Trustee shall (x) distribute
all amounts from the Collection Account deposited by the Certificate Insurer
under SECTION 5.8 as directed in writing by the Certificate Insurer, and (y)
(based solely on the information contained in the Servicer's Certificate
delivered with respect to the related Determination Date) distribute the
following amounts and in the following order of priority:
(i) first, from the Distribution Amount, to the Servicer, the
Basic Servicing Fee for the related Collection Period, any Supplemental
Servicing Fees for the related Collection Period, and any amounts
specified in SECTION 5.2(B), to the extent the Servicer has not reimbursed
itself in respect of such amounts pursuant to SECTION 5.6;
(ii) second, from the Distribution Amount, to the Trustee, Spread
Account Trustee, [____________] Banks or Local Banks (including the
Trustee if acting in any such additional capacity), any accrued and unpaid
fees (in each case, to the extent such Person has not previously received
such amount from the Servicer);
(iii) third, from the Amount Available to the Class A
Certificateholders, the Class A Interest Distributable Amount for such
Distribution Date;
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(iv) fourth, from the Amount Available to the Class A
Certificateholders, the sum of (x) the Class A Principal Distributable
Amount for such Distribution Date and (y) the Class A Principal Carryover
Shortfall, if any, for such Distribution Date;
(v) fifth, from the Distribution Amount, to the Certificate
Insurer, to the extent of any amounts owing to the Certificate Insurer
under the Insurance Agreement and not paid, whether or not the Originators
are also obligated to pay such amounts;
(vi) sixth, from Available Funds to the Spread Account Trustee
certain amounts for deposit in the Spread Account up to the Requisite
Amount in accordance with the Spread Account Agreement;
(vii) seventh, from Available Funds to the Class B
Certificateholders, the Class B Interest Distributable Amount for such
Distribution Date;
(viii) eighth, from Available Funds to the Class B
Certificateholders, the sum of (x) the Class B Principal Distributable
Amount for such Distribution Date and (y) the Class B Principal Carryover
Shortfall, if any, for such Distribution Date;
(ix) ninth, to the Spread Account, all remaining Available
Funds; and
(x) tenth, from the Spread Account, from amounts released under
priority SEVENTH of Section 3.03(b) of the Spread Agreement to the Class B
Certificateholders and the Class C Certificateholder.
Distributions hereunder to the Seller shall be made by the Trustee by check
mailed to the address specified in SECTION 13.11 or by wire transfer.
(c) Subject to SECTION 12.1 respecting the final payment upon
retirement of each Certificate, and provided that the Trustee has received the
applicable Servicer's Certificate, on each Distribution Date the Trustee shall
distribute to each Certificateholder of record on the preceding Record Date
either (i) by wire transfer, in immediately available funds to the account of
such holder at a bank or other entity having appropriate facilities therefor, if
such Certificateholder holds Certificates representing at least $[________] in
Class A Certificate Balance or Class B Certificate Balance as of the Cut-Off
Date, and if such Certificateholder shall have provided to the Trustee
appropriate written instructions not later than 15 days prior to such
Distribution Date, or (ii) by check mailed to such Certificateholder at the
address of such Holder appearing in the Certificate Register, such Holder's
Fractional Undivided Interest of either the Class A Distributable Amount or the
Class B Distributable Amount, as applicable, to the extent funds therefor are
distributed under SECTION 5.5(B).
(d) Each Certificateholder, by its acceptance of its Certificate,
will be deemed to have consented to the provisions of paragraph (a) above
relating to the priority of distributions, and will be further deemed to have
acknowledged that no property rights in any amount or the proceeds of any such
amount shall vest in such Certificateholder until such amounts have been
distributed to such Certificateholder pursuant to such provisions, PROVIDED,
that the foregoing shall not restrict the right of any Certificateholder, upon
compliance with the
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provisions hereof, from seeking to compel the performance of the provisions
hereof by the parties hereto.
In furtherance of and not in limitation of the foregoing, each Class
B and Class C Certificateholder by acceptance of its Class B Certificate or
Class C Certificate specifically acknowledges that, to the extent of any
reversionary interest such Certificateholder may have in the Spread Account, no
amounts shall be received by it, nor shall it have any right to receive any
amounts, unless and until such amounts have been released pursuant to Section
3.03(b) SEVENTH of the Spread Account Agreement for distribution to such Class B
and Class C Certificateholder pursuant to paragraph (b)(x) above. Each Class B
and Class C Certificateholder, by its acceptance of its Class B and Class C
Certificate further specifically acknowledges that it has no right to or
interest in any moneys at any time held pursuant to the Spread Account Agreement
or pursuant hereto prior to the release of such moneys as aforesaid, such moneys
being held in trust for the benefit of the Certificateholders and the
Certificate Insurer, as their interests may appear prior to such release.
Notwithstanding the foregoing, in the event that it is ever determined that the
moneys held in the Spread Account constitute a pledge of collateral, then the
provisions of this Agreement and the Spread Account Agreement shall be
considered to constitute a security agreement and the Class C Certificateholders
hereby grant to the Spread Account Trustee and to the Trustee a first priority
perfected security interest in such amounts, to be applied as set forth in
Section 3.03(b) of the Spread Account Agreement.
Section 5.6 NET DEPOSITS. The Servicer may make the remittances to
be made by it pursuant to SECTIONS 5.2 and 5.4 net of amounts (which amounts may
be netted prior to any such remittance for a Collection Period) to be
distributed to it pursuant to SECTIONS 4.8 and 5.2(B) and (subject to payment by
the Servicer of amounts otherwise payable pursuant to SECTION 5.5(B)(II))
5.5(B)(I), for so long as no Servicer Termination Event has occurred and is
continuing; PROVIDED, HOWEVER, that the Servicer shall account for all of such
amounts in the related Servicer's Certificate as if such amounts were deposited
and distributed separately; and, PROVIDED, further, that if an error is made by
the Servicer in calculating the amount to be deposited or retained by it, with
the result that an amount less than the amount required is deposited in the
Collection Account, the Servicer shall make a payment of the deficiency to the
Collection Account, immediately upon becoming aware, or receiving notice from
the Trustee, of such error.
Section 5.7 STATEMENTS TO CERTIFICATEHOLDERS. (a) On each
Distribution Date, the Trustee shall send to each Certificateholder, a copy of
the related Servicer's Certificate delivered on the related Determination Date
pursuant to SECTION 4.9, setting forth for the Collection Period relating to
such Distribution Date the following information:
(i) in the case of the Class A and Class B Certificateholders,
the amount of such distribution allocable to principal;
(ii) in the case of the Class A and Class B Certificateholders,
the amount of such distribution allocable to interest;
(iii) the amount of such distribution payable out of amounts
withdrawn from the Spread Account or pursuant to a claim on the Policy;
(iv) the Class A Certificate Balance and the Class B Certificate
Balance, as applicable, (after giving effect to distributions made on such
Distribution Date);
(v) the amount of fees paid by the Trust with respect to such
Collection Period;
(vi) the amount of the Class A Interest Carryover Shortfall,
Class A Principal Carryover Shortfall, Class B Interest Carryover
Shortfall and Class B Principal Carryover Shortfall, if any, on such
Distribution Date and the change in such amounts from those of the prior
Distribution Date;
(vii) the Class A Certificate Factor, Class A Certificate
Balance, Class B Certificate Factor and Class B Certificate Balance as
of such Distribution Date;
(viii) the Delinquency Ratio, Average Delinquency Ratio,
Default Rate, Average Default Rate, Net Loss Rate and Average Net Loss
Rate for such Determination Date;
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(ix) whether any Trigger Event has occurred as of such
Determination Date;
(x) whether any Trigger Event that may have occurred as of a
prior Determination Date is Deemed Cured (as defined in the Spread Account
Agreement), as of such Determination Date;
(xi) whether an Insurance Agreement Event of Default has
occurred; and
(xii) the Pool Factor (after giving effect to distributions made
on such Distribution Date).
Each amount set forth pursuant to subclauses (i) (such amounts broken down by
Class of Certificate), (ii) (such amounts broken down by Class of Certificate),
(v) and (vi) above shall be expressed as a dollar amount per $1,000 of original
principal balance of a Certificate of the related Class.
(b) Within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of this Agreement,
the Trustee shall mail, to each Person who at any time during such calendar year
shall have been a Certificateholder, a statement prepared by the Servicer
containing the sum of the amounts set forth in clauses (i), (ii), and (v)
(separately indicating amounts in respect of the Class A Certificates and the
Class B Certificates in the case of (i) and (ii)) and such other information,
requested in writing by the Servicer, if any, as the Servicer determines is
necessary to permit the Certificateholder to ascertain its share of the gross
income and deductions of the Trust (exclusive of the Supplemental Servicing
Fee), for such calendar year or, in the event such Person shall have been a
Certificateholder during a portion of such calendar year, for the applicable
portion of such year, for the purposes of such Certificateholder's preparation
of federal income tax returns.
Section 5.8 OPTIONAL DEPOSITS BY THE CERTIFICATE INSURER. The
Certificate Insurer shall at any time, and from time to time, with respect to a
Distribution Date, have the
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option (but shall not be required, except as provided in SECTION 6.4 and in
accordance with the terms of the Policy) to deliver amounts to the Trustee for
deposit into the Collection Account for any of the following purposes: (i) to
provide funds in respect of the payment of fees or expenses of any provider of
services to the Trust with respect to such Distribution Date, (ii) to distribute
as a component of the Class A Principal Distributable Amount to the extent that
the Class A Certificate Balance as of the Determination Date preceding such
Distribution Date exceeds the Class A Percentage of the Aggregate Principal
Balance as of such Determination Date, or (iii) to include such amount as part
of the Class A Distributable Amount for such Distribution Date to the extent
that without such amount a draw would be required to be made on the Policy. The
Certificate Insurer shall notify the Trustee at least three Business Days prior
to the Distribution Date of such optional deposit specifying the amount of the
optional deposit and remit such amount on the related Deposit Date.
ARTICLE VI
THE SPREAD ACCOUNT AND THE POLICY
Section 6.1 SPREAD ACCOUNT. The Seller will, simultaneously with the
execution and delivery of this Agreement, execute and deliver the Spread Account
Agreement and, pursuant to the terms thereof, deposit $[__________] in the
Spread Account.
Section 6.2 POLICY. The Seller (pursuant to the Insurance Agreement)
and the Servicer agree, simultaneously with the execution and delivery of this
Agreement, to cause the Certificate Insurer to issue the Policy for the benefit
of the Trust in accordance with the terms thereof.
Section 6.3 WITHDRAWALS FROM SPREAD ACCOUNT. (a) In the event that
the Servicer's Certificate with respect to any Determination Date shall state
that the amount of the Available Funds with respect to such Determination Date
is less than the sum of the amounts payable on the related Distribution Date
pursuant to clauses (i) through (v) of SUBSECTION 5.5(B) (such deficiency being
a "DEFICIENCY CLAIM AMOUNT") then on the Deficiency Claim Date immediately
preceding such Distribution Date, the Trustee shall deliver to the Spread
Account Trustee, the Certificate Insurer, the fiscal agent, if any, and the
Servicer, by hand delivery, telex or facsimile transmission, a written notice in
the form of Exhibit I (a "DEFICIENCY Notice") specifying the Deficiency Claim
Amount for such Distribution Date. Such Deficiency Notice shall direct the
Spread Account Trustee to remit such Deficiency Claim Amount (to the extent of
the funds available to be distributed pursuant to the Spread Account Agreement)
to the Trustee for deposit in the Collection Account.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New
York City time, on the fourth Business Day preceding such Distribution Date. The
amounts distributed by the Spread Account Trustee to the Trustee pursuant to a
Deficiency Notice shall be deposited by the Trustee into the Collection Account
pursuant to SECTION 5.4.
Section 6.4 CLAIMS UNDER POLICY. (a) In the event that the Trustee
has delivered a Deficiency Notice with respect to any Determination Date, the
Trustee shall determine on the related Draw Date whether the sum of (i) the
amount of Available Funds with
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respect to such Determination Date (as stated in the Servicer's Certificate with
respect to such Determination Date) plus (ii) the amount actually received by
the Trustee from the Spread Account Trustee as a result of a Deficiency Notice
with respect to such Distribution Date (as stated in the certificate delivered
on the immediately preceding Deficiency Claim Date by the Spread Account Trustee
pursuant to Section 3.03(a) of the Spread Account Agreement) would be
insufficient, after giving effect to the distributions required by SECTION
5.5(B)(I)-(II), to pay the Class A Distributable Amount for the related
Distribution Date. If the above sum is insufficient, then the Trustee shall
furnish to the Certificate Insurer no later than 10:00 a.m. New York City time
on the related Draw Date a completed Notice of Claim in the amount of the
shortfall in amounts so available to pay the Class A Interest Distributable
Amount and the Class A Principal Distributable Amount with respect to such
Distribution Date (the amount of any such shortfall being hereinafter referred
to as the "POLICY CLAIM AMOUNT"). Amounts paid by the Certificate Insurer under
the Policy shall be deposited by the Trustee into the Policy Payments Account
and thereafter into the Collection Account for payment to Class A
Certificateholders on the related Distribution Date (or promptly following
payment on a later date as set forth in the Policy).
(b) Any notice delivered by the Trustee to the Certificate Insurer
pursuant to SUBSECTION 6.4(A) shall specify the Policy Claim Amount claimed
under the Policy and shall constitute a "NOTICE OF CLAIM" under the Policy. In
accordance with the provisions of the Policy, the Certificate Insurer is
required to pay to the Trustee the Policy Claim Amount properly claimed
thereunder by 10:00 a.m., New York City time, on the later of (i) the third
Business Day following receipt on a Business Day of the Notice of Claim, and
(ii) the applicable Distribution Date. Any payment made by the Certificate
Insurer under the Policy shall be applied solely to the payment of the Class A
Certificates, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Certificateholder any Policy Claim Amount from the Certificate Insurer and (ii)
deposit the same in the Collection Account for disbursement to the Class A
Certificateholders as set forth in clauses (iii) and (iv) of SUBSECTION 5.5(B).
Any and all Policy Claim Amounts disbursed by the Trustee from claims made under
the Policy shall not be considered payment by the Trust or from the Spread
Account with respect to such Class A Certificates, and shall not discharge the
obligations of the Trust with respect thereto. The Certificate Insurer shall, to
the extent it makes any payment with respect to the Class A Certificates, become
subrogated to the rights of the recipients of such payments to the extent of
such payments. Subject to and conditioned upon any payment with respect to the
Class A Certificates by or on behalf of the Certificate Insurer in accordance
with the written instructions of the Servicer, the Trustee shall assign to the
Certificate Insurer, pursuant to an agreement of assignment prepared by and
provided by the Certificate Insurer in a form satisfactory to the Trustee all
rights to the payment of interest or principal with respect to the Class A
Certificates which are then due for payment to the extent of all payments made
by the Certificate Insurer, and the Certificate Insurer may exercise any option,
vote, right, power or the like with respect to the Class A Certificates to the
extent that it has made payment pursuant to the Policy. To evidence such
subrogation, the Trustee shall note the Certificate Insurer's rights as subrogee
upon the register of Class A Certificateholders upon receipt from the
Certificate Insurer of proof of payment by the Certificate Insurer of any Class
A Interest Distributable Amount or Class A Principal Distributable Amount.
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(d) The Trustee shall be entitled to enforce on behalf of the
Class A Certificateholders the obligations of the Certificate Insurer under the
Policy. Notwithstanding any other provision of this Agreement, the Class A
Certificateholders are not entitled to institute proceedings directly against
the Certificate Insurer.
Section 6.5 PREFERENCE CLAIMS; DIRECTION OF PROCEEDINGS. (a) In the
event that the Trustee has received a certified copy of an order of the
appropriate court that any Class A Interest Distributable Amount or Class A
Principal Distributable Amount paid on a Class A Certificate has been avoided in
whole or in part as a preference payment under applicable bankruptcy law, the
Trustee shall so notify the Certificate Insurer, shall comply with the
provisions of the Policy to obtain payment by the Certificate Insurer of such
avoided payment, and shall, at the time it provides notice to the Certificate
Insurer, notify Holders of the Class A Certificates by mail that, in the event
that any Class A Certificateholder's payment is so recoverable, such Class A
Certificateholder will be entitled to payment pursuant to the terms of the
Policy. Pursuant to the terms of the Policy, the Certificate Insurer will make
such payment on behalf of the Class A Certificateholder to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
(as defined in the Policy) and not to the Trustee or any Class A
Certificateholder directly (unless a Class A Certificateholder has previously
paid such payment to the receiver, conservator, debtor-in-possession or trustee
in bankruptcy, in which case the Certificate Insurer will make such payment to
the Trustee for distribution to such Class A Certificateholder upon proof of
such payment reasonably satisfactory to the Certificate Insurer).
(b) The Trustee shall promptly notify the Certificate Insurer of
any proceeding or the institution of any action (of which a Responsible Officer
of the Trustee has actual knowledge) seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership, rehabilitation
or similar law (a "PREFERENCE CLAIM") of any distribution made with respect to
the Class A Certificates. Each Holder, by its purchase of Class A Certificates,
and the Trustee hereby agree that so long as an Insurer Default shall not have
occurred and be continuing, the Certificate Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Certificate Insurer, but subject to reimbursement
as provided in the Insurance Agreement. In addition, and without limitation of
the foregoing, as set forth in SECTION 6.4(C), the Certificate Insurer shall be
subrogated to, and each Class A Certificateholder and the Trustee hereby
delegate and assign, to the fullest extent permitted by law, the rights of the
Trustee and each Class A Certificateholder in the conduct of any proceeding with
respect to a Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.
Section 6.6 SURRENDER OF POLICY. The Trustee shall surrender the
Policy to the Certificate Insurer for cancellation upon its expiration in
accordance with the terms thereof.
Section 6.7 SELLER AS AGENT OF THE REVERSIONARY HOLDERS. The Seller
shall be deemed to be the agent of the Reversionary Holders for purposes of
perfecting the Spread
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Account Trustee's Interest in the related Property (as such terms are defined in
the Spread Account Agreement). The Reversionary Holders agree, by acceptance of
the Class C Certificate, to execute and deliver such instruments of conveyance,
assignment, grant, confirmation, etc., as well as any financing statements, in
each case, as the Controlling Party (as defined in the Spread Account Agreement)
shall consider reasonably necessary in order to perfect the Spread Account
Trustee's Interest in the related Property.
ARTICLE VII
THE CERTIFICATES
Section 7.1 THE CERTIFICATES. (a) The Class A Certificates will be
issued in minimum denominations of $1,000,000 and integral multiples of $1,000
in excess thereof, except that one Class A Certificate shall be issued in a
denomination that includes any residual amount. The Class B Certificates will be
issued in minimum denominations of $250,000 and integral multiples of $1,000 in
excess thereof, except that one Class B Certificate shall be issued in a
denomination that includes any residual amount. The Class C Certificate will be
issued without denomination. Each Certificate shall represent a validly issued
and binding obligation, but only if such Certificate has been executed and
authenticated by a Responsible Officer of the Trustee by manual signature.
Certificates bearing the manual signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Trust
shall be valid and binding obligations, notwithstanding that such individuals or
any of them have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of such
Certificates. No Certificate shall be entitled to any benefit under this
Agreement, or be valid for any purpose, unless there appears on such Certificate
a certificate of authentication substantially in the form set forth in the form
of the Certificates of the related Class, attached as exhibits hereto, signed by
the Trustee by manual signature, and such certificate upon any Certificate shall
be conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder. All Class A Certificates shall be
substantially in the form set forth in Exhibit A hereto, all Class B
Certificates shall be substantially in the form set forth in Exhibit B hereto,
and the Class C Certificate shall be substantially in the form set forth in
Exhibit C hereto. The Certificates shall be dated the date of their
authentication. Neither the Certificates nor the Receivables are insured by the
Federal Deposit Insurance Corporation or any other governmental agency.
(b) It is intended that the Class A Certificates be registered so
as to participate in a global book-entry system with the Depository, as set
forth herein. The Class A Certificates shall, except as otherwise provided
below, be initially issued in the form of a single fully registered Class A
Certificate with a denomination equal to the initial Class A Certificate
Balance. Upon initial issuance, the ownership of each such Class A Certificate
shall be registered in the Certificate Register in the name of Cede & Co., or
any successor thereto, as nominee for the Depository.
The Depositor and the Trustee are hereby authorized to execute and
deliver the Representation Letter with the Depository.
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With respect to Class A Certificates registered in the Certificate
Register in the name of Cede & Co., as nominee of the Depository, the Depositor,
the Seller, the Originators, the Servicer and the Trustee shall have no
responsibility or obligation to Participants or beneficial owners for which the
Depository holds Class A Certificates from time to time as a Depository. Without
limiting the immediately preceding sentence, the Depositor, the Seller, the
Originators, the Servicer and the Trustee shall have no responsibility or
obligation with respect to (i) the accuracy of the records of the Depository,
Cede & Co., or any Participant with respect to any ownership interest in any
Class A Certificate, (ii) the delivery to any Participant or any other Person,
other than a Certificateholder, of any notice with respect to the Class A
Certificates or (iii) the payment to any Participant or any other Person, other
than a Certificateholder, of any amount with respect to any distribution of
principal or interest on the Class A Certificates. No Person other than a
Certificateholder shall receive a certificate evidencing such Class A
Certificate.
Upon delivery by the Depository to the Trustee of written notice to
the effect that the Depository has determined to substitute a new nominee in
place of Cede & Co., and subject to the provisions hereof with respect to the
payment of interest by the mailing of checks or drafts to the Certificateholders
appearing as Certificateholders at the close of business on a Record Date, the
name "Cede & Co." in this Agreement shall refer to such new nominee of the
Depository.
(c) In the event that (i) the Depository or the Servicer advises
the Trustee in writing that the Depository is no longer willing or able to
discharge properly its responsibilities as nominee and depository with respect
to the Class A Certificates and the Servicer or the Depository is unable to
locate a qualified successor or (ii) the Trustee in its sole discretion elects
to terminate the book-entry system through the Depository, the Class A
Certificates shall no longer be restricted to being registered in the
Certificate Register in the name of Cede & Co. (or a successor nominee) as
nominee of the Depository. At that time, the Servicer may determine that the
Class A Certificates shall be registered in the name of and deposited with a
successor depository operating a global book-entry system, as may be acceptable
to the Servicer, or such depository's agent or designee but, if the Servicer
does not select such alternative global book-entry system, then the Class A
Certificates may be registered in whatever name or names Certificateholders
transferring Class A Certificates shall designate, in accordance with the
provisions hereof; PROVIDED, HOWEVER, that any such reregistration shall be at
the expense of the Servicer.
(d) Notwithstanding any other provision of this Agreement to the
contrary, so long as any Class A Certificate is registered in the name of Cede &
Co., as nominee of the Depository, all distributions of principal or interest on
such Class A Certificates as the case may be and all notices with respect to
such Class A Certificates as the case may be shall be made and given,
respectively, in the manner provided in the Representation Letter.
(e) No transfer of any Class B Certificates or Class C Certificate
shall be made unless such transfer is made pursuant to an effective registration
statement under the Securities Act and effective registration or qualification
under any State securities laws or "Blue Sky" laws or in a transaction which
does not require such registration or qualification. If such a transfer is to be
made in reliance upon an exemption from the Securities Act other than Rule
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144A thereunder, (i) the Trustee shall require an Opinion of Counsel that such
transfer may be made pursuant to an exemption from the Securities Act,
describing the applicable exemption and the basis therefor, from said Act and
laws or is being made pursuant to said Act or laws or (ii) the Trustee shall
require the transferee to execute an investment letter acceptable to and in form
and substance satisfactory to the transferor and the Certificate Insurer in the
form of Exhibit L certifying to the Trustee, the Certificate Insurer and the
transferor the facts surrounding such transfer, which investment letter shall
not be an expense of the Trustee, the Trust, the Certificate Insurer, the
Depositor or the transferor. The Servicer promptly shall furnish to any Holder,
or any prospective purchaser designated by a Holder, the information required to
be delivered to Holders and prospective purchasers of Class B Certificates and
Class C Certificate in connection with the resale of the Class B Certificates
and Class C Certificate to permit compliance with Rule 144A in connection with
such resale.
Section 7.2 INITIAL ISSUANCE OF CERTIFICATES. The Trustee has
delivered upon the instruction of the Depositor, in exchange for the
Receivables, Class A Certificates and the Class B Certificates duly
authenticated by the Trustee, in authorized denominations equaling in the
aggregate the initial Class A Certificate Balance and the initial Class B
Certificate Balance and the Class C Certificate duly authenticated by the
Trustee, evidencing an aggregate Class C Percentage Interest of 100%.
Section 7.3 REGISTRATION OF TRANSFER AND EXCHANGE OF Certificates.
(a) The Trustee shall maintain, or cause to be maintained, at the Corporate
Trust Office, a Certificate Register in which the Trustee shall provide for the
registration of Certificates and of transfers and exchanges of Certificates as
herein provided. All Certificates shall be so registered.
(b) Upon surrender for registration of transfer of any Certificate
at the Corporate Trust Office, the Trustee shall execute on behalf of the Trust,
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of the
same class, of a like aggregate Percentage Interest, dated the date of such
authentication.
(c) At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of the same class (of authorized denominations
in the case of Class A Certificates and Class B Certificates) of a like
aggregate Class A Percentage Interest, Class B Percentage Interest or Class C
Percentage Interest, as the case may be, upon surrender of the Certificates to
be exchanged at any such office or agency. Whenever any Certificates are so
surrendered for exchange the Trustee on behalf of the Trust shall execute on
behalf of the Trust, authenticate and deliver the Certificates that the
Certificateholder making the exchange is entitled to receive.
(d) No service charge shall be made for any registration of
transfer or exchange of Certificates, but the Trustee may require payment of a
sum sufficient to cover any tax or governmental charge or expense that may be
imposed in connection with any transfer or exchange of Certificates.
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(e) All Certificates surrendered for registration of transfer or
exchange shall be delivered to the Trustee and canceled and subsequently
destroyed by the Trustee in accordance with its customary procedures in effect
from time to time.
(f) Notwithstanding the foregoing, in the case of any transfer or
exchange of record or beneficial ownership of a Class B or Class C Certificate,
the transferee of such Certificate shall be deemed to have represented and
warranted that it is not acquiring its interest in the Certificate with the
assets of (A) an employee benefit plan (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) subject
to Title I of ERISA, (B) a plan or other arrangement described in Section 4975
of the Code or (C) any entity whose underlying assets include plan assets by
reason of an investment in such entity by a plan described in (A) or (B) above.
Section 7.4 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES. If
(a) any mutilated Certificate is surrendered to the Trustee, or the Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate, and (b) there is delivered to the Depositor, the Servicer and the
Trustee such security or indemnity as may be required by them to save each of
them harmless, then, in the absence of notice to the Trustee that such
Certificate has been acquired by a bona fide purchaser, the Trustee on behalf of
the Trust shall execute on behalf of the Trust, authenticate and deliver in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate a new Certificate of like Class and Percentage Interest. In
connection with the issuance of any new Certificate under this SECTION 7.4, the
Trustee may require the payment by the Certificateholder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto. Any other expenses (including the fees and expenses of the Trustee) in
connection therewith shall be paid by the Servicer. Any duplicate Certificate
issued pursuant to this SECTION 7.4 shall constitute a Certificate duly issued
by the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 7.5 PERSONS DEEMED OWNERS. The Trustee may treat the Person
in whose name any Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to SECTION 5.6 hereof and for
all other purposes whatsoever, and the Trustee shall not be affected by any
notice to the contrary.
Section 7.6 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Trustee shall furnish or cause to be furnished to the Servicer or
(unless an Insurer Default shall have occurred and be continuing) the
Certificate Insurer, within 10 days after receipt by the Trustee of a written
request therefor from such party, a list of the names and addresses of the
Certificateholders as of the most recent Record Date for payment of
distributions to Certificateholders. Every Certificateholder, by receiving and
holding a Certificate, agrees with the Servicer and the Trustee that neither the
Servicer nor the Trustee shall be held accountable by reason of the disclosure
of any such information as to the names and addresses of the Certificateholders
under this Agreement, regardless of the source from which such information was
derived.
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ARTICLE VIII
THE DEPOSITOR
Section 8.1 LIABILITY OF DEPOSITOR. The Depositor shall be liable
for payments in respect of the Certificates in accordance herewith only to the
extent of the obligations specifically undertaken by the Depositor herein.
Section 8.2 LIMITATION ON LIABILITY OF DEPOSITOR. The directors,
officers, employees or agents of the Depositor shall not be under any liability
to the Trust, the Trustee, the Certificateholders, the Originators, the
Servicer, the Seller or any other Person hereunder or pursuant to any document
delivered hereunder, it being expressly understood that all such liability is
expressly waived and released as a condition of, and as consideration for, the
Depositor's execution and delivery of this Agreement and the issuance of the
Certificates. The Depositor shall not be under any liability to the Trust, the
Trustee, the Certificateholders, the Originators, the Servicer, the Seller or
any other Person for any action taken or for refraining from the taking of any
action in its capacity as Depositor pursuant to this Agreement whether arising
from express or implied duties under this Agreement; PROVIDED, HOWEVER, that
this provision shall not protect the Depositor against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith,
misrepresentation or negligence in the performance of duties or by reason of
reckless disregard of obligations and duties hereunder. The Depositor may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any other Person respecting any matters arising hereunder.
ARTICLE IX
THE SERVICER
Section 9.1 LIABILITY OF SERVICER; INDEMNITIES. (a) The Servicer
shall be liable hereunder only to the extent of the obligations in this
Agreement specifically undertaken by the Servicer and the representations made
by the Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Trustee, the Backup Servicer, the Spread Account Trustee, the Certificate
Insurer, the Depositor, the Seller and their respective officers, directors,
agents and employees, the Trust, and the Certificateholders from and 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 the use, ownership or operation by the Servicer or any
Affiliate thereof of any Financed Vehicle.
(c) The Servicer shall defend, indemnify and hold harmless the
Trust, the Trustee, the Backup Servicer, the Spread Account Trustee, the
Depositor, the Seller, the Certificate Insurer, their respective officers,
directors, agents and employees, and the Certificateholders from and against any
taxes that may at any time be asserted against the Trust, the Trustee or the
Certificateholders with respect to the transactions contemplated in this
Agreement, including, without limitation, any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but not
including any taxes asserted with respect to,
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and as of the date of, the sale of the Receivables and the other Trust Property
to the Trustee or the issuance and original sale of the Certificates, or
asserted with respect to ownership of the Receivables, or federal or other
income taxes arising out of distributions on the Certificates) and costs and
expenses in defending against the same.
(d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Backup Servicer, the Certificate Insurer, the Depositor,
the Seller, the Spread Account Trustee, their respective officers, directors,
agents and employees and the Certificateholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon the Trustee, the Trust, the Certificate Insurer, the Depositor, the
Seller or the Certificateholders through the breach of this Agreement, the
negligence, willful misfeasance, or bad faith of the Servicer in the performance
of its duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(e) The Servicer shall indemnify, defend, and hold harmless the
Backup Servicer, the Trustee, its officers, directors, agents and employees,
from and against all costs, tax (other than income taxes on fees and expenses
payable to the Trustee), expenses, losses, claims, damages and liabilities
arising out of or incurred in connection with the acceptance or performance of
the trusts and duties contained in this Agreement, except to the extent that
such cost, taxes (other than income tax), expense, loss, claim, damage or
liability (A) is due to the willful misfeasance, bad faith or negligence of the
Backup Servicer or the Trustee, or (B) arises from the Backup Servicer's or the
Trustee's breach of any of its representations or warranties set forth in
SECTION 11.12.
(f) For purposes of this SECTION 9.1, in the event of the
termination of the rights and obligations of the Servicer (or any successor
thereto pursuant to SECTION 9.2) as Servicer pursuant to SECTION 10.1, or a
resignation by such Servicer pursuant to this Agreement, such Servicer shall be
deemed to be the Servicer pending appointment of a successor Servicer pursuant
to SECTION 10.3. The provisions of this SECTION 9.1(F) shall in no way affect
the survival pursuant to SECTION 9.1(G) of the indemnification by the Servicer
provided by SECTIONS 9.1(B) through 9.1(E).
(g) Indemnification under this Article shall survive the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation. If the Servicer shall have made any
indemnity payments pursuant to this Article and the recipient thereafter
collects any of such amounts from others, the recipient shall promptly repay
such amounts collected to the Servicer, without interest. Notwithstanding any
other provision of this Agreement, the obligations of the Servicer described in
this Section shall not terminate or be deemed released upon the resignation or
termination of [____________] as the Servicer and shall survive any termination
of this Agreement.
Section 9.2 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP SERVICER. (a) The Servicer shall not
merge or consolidate with any other Person, convey, transfer or lease
substantially all its assets as an entirety to another Person, or permit any
other Person to become the successor to the Servicer's business unless, after
the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity
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shall be an Eligible Servicer and shall be capable of fulfilling the duties of
the Servicer contained in this Agreement. Any Person (i) into which the Servicer
may be merged or consolidated, (ii) resulting from any merger or consolidation
to which the Servicer shall be a party, (iii) which acquires by conveyance,
transfer, or lease substantially all of the assets of the Servicer, or (iv)
succeeding to the business of the Servicer, in any of the foregoing cases shall
execute an agreement of assumption to perform every obligation of the Servicer
under this Agreement and, whether or not such assumption agreement is executed,
shall be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall be
deemed to release the Servicer from any obligation. The Servicer shall provide
notice of any merger, consolidation or succession pursuant to this SECTION
9.2(A) to the Trustee, the Certificate Insurer, the Certificateholders and each
Rating Agency. Notwithstanding the foregoing, as a condition to the consummation
of the transactions referred to in clauses (i), (ii) and (iii) above, (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to SECTION 4.6 shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse of
time, or both, would become an Insurance Agreement Event of Default, shall have
occurred and be continuing, (y) the Servicer shall have delivered to the Trustee
and the Certificate Insurer an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such agreement of
assumption comply with this SECTION 9.2(A) and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with, and (z) the Servicer shall have delivered to the Trustee and the
Certificate Insurer an Opinion of Counsel, stating, in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to preserve
and protect the interest of the Trustee in the Trust Property and reciting the
details of the filings or (B) no such action shall be necessary to preserve and
protect such interest.
(b) Any Person (i) into which the Backup Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Backup Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Backup Servicer, or (iv)
succeeding to the business of the Backup Servicer, in any of the foregoing cases
shall execute an agreement of assumption to perform every obligation of the
Backup Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; PROVIDED, HOWEVER, that nothing contained herein shall
be deemed to release the Backup Servicer from any obligation.
Section 9.3 LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS. Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or the Backup Servicer shall be
under any liability to the Trust, the Originators, the Seller, the Depositor or
the Certificateholders, except as provided in this Agreement, for any action
taken or for refraining from the taking of any action pursuant to this
Agreement; PROVIDED, HOWEVER, that this provision shall not protect the
Servicer, the Backup Servicer or any such person against any liability that
would otherwise be imposed by reason of a
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breach of this Agreement or willful misfeasance, bad faith or negligence
(excluding errors in judgment) in the performance of duties (including
negligence with respect to the Servicer's indemnification obligations
hereunder), by reason of reckless disregard of obligations and duties under this
Agreement or any violation of law by the Servicer, the Backup Servicer or such
person, as the case may be; FURTHER PROVIDED, that this provision shall not
affect any liability to indemnify the Trustee for costs, taxes, expenses,
claims, liabilities, losses or damages paid by the Trustee in its individual
capacity. The Servicer, the Backup Servicer and any director, officer, employee
or agent of the Servicer or Backup Servicer may conclusively 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. The Backup Servicer 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 the
repayment of such funds or written indemnity reasonably satisfactory to it
against such risk or liability is not reasonably assured to it in writing prior
to the expenditure or risk of such funds or incurrence of financial liability.
Section 9.4 DELEGATION OF DUTIES. Subject to prior approval by the
Certificate Insurer, the Servicer may at any time delegate any duties hereunder
to any Person, including, without limitation, the Sub-Servicers, who agree to
conduct such duties in accordance with this Agreement. Such delegation shall not
relieve the Servicer of its responsibilities and liabilities with respect to
such duties, and shall not constitute a resignation within the meaning of
SECTION 9.5. The Backup Servicer may execute any of the trusts or powers under
this Agreement or perform any duties under this Agreement either directly or by
or through agents or attorneys, custodians or nominees. The Backup Servicer
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by the Backup Servicer.
Section 9.5 RESIGNATION OF SERVICER AND BACKUP SERVICER. (a) Subject
to the provisions of SECTION 9.2, the Servicer shall not resign from the
obligations and duties imposed on it by this Agreement as Servicer except upon a
determination that by reason of a change in legal requirements the performance
of its duties under this Agreement would cause it to be in violation of such
legal requirements in a manner which would result in a material adverse effect
on the Servicer, and the Certificate Insurer (so long as an Insurer Default
shall not have occurred and be continuing) or a Certificate Majority (if an
Insurer Default shall have occurred and be continuing) does not elect to waive
the obligations of the Servicer to perform the duties which render it legally
unable to act or to delegate those duties to another Person. Any such
determination permitting the resignation of the Servicer shall be evidenced by
an Opinion of Counsel to such effect delivered and acceptable to the Trustee and
the Certificate Insurer (unless an Insurer Default shall have occurred and be
continuing). No resignation of the Servicer shall become effective until, so
long as no Insurer Default shall have occurred and be continuing, the Backup
Servicer or an entity acceptable to the Certificate Insurer shall have assumed
the responsibilities and obligations of the Servicer or, if an Insurer Default
shall have occurred and be continuing, the Backup Servicer or a successor
Servicer that is an Eligible Servicer shall have assumed the responsibilities
and obligations of the Servicer.
(b) The Backup Servicer may at any time resign from the
obligations and duties imposed on it by this Agreement by giving written notice
to the Certificate Insurer, PROVIDED, HOWEVER, that no resignation of the Backup
Servicer shall become effective until, so
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long as no Insurer Default shall have
occurred and be continuing, an entity acceptable to the Certificate Insurer
shall have assumed the responsibilities and obligations of the Backup Servicer
or, if an Insurer Default shall have occurred and be continuing, a Person that
is an Eligible Servicer shall have assumed the responsibilities and obligations
of the Backup Servicer; PROVIDED, HOWEVER, that in the event a successor Backup
Servicer is not appointed within 60 days after the Backup Servicer has given
notice of its resignation as permitted by this SECTION 9.5, the Backup Servicer
may petition a court for its removal. Notwithstanding anything herein to the
contrary, in the event the entity serving as Trustee hereunder is also serving
as Backup Servicer, such resignation of the Backup Servicer shall become
effective without any further act upon the effectiveness of the resignation of
the Trustee hereunder.
ARTICLE X
SERVICER TERMINATION EVENTS
Section 10.1 SERVICER TERMINATION EVENT. For purposes of
this Agreement, each of the following shall constitute a "SERVICER
TERMINATION EVENT":
(a) Any failure by the Servicer to deliver to the Trustee for
distribution to Certificateholders or deposit in the Spread Account any proceeds
or payment required to be so delivered under the terms of the Certificates or
this Agreement (including deposits of the Purchase Amount pursuant to SECTION
4.7) that continues unremedied for a period of two Business Days (one Business
Day with respect to payment of Purchase Amounts) after written notice is
received by the Servicer from the Trustee or (unless an Insurer Default shall
have occurred and be continuing) the Certificate Insurer or after discovery of
such failure by a Responsible Officer of the Servicer;
(b) Failure by the Servicer to deliver to the Trustee and (so long
as an Insurer Default shall not have occurred and be continuing) the Certificate
Insurer the Servicer's Certificate required by SECTION 4.9 on the date such
certificate is required to be delivered;
(c) Failure on the part of the Servicer to observe its
covenants and agreements set forth in SECTION 9.2(A);
(d) Failure on the part of the Servicer duly to observe or perform
in any material respect any other covenants or agreements of the Servicer set
forth in this Agreement, which failure continues unremedied for a period of 30
days after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Servicer by the Trustee or the
Certificate Insurer (or, if an Insurer Default shall have occurred and be
continuing, any Certificateholder);
(e) The entry of a decree or order for relief by a court or
regulatory authority having jurisdiction in respect of the Servicer in an
involuntary case under the federal bankruptcy laws, as now or hereafter in
effect, or another present or future, federal or state, bankruptcy, insolvency
or similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator or other similar official of the Servicer or of any
substantial part of their respective properties or ordering the winding up or
liquidation of the affairs of the Servicer and the
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continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days or 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;
(f) The commencement by the Servicer of a voluntary 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 the consent
by the Servicer to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Servicer or of any substantial part of its property or the making by the
Servicer of an assignment for the benefit of creditors or the failure by the
Servicer generally to pay its debts as such debts become due or the taking of
corporate action by the Servicer in furtherance of any of the foregoing;
(g) 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 Trust and, within 30
days after written notice thereof shall have been given to the Servicer by the
Trustee or the Certificate Insurer (or, if an Insurer Default shall have
occurred and be continuing, a Certificateholder), the circumstances or condition
in respect of which such representation, warranty or statement was incorrect
shall not have been eliminated or otherwise cured;
(h) So long as an Insurer Default shall not have occurred and be
continuing, the Certificate Insurer shall not have delivered a Servicer
Extension Notice pursuant to SECTION 4.14;
(i) So long as an Insurer Default shall not have occurred and be
continuing, (x) an Insurance Agreement Event of Default shall have occurred or
(y) an Insurance Agreement Event of Default with respect to another Series (as
defined in the Spread Account Agreement) (other than a Portfolio Performance
Event of Default as defined in the related Insurance Agreement) shall have
occurred;
(j) A claim is made under the Policy; or
(k) Any failure by [____________], only while [________________]
is acting as Servicer, to cure any breach or repurchase any Receivable in
accordance with and upon the conditions set forth in SECTION 3.6 hereof.
Section 10.2 CONSEQUENCES OF A SERVICER TERMINATION EVENT. (a) If a
Servicer Termination Event shall occur and be continuing, so long as no Insurer
Default shall have occurred and be continuing, the Certificate Insurer, subject
to SUBSECTION (B) of this SECTION 10.2, (or, if an Insurer Default shall have
occurred and be continuing, any of the Trustee or the Certificateholders
evidencing not less than a Certificate Majority), by notice given in writing to
the Servicer (and to the Trustee if given by the Certificate Insurer or the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement. On or after the receipt by the Servicer of such
written notice, or, if the Certificate Insurer shall not have
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delivered a Servicer Extension Notice pursuant to SECTION 4.14, all authority,
power, obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Certificates or the Trust Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer; PROVIDED, HOWEVER, that the Backup
Servicer shall have no liability with respect to any obligation which was
required to be performed by the prior Servicer prior to the date that the Backup
Servicer becomes the Servicer or any claim of a third party based on any alleged
action or inaction of the prior Servicer. The Backup Servicer is authorized and
empowered by this Agreement to execute and deliver, on behalf of the prior
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and the other Trust
Property and related documents to show the Trustee as lienholder or secured
party on the related Lien Certificates, or otherwise. The prior Servicer agrees
to cooperate with the Backup Servicer in effecting the termination of the
responsibilities and rights of the prior Servicer under this Agreement,
including, without limitation, the transfer to the Backup Servicer for
administration by it of all cash amounts that shall at the time be held by the
prior Servicer for deposit, or have been deposited by the prior Servicer, in the
Collection Account or thereafter received with respect to the Receivables and
the delivery to the Backup Servicer of all Receivable Files, Collection Records
and a computer tape in readable form containing all information necessary to
enable the Backup Servicer or a successor Servicer to service the Receivables
and the other Trust Property. The Trustee and the Backup Servicer may set off
and deduct any amounts owed by the terminated Servicer from any amounts payable
to the terminated Servicer pursuant to the preceding sentence. The terminated
Servicer shall grant the Trustee, the Backup Servicer and the Certificate
Insurer reasonable access to the terminated Servicer's premises at the
Servicer's expense.
(b) So long as no Insurer Default shall have occurred and be
continuing, (i) if as the result of a default by the Servicer with respect to
its obligations pursuant to SECTION 4.7, a Servicer Termination Event described
in SECTION 10.1(A) shall occur and be continuing and (ii) if a Servicer
Termination Event described in SECTION 10.1(K) has occurred and is continuing,
the Trustee may request in writing that the Certificate Insurer deliver the
notice as set forth in SUBSECTION (A) above. The consent of the Certificate
Insurer to such request shall not be unreasonably withheld.
Section 10.3 APPOINTMENT OF SUCCESSOR. (a) On and after (i) the time
the Servicer receives a notice of termination pursuant to SECTION 10.2 or (ii)
upon the resignation of the Servicer pursuant to SECTION 9.5 or (iii) the
receipt by the Backup Servicer (or any alternate successor Servicer appointed by
the Certificate Insurer pursuant to SECTION 10.3(B)), of written notice from the
Certificate Insurer that the Certificate Insurer is not extending the Servicer's
term pursuant to SECTION 4.14, the Backup 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 in this Agreement, and shall be
subject to all the responsibilities, restrictions, duties, liabilities and
termination provisions relating thereto placed on the Servicer by the terms and
provisions of this Agreement; PROVIDED, HOWEVER that the Backup Servicer shall
not be liable for any acts, omissions or obligations of the Servicer prior to
such succession or for any breach by the Servicer of any of its representations
and warranties contained in this Agreement or in any related document or
agreement. The Trustee and such successor shall take such action,
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consistent with this Agreement, as shall be necessary to effectuate any such
succession. If a successor Servicer is acting as Servicer hereunder, it shall be
subject to termination under SECTION 10.2 upon the occurrence of any Servicer
Termination Event applicable to it as Servicer.
(b) The Certificate Insurer may (so long as an Insurer Default
shall not have occurred and be continuing) exercise at any time its right to
appoint as Backup Servicer or as successor to the Servicer a person other than
the Person serving as Backup Servicer at the time, and (without limiting its
obligations under the Policy) shall have no liability to the Trustee, the
Depositor, the Seller, the Person then serving as Backup Servicer, any
Certificateholder or any other Person if it does so. Notwithstanding the above,
if the Backup Servicer shall be legally unable or unwilling to act as Servicer
and an Insurer Default shall have occurred and be continuing, the Backup
Servicer, the Trustee or a Certificate Majority may petition a court of
competent jurisdiction to appoint any Eligible Servicer as the successor to the
Servicer. Pending such appointment, the Backup Servicer shall act as successor
Servicer unless it is legally unable to do so, in which event the outgoing
Servicer shall continue to act as Servicer until a successor Servicer has been
appointed and accepted such appointment. Subject to SECTION 9.5, no provision of
this Agreement shall be construed as relieving the Backup Servicer of its
obligation to succeed as successor Servicer upon the termination of the Servicer
pursuant to SECTION 10.2 or the resignation of the Servicer pursuant to SECTION
9.5. If upon the termination of the Servicer pursuant to SECTION 10.2 or the
resignation of the Servicer pursuant to SECTION 9.5, the Certificate Insurer
appoints a successor Servicer other than the Backup Servicer, the Backup
Servicer shall not be relieved of its duties as Backup Servicer hereunder.
(c) Any successor Servicer which shall include the Backup Servicer
shall be entitled to such compensation (whether payable out of the Collection
Account or otherwise) as the Servicer would have been entitled to under the
Agreement if the Servicer had not resigned or been terminated hereunder. If any
successor Servicer is appointed for any reason, the Certificate Insurer and such
successor Servicer may agree on additional compensation to be paid to such
successor Servicer, which additional compensation shall be payable out of funds
on deposit in the Spread Account. In addition, any successor Servicer shall be
entitled, out of funds in the Spread Account, to reasonable transition expenses
incurred in acting as successor Servicer.
Section 10.4 NOTIFICATION TO CERTIFICATEHOLDERS. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
ARTICLE X, the Trustee shall give prompt written notice thereof to
Certificateholders at their respective addresses appearing in the Certificate
Register and to each Rating Agency.
Section 10.5 WAIVER OF PAST DEFAULTS. So long as no Insurer Default
shall have occurred and be continuing, the Certificate Insurer, subject to
SUBSECTION (B) of this SECTION 10.5 (or, if an Insurer Default shall have
occurred and be continuing, a Certificate Majority) may, on behalf of all
Certificateholders, waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Servicer Termination Event
arising therefrom shall be deemed to have been remedied for every purpose of
this Agreement. No such waiver shall extend to any subsequent or other default
or impair any right consequent thereon.
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Section 10.6 EFFECT OF SERVICER TERMINATION EVENT ON SUB-SERVICER.
Any removal of the Servicer pursuant to this ARTICLE X shall ipso facto
constitute a removal of the Sub-Servicers.
ARTICLE XI
THE TRUSTEE
Section 11.1 DUTIES OF TRUSTEE. (a) Subject to paragraph (c) of this
SECTION 11.1, the Trustee, both prior to and after the occurrence of a Servicer
Termination Event, undertakes to perform as Trustee such duties and only such
duties as are specifically set forth in this Agreement.
(b) The Trustee, upon receipt of any resolutions, certificates,
statements, opinions, reports, documents, orders or other instruments furnished
to the Trustee that are specifically required to be furnished pursuant to any
provisions of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) 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 (other than errors in judgment) or its own bad faith or willful
misfeasance; PROVIDED, HOWEVER, that:
(i) 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;
(ii) 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 proven that the Trustee was negligent in performing its duties in
accordance with the terms of this Agreement;
(iii) the Trustee shall not be liable for any action taken,
suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Agreement; and
(iv) the Trustee shall not be liable for any action it takes or
omits to take in good faith at the direction of the Certificate Insurer
(or, after an Insurer Default shall have occurred and be continuing, a
Certificate Majority); provided that the Trustee shall not be authorized
hereunder to comply with any direction which is not authorized by the
terms of this Agreement.
(d) Notwithstanding any other provision of this Agreement, the
Trustee shall not be required to expend or risk its own funds or otherwise incur
financial liability in the
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performance of any of its duties under this Agreement, 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 indemnity reasonably satisfactory to it against such
risk or liability is not reasonably assured to it, and none of the provisions
contained in this Agreement shall in any event require the Trustee to perform,
or be responsible for the manner of performance of, any of the obligations of
the Servicer under this Agreement except during such time, if any, as the Backup
Servicer shall be the successor to, and be vested with the rights, duties,
powers and privileges of, the Servicer in accordance with the terms of this
Agreement.
(e) The Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with the obligations of the Servicer referred to in
this Agreement, or of any failure by the Seller to comply with the obligations
of the Seller referred to in this Agreement, unless a Responsible Officer of the
Trustee obtains actual knowledge of such failure (it being understood that
knowledge of the Servicer is not attributable to the Trustee) or the Trustee
receives written notice of such failure from the Servicer or the Seller, as the
case may be, or the Certificate Insurer (or, if an Insurer Default shall have
occurred and be continuing) the Certificateholders evidencing not less than 25%
of the sum of the Class A Certificate Balance and the Class B Certificate
Balance, or, if there are no Class A Certificates then outstanding, by Holders
of Class B Certificates evidencing not less than 25% of the Class B Certificate
Balance; and
(f) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or Financed Vehicle or to impair the
value of any Receivable or Financed Vehicle.
Section 11.2 TRUSTEE'S ASSIGNMENT OF ADMINISTRATIVE RECEIVABLES AND
WARRANTY RECEIVABLES. With respect to all Administrative Receivables and all
Warranty Receivables purchased by the Seller, the Originators,
[____________________] or the Servicer, the Trustee shall take any and all
actions reasonably requested in writing by the Seller, the Originators,
[____________________] or the Servicer at the expense of the Person whose
obligation was to repurchase the Administrative Receivable or the Warranty
Receivable, to assign, without recourse, representation or warranty, to the
Seller, the Originators, [____________________] or the Servicer, as applicable,
including, without limitation, all the items conveyed to the Trustee pursuant to
SECTION 3.1(A) with respect to such purchased Receivable, all monies due
thereon, the security interests in the related Financed Vehicles, proceeds from
any Insurance Policies, proceeds from recourse against Dealers on such
Receivables and the interests of the Trust in certain rebates of premiums and
other amounts relating to the Insurance Policies and any documents relating
thereto, such assignment being an assignment outright and not for security; and
the Seller, the Originators, [____________________] or the Servicer, as
applicable, shall thereupon own such Receivable, and all such security and
documents, free of any further obligation to the Trustee or the
Certificateholders with respect thereto. Each of the Servicer and the Trustee
shall cooperate with respect to the orderly transfer of the servicing to the
party purchasing the Administrative Receivable or the Warranty Receivable
hereunder, and each of the Servicer and the Trustee shall cooperate with such
party to ensure that the purchasing party is subrogated to the rights of each
such Person with respect to such Receivable.
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Section 11.3 CERTAIN MATTERS AFFECTING THE TRUSTEE. Except
as otherwise provided in SECTION 11.1(C):
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting upon any resolution, Officer's Certificate,
certificate of auditors or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond or other paper
or document believed by it to be genuine and to have been signed or presented by
the proper party or parties;
(b) The Trustee may consult with counsel and the advice of such
counsel shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it under this Agreement in good faith
and in accordance with such advice;
(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 under this Agreement or in relation to this Agreement,
pursuant to the provisions of this Agreement, unless the Trustee shall have been
assured security or indemnity reasonably satisfactory to it against the costs,
expenses and liabilities that may be incurred therein or thereby; PROVIDED,
HOWEVER, that the Trustee shall, upon the occurrence of a Servicer Termination
Event (that has not been cured), exercise the rights and powers vested in it by
this Agreement with reasonable care and skill;
(d) The Trustee shall not be bound to make any investigation into
the facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so by the Certificate
Insurer or by Certificateholders evidencing not less than 25% of the sum of the
Class A Certificate Balance and the Class B Certificate Balance, or, if there
are no Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation 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 indemnity reasonably satisfactory to it against such cost,
expense or liability as a condition to so proceeding; the reasonable expense of
every such examination shall be paid by the Person making such request or, if
paid by the Trustee, shall be reimbursed by the Person making such request upon
demand;
(e) The Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or by or
through agents or attorneys, custodians or nominees. The Trustee shall not be
responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by the Trustee. The Trustee shall not be
responsible for any misconduct or negligence attributable to the acts or
omissions of the Servicer or the Depositor;
(f) The Trustee may conclusively rely, as to factual matters
relating to the Depositor or the Servicer, on an Officer's Certificate of a
Responsible Officer of the Depositor or Servicer, respectively; and
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(g) The Trustee shall not be required to take any action or
refrain from taking any action under this Agreement, or any Related Document
referred to herein, nor shall any provision of this Agreement, or any such
Related Document be deemed to impose a duty on the Trustee to take action, if
the Trustee shall have been advised by counsel that such action is contrary to
the terms of this Agreement, or any Related Document or is contrary to law.
Section 11.4 TRUSTEE NOT LIABLE FOR CERTIFICATES OR RECEIVABLES. The
Trustee makes no representations as to the validity or sufficiency of this
Agreement or of the Certificates (other than the execution of the Certificates)
or of any Receivable or Related Document, except to the extent otherwise
expressly provided herein. The Trustee and the Backup Servicer shall at no time
(except during such time, if any, as it is acting as successor Servicer) have
any responsibility or liability for or with respect to the legality, validity
and enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to the
efficiency of the Trust or its ability to generate the payments to be
distributed to Certificateholders under this Agreement, including, without
limitation, the existence, condition, location and ownership of any Financed
Vehicle; the existence and enforceability of any insurance thereon; the
existence of any Receivable or any computer or other record thereof (it being
understood that the Trustee has not reviewed and does not intend to review such
matters, the sole responsibility for such review being vested in the Servicer);
the completeness of any Receivable; the receipt by the Servicer of any
Receivable; the performance or enforcement of any Receivable; the compliance by
the Depositor and the Servicer with any covenant or the breach by the Depositor
and the Servicer of any warranty or representation made under this Agreement or
in any related document and the accuracy of any such warranty or representation
prior to the Trustee's receipt of notice or other discovery of any noncompliance
therewith or any breach thereof, any investment of monies by or at the direction
of the Servicer or any loss resulting therefrom (it being understood, however,
that the Trustee shall remain responsible for any Trust Property that it may
hold directly); the acts or omissions of the Depositor, the Servicer or any
Obligor; any action of the Servicer taken in the name of the Trustee; the
accuracy, content or completeness of any offering documents used in connection
with the sale of the Certificates or any action by the Trustee taken at the
instruction of the Servicer, the Depositor, the Certificate Insurer or the
Certificateholders holding the requisite percentage of Certificates; PROVIDED,
HOWEVER, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement, whether as Trustee or as Backup
Servicer. The Trustee shall not be accountable for the use or application by the
Depositor of any of the Certificates or of the proceeds of such Certificates, or
for the use or application of any funds paid to the Servicer in respect of the
Receivables prior to the time such funds are deposited in the Collection
Account.
Section 11.5 TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee and may deal with
the Depositor and the Servicer in banking transactions with the same rights as
it would have if it were not Trustee.
Section 11.6 TRUSTEE'S FEES AND EXPENSES; INDEMNIFICATION. The
Servicer in a separate agreement (the "FEE LETTER") has covenanted and agreed to
pay to the Trustee, and the Trustee shall be entitled to, certain annual fees
(the "ANNUAL TRUSTEE'S FEE") (which shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust) for
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all services, including services as Backup Servicer, rendered by it in the
execution of the trusts created by this Agreement and in the exercise and
performance of any of the powers and duties under this Agreement of the Trustee.
To the extent not covered by ARTICLE IX, the Depositor and the Servicer shall
indemnify, defend, and hold harmless the Trustee and the Backup Servicer from
and against all costs, expenses (including legal fees and expenses), losses,
claims, damages and liabilities arising out of or incurred in connection with
the acceptance of the performance of the trusts and duties contained in this
Agreement, except to the extent that such cost, expense, loss, claim, damage or
liability is due to the bad faith or gross negligence (except for errors in
judgment) of the Trustee or the Backup Servicer, respectively. In addition, the
Servicer in SECTION 9.1 has agreed to indemnify the Trustee with respect to
certain matters, and the Certificateholders in their individual capacity under
SECTION 11.3(C) or (D) may agree to indemnify the Trustee under certain
circumstances. The provisions of this SECTION 11.6 shall (i) not be in
limitation of the Fee Letter entered into in connection with this Agreement
between the Servicer and the Trustee (ii) shall not terminate or be deemed
released upon the resignation or termination of [____________________] as the
Servicer, or the resignation or termination of the Trustee or the Backup
Servicer and (iii) shall survive any termination of this Agreement.
Section 11.7 ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee under
this Agreement shall at all times be a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation authorized under
such laws 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 authority (so long as an Insurer Default shall not have
occurred and be continuing) satisfactory to the Certificate Insurer, and (if
[___________] then has a rating outstanding on the Certificates) with a
long-term debt rating from [___________] of "Baa3" or higher or otherwise
acceptable to [___________]. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this SECTION 11.7,
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 Trustee shall cease to be eligible in
accordance with the provisions of this SECTION 11.7, the Trustee shall resign
immediately in the manner and with the effect specified in SECTION 11.8.
Section 11.8 RESIGNATION OR REMOVAL OF TRUSTEE. (a) Subject to the
provisions of SUBSECTION (C) of this Section, the Trustee may at any time
resign and be discharged from the trusts created by this Agreement by giving
written notice thereof to the Servicer. Upon receiving such notice of
resignation, the Servicer, with the consent of the Certificate Insurer (unless
an Insurer Default shall have occurred and be continuing), shall promptly
appoint a successor Trustee by written instrument, in duplicate, one copy of
which instrument shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and have
accepted 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.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section and shall fail to resign after written
request therefor by the Servicer, 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
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charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation, then the Servicer or (so long as
an Insurer Default shall not have occurred and be continuing) the Certificate
Insurer shall remove the Trustee. If the Trustee is removed under the authority
of the immediately preceding sentence, the Servicer or the Certificate Insurer,
as the case may be, shall promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee. The Servicer shall
also pay all amounts due and owing to the outgoing Trustee. Any successor
trustee shall (so long as an Insurer Default shall not have occurred and be
continuing) be acceptable to the Certificate Insurer.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this SECTION 11.8 shall
not become effective until acceptance of appointment by the successor Trustee as
provided in SECTION 11.9.
(d) If the Trustee and the Backup Servicer shall be the same
Person and the rights and obligations of the Backup Servicer shall have been
terminated pursuant to SECTION 10.2, then the Certificate Insurer (or, if an
Insurer Default shall have occurred and be continuing, a Certificate Majority)
shall have the option, by 60 days' prior notice in writing to the Servicer and
the Trustee, to remove the Trustee, and the Certificate Insurer shall not have
any liability to the Trustee, the Depositor, the Servicer or any
Certificateholder in connection with such removal.
Section 11.9 SUCCESSOR TRUSTEE. (a) Any successor Trustee appointed
as provided in SECTION 11.8 shall execute, acknowledge and deliver to the
Servicer and the Certificate Insurer, and to its predecessor Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Trustee shall become effective and
such successor trustee, without any further act, deed or conveyance (except as
provided below), shall become fully vested with all the rights, powers, duties
and obligations of its predecessor under this Agreement, with like effect as if
originally named as Trustee; but, on request of the Servicer and the Certificate
Insurer, or the successor trustee, such predecessor Trustee shall, upon payment
of its charges then unpaid, execute and deliver an instrument transferring to
such successor trustee all of the rights, powers and trusts of the Trustee so
ceasing to act, and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such trustee so ceasing to act hereunder.
Upon request of any such successor trustee, the Depositor, on behalf of the
Trust, shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor trustee all such rights, powers and
trusts. The predecessor Trustee shall deliver to the successor Trustee all
documents and statements held by it under this Agreement or any Related
Document; and the predecessor Trustee and the other parties to the Related
Documents shall amend any Related Document to make the successor Trustee the
successor to the predecessor Trustee thereunder; and the Servicer and the
predecessor Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Trustee all such rights, powers, duties and
obligations. No successor Trustee shall accept appointment as provided in this
SECTION 11.9 unless at the time of such acceptance such successor Trustee shall
be eligible under the provisions of SECTION 11.7. Upon acceptance of appointment
by a successor Trustee as provided in this SECTION 11.9, the Depositor shall
mail notice by first-class mail of the successor of such Trustee and the address
of the successor Trustee's corporate trust office under this
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Agreement to each Rating Agency, the Certificate Insurer and all Certificat-
holders at their addresses as shown in the Certificate Register. If the
Depositor fails to mail such notice within 10 days after acceptance of
appointment by the successor Trustee, the successor Trustee shall cause such
notice to be mailed at the expense of the Depositor. The Trustee shall not be
liable for acts and omissions of any Successor Trustee.
Section 11.10 MERGER OR CONSOLIDATION OF TRUSTEE. Any corporation
into which the Trustee may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Trustee
shall be a party, or any corporation succeeding to the business of the Trustee,
shall be the successor of the Trustee under this Agreement, provided such
corporation shall be eligible under the provisions of SECTION 11.7, without the
execution or filing of any instrument or any further act on the part of any of
the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding. The Trustee or its successor hereunder shall provide the
Servicer and the Certificate Insurer with prompt notice of any such transaction.
Section 11.11 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property or any Financed Vehicle may at the time be located, the
Trustee, with the consent of the Servicer and (so long as an Insurer Default
shall not have occurred and be continuing) the Certificate Insurer, shall have
the power and may 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 Trust Property, and to vest in such Person or Persons, in such capacity
and for the benefit of the Certificateholders, such title to the Trust Property,
or any part thereof, and, subject to the other provisions of this SECTION 11.11,
such powers, duties, obligations, rights and trusts as the Servicer, the Trustee
and (so long as an Insurer Default shall not have occurred and be continuing)
the Certificate Insurer may consider necessary or desirable. If the Servicer
shall not have responded to such appointment within 15 days after the receipt by
it of a request to do so, or if a Servicer Termination Event shall have occurred
and be continuing, the consent of the Servicer shall not be required. No
co-Trustee or separate Trustee under this Agreement shall be required to meet
the terms of eligibility as a successor trustee under SECTION 11.7 and no notice
to Certificateholders of the appointment of any co-trustee or separate trustee
shall be required under SECTION 11.9. Every separate trustee and co-trustee
shall, to the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) All rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and exercised
or performed by the Trustee and such separate trustee or co-Trustee
jointly (it being understood that such separate trustee or co-Trustee is
not authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed by the Trustee, the Trustee
shall be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the holding
of title to the Trust Property or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee;
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(ii) No trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) The Servicer, the Trustee and provided no Insurer Default
shall have occurred and be continuing, the Certificate Insurer acting
jointly may at any time accept the resignation of or remove any separate
trustee or co-trustee.
(b) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this ARTICLE XI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with 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 and a
copy thereof given to the Servicer.
(c) Any separate trustee or co-trustee may at any time constitute
the Trustee, its agent or attorney-in-fact, with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect of
this Agreement on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be removed, all of
its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
Section 11.12 REPRESENTATIONS AND WARRANTIES OF TRUSTEE AND BACKUP
SERVICER. Each of the Trustee and Backup Servicer represents and warrants as of
the date of this Agreement that:
(a) It is a banking corporation duly organized and validly
existing under the laws of the state of its incorporation;
(b) It has full power, authority and legal right to execute,
deliver and perform this Agreement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement;
(c) The execution, delivery and performance by it of this
Agreement do not violate any provision of its corporate charter or by-laws;
and
(d) This Agreement has been duly executed and delivered by it and
constitutes the legal, valid and binding agreement of it, 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 generally and by equitable limitations on the
availability of specific remedies, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
Section 11.13 TAX RETURNS. In the event the Trust shall be required
to file tax returns, the Servicer shall prepare or shall cause to be prepared
any tax returns required to be
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filed by the Trust and shall remit such returns to the Trustee for signature on
behalf of the Trust at least ten Business Days before such returns are due to be
filed by the Servicer. The Trustee, upon request, shall furnish the Servicer
with all such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust.
Section 11.14 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
Section 11.15 SUIT FOR ENFORCEMENT. If a Servicer Termination Event
shall occur and be continuing, the Trustee, in its discretion may (but shall
have no duty or obligation so to proceed), subject to the provisions of SECTION
11.1, proceed to protect and enforce its rights and the rights of the
Certificateholders under this Agreement by a suit, action or proceeding in
equity or at law or otherwise, whether for the specific performance of any
covenant or agreement contained in this Agreement or in aid of the execution of
any power granted in this Agreement or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by counsel, shall deem
most effectual to protect and enforce any of the rights of the Trustee or the
Certificateholders.
Section 11.16 RIGHTS TO DIRECT TRUSTEE. Subject to SECTION 11.3(C),
the Certificate Insurer (or, if an Insurer Default shall have occurred and be
continuing, a Certificate Majority) shall have the right to direct in writing
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust or power conferred on the Trustee;
PROVIDED, HOWEVER, that subject to SECTION 11.1, the Trustee shall have the
right to decline to follow any such direction if the Trustee being advised by
counsel determines that the action so directed may not lawfully be taken, or if
the Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed would be in violation of this Agreement or any of the
Related Documents or would subject it to personal liability against which it has
not been provided indemnity reasonably satisfactory to it or (in the case of
directions provided by a Certificate Majority) be unduly prejudicial to the
rights of Certificateholders not parties to such direction; and PROVIDED FURTHER
that nothing in this Agreement shall impair the right of the Trustee to take any
action deemed proper by the Trustee and which is not inconsistent with such
direction by the Certificate Insurer or the Certificateholders.
ARTICLE XII
TERMINATION
Section 12.1 TERMINATION OF THE TRUST. (a) The respective
obligations and responsibilities of the Depositor, the Servicer, the Certificate
Insurer and the Trustee created by this Agreement and the Trust created by this
Agreement shall terminate upon the latest of (i) the
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maturity or other liquidation of the last Receivable (including the purchase as
of any Record Date by the Depositor or the Servicer at its option of the corpus
of the Trust as described in SECTION 12.2) and the subsequent distribution to
Certificateholders pursuant to SECTION 5.5 of the amount required to be
deposited pursuant to SECTION 12.2 or (ii) the payment to Certificateholders of
all amounts required to be paid to them pursuant to this Agreement and the
payment to the Certificate Insurer of all amounts payable or reimbursable to it
pursuant to this Agreement and the Insurance Agreement. In either case, there
shall be delivered to the Trustee and the Certificate Insurer an Opinion of
Counsel that all applicable preference periods under federal, state and local
bankruptcy insolvency and similar laws have expired with respect to the payments
pursuant to clause (ii); PROVIDED, HOWEVER, that in no event shall the Trust
created by this Agreement continue beyond the expiration of 21 years from the
death of the last survivor of the descendants living on the date of this
Agreement of Rose Kennedy of the Commonwealth of Massachusetts; and PROVIDED,
FURTHER, that the rights to indemnification under SECTIONS 9.1 and 11.6 shall
survive the termination of the Trust. The Servicer shall promptly notify the
Trustee and the Certificate Insurer of any prospective termination pursuant to
this SECTION 12.1.
(b) Notice of any final distribution, specifying the Distribution
Date upon which the Certificateholders may surrender their Certificates to the
Trustee for payment of the final distribution and retirement of the
Certificates, shall be given promptly by the Trustee by letter to
Certificateholders mailed not earlier than the 1st day and not later than the
seventeenth day of the month of such final distribution specifying (i) the
Distribution Date upon which final payment of the Certificates shall be made
upon presentation and surrender of Certificates at the office of the Trustee
therein specified, (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 Certificates at
the office of the Trustee therein specified. The Trustee shall give such notice
to the Certificate Registrar at the time such notice is given to
Certificateholders. In the event such notice is given, the Servicer or the
Trustee, as the case may be, shall make deposits into the Collection Account in
accordance with SECTION 5.4, or, in the case of an optional purchase of
Receivables pursuant to SECTION 12.2, shall deposit the amount specified in
SECTION 12.2. Upon presentation and surrender of the Certificates, the Trustee
shall cause to be distributed to Certificateholders amounts distributable on
such Distribution Date pursuant to SECTION 5.5.
(c) In the event that all of the Certificateholders shall not
surrender their Certificates for retirement within six months after the date
specified in the above-mentioned written notice, the Trustee shall have a second
written notice to the remaining Certificateholders to surrender their
Certificates for retirement and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for retirement, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that remain subject
to this Agreement. As soon as practicable after the termination of the Trust,
the Trustee shall surrender the Policy to the Certificate Insurer for
cancellation.
Section 12.2 OPTIONAL PURCHASE OF ALL RECEIVABLES. On each
Determination Date as of which the Aggregate Principal Balance is less than
[_____]% of the Original Aggregate Principal Balance, the Servicer shall have
the option to purchase the corpus of the
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Trust (with the consent of the Certificate Insurer, if such purchase would
result in a claim on the Policy or would result in any amount owing to the
Certificate Insurer remaining unpaid). To exercise such option, the Servicer
shall pay the aggregate Purchase Amounts for the Receivables, plus the appraised
value of any other property (including the right to receive any future
recoveries) held as part of the Trust, such appraisal to be conducted by an
appraiser mutually agreed upon by the Servicer and the Certificate Insurer (or
the Trustee, if an Insurer Default shall have occurred and be continuing), and
such appraisal to be conducted only in the event that the Class A
Certificateholders have not been paid in full. The Servicer shall succeed to all
interests in and to the Trust Property. The fees and expenses related to such
appraisal shall be paid by the party exercising the option to purchase.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
Section 13.1 AMENDMENT. (a) This Agreement may be amended by the
Depositor, the Servicer, the Trustee and the Backup Servicer with the prior
written consent of the Certificate Insurer (so long as an Insurer Default shall
not have occurred and be continuing) but without the consent of any of the
Certificateholders, (i) to cure any ambiguity, or (ii) to correct or supplement
any provisions in this Agreement; PROVIDED, HOWEVER, that such action shall not,
as evidenced by an Opinion of Counsel, adversely affect in any material respect
the interests of the Certificateholders, PROVIDED, FURTHER, that if an Insurer
Default has occurred and is continuing, such action shall not amend, modify or
limit the Certificate Insurer's rights under (i) SECTION 5.5(B), (II) any rights
to indemnification to which the Certificate Insurer is entitled hereunder or
(iii) any defined terms used in preceding clauses (i) or (ii).
(b) This Agreement may also be amended from time to time by the
Depositor, the Servicer, the Trustee and the Backup Servicer with the prior
written consent of the Certificate Insurer (so long as an Insurer Default shall
not have occurred and be continuing) and with the consent of a Certificate
Majority (which consent of any Certificateholder given pursuant to this SECTION
13.1(B) or pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Certificate and of
any Certificate issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the
Certificate) 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 shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions that shall be required to be made on any Certificate or the Class
A Pass-Through Rate or the Class B Pass-Through Rate or (b) reduce the aforesaid
percentage required to consent to any such amendment or any waiver hereunder,
without the consent of all the Certificateholders then outstanding, PROVIDED,
FURTHER, that if an Insurer Default has occurred and is continuing, such action
shall not amend, modify or limit the Certificate Insurer's rights under (i)
SECTION 5.5(B), (II) any rights to indemnification to which the Certificate
Insurer is entitled hereunder or (iii) any defined terms used in preceding
clauses (i) or (ii).
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(c) Prior to the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Rating Agency.
(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.
(e) It shall not be necessary for the consent of Certificate-
holders pursuant to SECTION 13.1(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 any
other consents of Certificateholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Certificateholders
shall be subject to such reasonable requirements as the Trustee may prescribe,
including the establishment of record dates.
(f) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and conclusively rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement, in addition to the Opinion of Counsel referred to in SECTION
13.2(I). 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.
Section 13.2 PROTECTION OF TITLE TO TRUST. (a) The Depositor or the
Servicer or both shall execute and file such financing statements and cause to
be executed and filed such continuation and other statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Trust, the Trustee and the Certificate Insurer under
this Agreement in the Trust Property and in the proceeds thereof. The Depositor
or the Servicer or both shall deliver (or cause to be delivered) to the Trustee
and the Certificate Insurer file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.
(b) Neither 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 by the Depositor in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee and the
Certificate Insurer (so long as an Insurer Default shall not have occurred and
be continuing) at least 60 days prior written notice thereof, and shall promptly
file appropriate amendments to all previously filed financing statements and
continuation statements.
(c) Each of the Depositor and the Servicer shall give the Trustee
and the Backup Servicer and the Certificate Insurer at least 60 days prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement. The Servicer shall at all times
maintain each office from which it services Receivables and its principal
executive office within the United States of America.
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(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems (and shall
require the Sub-Servicers to maintain their computer systems) so that, from and
after the time of sale under this Agreement of the Receivables to the Trustee,
the Servicer's master computer records (including any Backup archives) that
refer to any Receivable indicate clearly (with reference to the particular
grantor trust) that the Receivable is owned by the Trust. Indication of the
Trust's ownership of a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the Receivable has been paid in
full or repurchased by the Seller, the Originators or the Servicer.
(f) If at any time the Depositor or the Servicer proposes to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they refer in any manner whatsoever to any Receivable,
indicate clearly that such Receivable has been sold and is owned by the Trust
unless such Receivable has been paid in full or repurchased by the Seller, the
Originators or the Servicer.
(g) The Servicer shall permit the Trustee, the Backup Servicer,
the Certificate Insurer, the Depositor and their respective agents, at any time
to inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Receivables or any other portion of the Trust Property.
(h) The Servicer shall furnish to the Trustee, the Backup
Servicer, the Depositor and the Certificate Insurer at any time upon request a
list of all Receivables then held as part of the Trust, together with a
reconciliation of such list to the Schedule of Receivables and to each of the
Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust. The Trustee shall hold any such list and Schedule of
Receivables for examination by interested parties during normal business hours
at the Corporate Trust Office upon reasonable notice by such Persons of their
desire to conduct an examination.
(i) The Depositor and the Servicer shall deliver to the Trustee
and the Certificate Insurer simultaneously with the execution and delivery of
this Agreement and of each amendment thereto and upon the occurrence of the
events giving rise to an obligation to give notice pursuant to SECTION 13.2(b)
or (C), an Opinion of Counsel (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 in the Receivables and the other Trust Property, and reciting the
details of such filing or referring to prior Opinions of Counsel in which such
details are given, (b) stating that, in the opinion of such counsel, no such
action is necessary to preserve and protect such interest, or (c) stating in the
opinion of such
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<PAGE>
counsel, any action which is necessary to preserve and protect such interest
during the following 12- month period.
(j) The Servicer shall deliver to the Trustee and the Certificate
Insurer, within 90 days after the beginning of each calendar year beginning with
the first calendar year beginning more than three months after the Closing Date,
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 in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (b)
stating that, in the opinion of such counsel, no action shall be necessary to
preserve and protect such interest.
Section 13.3 LIMITATION ON RIGHTS OF CERTIFICATEHOLDERS. (a) The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
provided in this SECTION 13.3 or SECTIONS 10.2, 10.5 or 13.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties to this Agreement, nor shall anything set forth in this
Agreement, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time 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 by the parties to this Agreement pursuant
to any provision of this Agreement or any Related Document.
(c) So long as no Insurer Default has occurred and is continuing,
except as otherwise specifically provided herein, whenever Class A
Certificateholder action, consent or approval is required under this Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Class A Certificateholders if the
Certificate Insurer agrees to take such action or give such consent or approval.
If an Insurer Default shall have occurred and is continuing, no
Certificateholder shall have any right by virtue or by availing itself of any
provisions of this Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as provided in this Agreement and unless also
the Certificateholders evidencing not less than 25% of the sum of the Class A
Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by Holders of Class B Certificates
evidencing not less than 25% of the Class B Certificate Balance shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee under this Agreement and shall have offered to the
Trustee such indemnity reasonably satisfactory to it 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 neglected or refused to institute any such action, suit,
or proceeding and during such 30-day period, no request or waiver inconsistent
with such written request has been
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<PAGE>
given to the Trustee pursuant to and in compliance with this SECTION 13.3 or
SECTION 10.5; it being understood and intended, and being expressly covenanted
by each Certificateholder with every other Certificateholder and the Trustee,
that no one or more Certificateholders 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 13.3, each and every
Certificateholder and the Trustee shall be entitled to such relief as can be
given either at law or in equity. Nothing in this Agreement shall be construed
as giving the Certificateholders any right to make a claim under the Policy.
Section 13.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
the principles of conflicts of laws thereof and the obligations, rights and
remedies of the parties under this Agreement shall be determined in accordance
with such laws.
Section 13.5 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or of the Certificates
or the rights of the Holders thereof.
Section 13.6 ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, except as provided in SECTION 8.2 or SECTION 9.2
and as provided in the provisions of the Agreement concerning the resignation of
the Servicer and the Backup Servicer, this Agreement may not be assigned by the
Depositor or the Servicer without the prior written consent of the Trustee and
the Certificate Insurer (or, if an Insurer Default shall have occurred and be
continuing the Trustee and a Certificate Majority).
Section 13.7 CERTIFICATES NONASSESSABLE AND FULLY PAID.
Certificateholders shall not be personally liable for obligations of the Trust,
the Fractional Undivided Interests represented by the Certificates shall be
nonassessable for any losses or expenses of the Trust or for any reason
whatsoever, and Certificates upon authentication thereof by the Trustee pursuant
to SECTION 7.2 are and shall be deemed fully paid.
Section 13.8 THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this ARTICLE
XIII, no other Person shall have any right or obligation hereunder. The
Certificate Insurer and its successors and assigns shall be a third-party
beneficiary to the provisions of this Agreement, and shall be entitled to rely
upon and directly enforce such provisions of this Agreement so long as no
Insurer Default shall have occurred and be continuing. Except as expressly
stated otherwise herein or in the Related Documents, any right of the
Certificate Insurer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Certificate
Insurer in its sole
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<PAGE>
and absolute discretion. The Certificate Insurer may disclaim any of its rights
and powers under this Agreement (but not its duties and obligations under the
Policy) upon delivery of a written notice to the Trustee.
Section 13.9 FINANCIAL SECURITY AS CONTROLLING PARTY. Each
Certificateholder by purchase of the Certificates held by it acknowledges that
the Trustee on behalf of the Trust, as partial consideration of the issuance of
the Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Certificateholders. The Certificate
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Policy) upon delivery of a written notice
to the Trustee. The Certificate Insurer may give or withhold any consent
hereunder in its sole and absolute discretion.
Section 13.10 COUNTERPARTS. This Agreement may be executed
simultaneously in any number of counterparts, each of which counterparts shall
be deemed to be an original, and all of which counterparts shall constitute but
one and the same instrument.
Section 13.11 NOTICES. All demands, notices and communications
under this Agreement shall be in writing, personally delivered or mailed and
shall be deemed to have been duly given upon receipt:
(a) in the case of the Servicer, at the following address:
[____________________], [Address];
(b) in the case of the Trustee, and, for so long as the Trustee is
the Backup Servicer, the Trustee, at its Corporate Trust Office:
[_____________________], [Address];
(c) in the case of each Rating Agency: [____________________],
[Address] and [____________________], [Address];
(d) in the case of the Certificate Insurer: [________________],
[Address], Attention: Surveillance Department, Re: [__________________] Trust
200[_]-[_];
or at such other address as shall be designated by any such party in a written
notice to the other parties. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register, and any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder receives
such notice.
Section 13.12 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the parties hereof and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereof and their
respective successors and assigns permitted hereunder. All covenants and
agreements contained herein shall be binding upon, and inure to
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<PAGE>
the benefit of, the Trustee and the Certificateholders and their respective
permitted successors and assigns, if any. Any request, notice, direction,
consent, waiver or other instrument or action by any Certificateholder shall
bind its successors and assigns.
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<PAGE>
IN WITNESS WHEREOF, the Depositor, the Servicer and the Trustee have
caused this Pooling and Servicing Agreement to be duly executed by their
respective officers, effective as of the day and year first above written.
PAINEWEBBER ASSET
ACCEPTANCE CORPORATION,
as Depositor
By:____________________________________
Name:
Title:
[____________________],
as Servicer
By:____________________________________
Name:
Title:
[____________________],
as Trustee and as Backup Servicer
By:____________________________________
Name:
Title:
<PAGE>
SCHEDULE A
SCHEDULE OF RECEIVABLES
[See Exhibit A to the Unaffiliated Seller's Agreement]
Sch. A-1
<PAGE>
EXHIBIT A
[FORM OF CLASS A CERTIFICATE]
[__________________] TRUST 200[_]-[_]
[_____]% [_______________] BACKED CERTIFICATE, CLASS A
Unless this Certificate is presented by an authorized representative
of the Depository Trust Company ("DTC") to Issuer ("[__________________] TRUST
200[_]-[_]") or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or 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 Certificate evidences a fractional undivided interest in the
Class A Percentage Interest of the Trust, as defined below, the property of
which includes a pool of installment sale contracts secured by new and used
automobiles and light trucks and sold to the Trust by [_____________________]
("[______]"). This Certificate does not represent any interest in or obligation
of [______], [____________________] or any of their respective affiliates
thereof. Neither the Class A Certificates nor the Receivables are insured by any
governmental agency.
No. A-1 CUSIP: [____________]
$[_____________]
Certificate Principal Balance Percentage Interest: [100%]
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a
$[__________] nonassessable, fully-paid, 100% Class A Percentage Interest in the
Class A Certificates issued by [__________________] Trust 200[_]-[_] (the
"TRUST") formed by [______]. The Trust hereby agrees to pay to such registered
holder its pro rata share (based on the aggregate Class A Percentage Interest
held by such registered Holder) of the amounts which all Holders of the Class A
Certificates are entitled to receive, as hereinafter set forth in this Class A
Certificate and as more fully set forth in the Agreement (defined below), at all
times from the sources and on the terms and conditions hereinafter set forth and
as more fully set forth in the Agreement.
The Trust was created pursuant to the Pooling and Servicing
Agreement (the "AGREEMENT"), dated as of [_____], 200[_], by and among [______],
[____________________], as servicer, and [_____________________], as trustee of
the Trust (the "TRUSTEE"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement.
The property of the Trust includes (as more fully described in the
Agreement) a pool of installment sale contracts for new and used automobiles and
light duty trucks (the
A-1
<PAGE>
"RECEIVABLES"), certain monies due thereunder on or after [_______][_], 200[_]
an assignment of security interests in the vehicles financed thereby, certain
bank accounts and the proceeds thereof, property securing the Receivables and
held by the Trustee, proceeds from claims on physical damage, credit life and
credit disability insurance policies covering vehicles financed thereby and the
obligors thereunder, certain rights against Dealers and in contracts with
Dealers, all right, title and interest of the Depositor in and to the
Unaffiliated Seller's Agreement and all right, title and interest of the Seller
in and to the Purchase Agreement and Assignment and any and all proceeds of the
foregoing.
This Certificate is one of the duly authorized Certificates
designated as [__________________] Trust 200[_]-[_], [_____]% [_______________]
Backed Certificates, Class A (the "CLASS A CERTIFICATES") issued under the
Agreement. Also issued under the Agreement are the Class B Certificate and the
Class C Certificate. The aggregate undivided interest in the Trust evidenced by
all Class A Certificates is [_____]%. This Class A Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Class A Certificate, by virtue of the
acceptance hereof, assents and by which such Holder is bound.
With respect to the Class A Certificates registered in the name of
Cede & Co., as nominee of the Depository, the Depositor, the Seller, the
Originators, the Servicer and the Trustee shall have no responsibility or
obligation to Participants or beneficial owners for which the Depository holds
Class A Certificates from time to time as a Depository. Without limiting the
immediately preceding sentence, the Depositor, the Seller, the Originators, the
Servicer and the Trustee shall have no responsibility or obligation with respect
to (i) the accuracy of the records of the Depository, Cede & Co., or any
Participant with respect to the ownership interest in any Class A Certificate,
(ii) the delivery to any Participant or any other Person, other than a
Certificateholder, of any notice with respect to the Class A Certificates or
(iii) the payment to any Participant or any other Person, other than a
Certificateholder, of any amount with respect to any distribution of principal
or interest on the Class A Certificates. No Person other than a
Certificateholder shall receive a Certificate evidencing such Class A
Certificate.
IN WITNESS WHEREOF, the Trust has caused this Class A Certificate to
be duly executed.
[__________________] TRUST 200[_]-[_]
By: ___________________________________
[_____________________], not in
its individual capacity, but
solely as Trustee
Date: [__________][_], 200[_]
A-2
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class A Certificates of the Series designated
herein, issued under the within-mentioned Pooling and Servicing Agreement.
[_____________________], not in its
individual capacity but solely as
Trustee
By:____________________________________
This Class A Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class A Certificateholder, at
its expense, upon a written request to the Trustee: [_____________________],
[Address], Attention: [________________].
There will be distributed on the [___] day of each month or, if such
[___] day is not a Business Day, the next succeeding Business Day (the
"DISTRIBUTION DATE"), commencing on [_______][_], 200[_], to the person in whose
name this Class A Certificate is registered at the close of business on the last
day of the prior calendar month (the "RECORD DATE"), to the extent available
from the Amount Available, such Class A Certificateholder's fractional undivided
interest in the sum of the Class A Interest Distributable Amount for such
Distribution Date, any outstanding Class A Interest Carryover Shortfall for such
Distribution Date, the Class A Principal Distributable Amount for such
Distribution Date and any Class A Principal Carryover Shortfall for such
Distribution Date.
Distributions on this Class A Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof to
Certificateholders holding certificates representing at least $[________] in
Class A Certificate Balance, by wire transfer of immediately available funds, to
the Person entitled thereto, as specified by such Person in accordance with the
terms of the Agreement or by such other means as the Person entitled thereto and
the Trustee shall agree, without the presentation or surrender of this Class A
Certificate, other than with respect to the final payment of the Class A
Certificateholder, or the making of any notation hereon.
The Class A Certificates do not represent an obligation of, or an
interest in, the Trustee or any Affiliate thereof. The Class A Certificates are
limited in right of payment to certain collections and recoveries respecting the
Receivables, all as more specifically set forth above in the Agreement. The
right to receive payments with respect to the Class B Certificate and the Class
C Certificate is subordinate to the prior payment in full of all amounts of
principal and interest due and payable on the Class A Certificates on each
Distribution Date.
A-3
<PAGE>
As provided in the Agreement, so long as no Insurer Default has
occurred and is continuing, with certain exceptions whenever Class A
Certificateholder action, consent or approval is required under the Agreement,
such action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Class A Certificateholders if the
Certificate Insurer agrees to take such action or give such consent or approval.
If an Insurer Default shall have occurred and is continuing, no
Certificateholder shall have any right by virtue or by availing itself of any
provisions of the Agreement to institute any suit, action, or proceeding in
equity or at law upon or under or with respect to the Agreement, unless such
Holder previously shall have given to the Trustee a written notice of default
and of the continuance thereof, as provided in the Agreement and unless also the
Certificateholders evidencing not less than 25% of the sum of the Class A
Certificate Balance and the Class B Certificate Balance, or, if there are no
Class A Certificates then outstanding, by the Holder of Class B Certificate
evidencing not less than 25% of the Class B Certificate Balance shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee under the Agreement.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of [______]
and the Servicer and the rights of the Holders of the Certificates under the
Agreement at any time by the Servicer, [______] and the Trustee with the consent
of the Certificate Insurer and the Holders of Certificates, voting together as a
Class, evidencing not less than a Certificate Majority. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
The Class A Certificates are issuable only as registered Class A
Certificates without coupons in minimum denominations of $1,000,000 and integral
multiples of $1,000 in excess thereof; however, one Certificate may be issued in
a denomination representing or including any remaining portion of the initial
Class A Certificate Balance. 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
Class A Percentage Interest, as requested by the Class A Certificateholder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charge or expenses payable in connection
therewith.
Each Certificateholder by purchase of the Certificates held by it
acknowledges that the Trustee, as partial consideration of the issuance of the
Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Certificateholders. The Certificate
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Policy) upon delivery of a written notice
A-4
<PAGE>
to the Trustee. The Certificate Insurer may give or withhold any consent
hereunder in its sole and absolute discretion.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option (subject to the consent of the Certificate
Insurer, as described in the Agreement), purchase the corpus of the Trust at a
price specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only on any Determination Date as of which
the Aggregate Principal Balance is less than [_____]% of the Original Aggregate
Principal Balance. In the event of such removal, the entire outstanding Class A
Certificate Balance and the Class B Certificate Balance, together with accrued
interest thereon at the Class A Percentage or Class B Percentage, as applicable,
will be required to be paid to the Class A Certificateholders and the Class B
Certificateholder on such Distribution Date.
The Trustee and any agent of the Trustee may treat the person in
whose name this Class A Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any agent shall be affected by any notice
to the contrary.
A-5
<PAGE>
EXHIBIT B
[FORM OF CLASS B CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF CERTAIN PAYMENTS TO THE
CLASS A CERTIFICATES AS DESCRIBED IN THE AGREEMENT REFERRED TO HEREIN.
DISTRIBUTIONS HEREON ARE SUBJECT TO THE PRIOR RIGHT OF THE CLASS A
CERTIFICATEHOLDERS TO RECEIVE AMOUNTS ON DEPOSIT IN THE SPREAD ACCOUNT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE IN
RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 7.1 OF THE
POOLING AND SERVICING AGREEMENT AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, (iii) TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF
CERTAIN OTHER REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER [______], THE
SELLER, THE SERVICER, THE TRUST NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE
CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS
THE PROPOSED TRANSFEREE OF THIS CERTIFICATE HAS DELIVERED AN AFFIDAVIT (OR AN
OPINION OF COUNSEL) TO THE EFFECT THAT SUCH A TRANSFER MAY BE MADE PURSUANT TO
AN EXEMPTION FROM THE SECURITIES ACT, INCLUDING RULE 144A THEREUNDER, AND
APPLICABLE STATE SECURITIES LAWS AND (A) SUCH TRANSFEREE WILL NOT ACQUIRE THIS
CERTIFICATE WITH THE ASSETS OF ANY "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION
3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), (B) NO "PROHIBITED TRANSACTION" UNDER ERISA OR THE CODE WILL OCCUR
IN CONNECTION WITH SUCH TRANSFEREE'S ACQUISITION OF THIS CERTIFICATE OR (C) THE
ACQUISITION OF THIS CERTIFICATE IS SUBJECT TO A STATUTORY OR ADMINISTRATIVE
EXEMPTION FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE CODE.
B-1
<PAGE>
[__________________] TRUST 200[_]-[_]
[_____]% [_______________] BACKED CERTIFICATE, CLASS B
This Certificate evidences a fractional undivided interest in the
Class B Percentage Interest of the Trust, as defined below, the property of
which includes a pool of installment sale contracts secured by new and used
automobiles and light trucks and sold to the Trust by [_____________________]
("[______]"). This Certificate does not represent any interest in or obligation
of [______], [____________] or any of their respective affiliates thereof.
Neither the Class B Certificates nor the Receivables are insured by any
governmental agency.
No. B-1
$[___________]
Certificate Principal Balance Percentage Interest: 100%.
THIS CERTIFIES THAT [____________] is the registered owner of a
$[___________] nonassessable, fully-paid, fractional undivided interest in the
Class B Certificates issued by [__________________] Trust 200[_]-[_] (the
"TRUST") formed by [______]. The Trust was created pursuant to the Pooling and
Servicing Agreement (the "AGREEMENT"), dated as of [________][_], 200[_], by and
among [______], [____________________], as servicer, and
[_____________________], as trustee of the Trust (the "TRUSTEE"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Agreement.
The property of the Trust includes (as more fully described in the
Agreement) a pool of installment sale contracts for new and used automobiles and
light duty trucks (the "RECEIVABLES"), certain monies due thereunder on or after
[________][_],200[_], an assignment of security interests in the vehicles
financed thereby, certain bank accounts and the proceeds thereof, property
securing the Receivables and held by the Trustee, proceeds from claims on
physical damage, credit life and disability insurance policies covering vehicles
financed thereby and the obligors thereunder, certain rights against Dealers and
in contracts with Dealers, all right, title and interest of the Depositor in and
to the Unaffiliated Seller's Agreement and all right, title and interest of the
Seller in and to the Purchase Agreement and Assignment and any and all proceeds
of the foregoing.
This Certificate is one of the duly authorized Certificates
designated as [_____]% [__________________] Trust 200[_]-[_], [_______________]
Backed Certificates, Class B (the "CLASS B CERTIFICATES") issued under the
Agreement. Also issued under the Agreement are the Class A Certificates and the
Class C Certificate. The aggregate undivided interest in the Trust evidenced by
all Class B Certificates is [_____]%. This Class B Certificate is issued under
and is subject to the terms, provisions and conditions of the Agreement, to
which Agreement the Holder of this Class B Certificate, by virtue of the
acceptance hereof, assents and by which such Holder is bound.
B-2
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Class B Certificate to
be duly executed.
[__________________] TRUST 200[_]-[_]
By:__________________________________
[_____________________], not in its
individual capacity, but solely
as Trustee
Date: [_______][_],200[_],
B-3
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Class B Certificates of the Series designated
herein, issued under the within-mentioned Pooling and Servicing Agreement.
[_____________________], not in its
individual capacity but solely as
Trustee
By:____________________________________
This Class B Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class B Certificateholder, at
its expense, upon a written request to the Trustee: [_____________________],
[Address], Attention: [____________________].
There will be distributed on the [___] day of each month or, if such
[___] day is not a Business Day, the next succeeding Business Day (the
"DISTRIBUTION DATE"), commencing on [________][_], 200[_], to the person in
whose name this Class B Certificate is registered at the close of business on
the last day of the prior calendar month (the "RECORD DATE"), to the extent
available from the Available Funds, such Class B Certificateholder's fractional
undivided interest in the sum of the Class B Interest Distributable Amount for
such Distribution Date, the Class B Principal Distributable Amount for such
Distribution Date and any Class B Principal Carryover Shortfall for such
Distribution Date.
Distributions on this Class B Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof to
Certificateholders holding Certificates representing at least $[________] in
Class B Certificate Balance, by wire transfer of immediately available funds, to
the Person entitled thereto, as specified by such Person in accordance with the
terms of the Agreement or by such other means as the Person entitled thereto and
the Trustee shall agree, without the presentation or surrender of this Class B
Certificate, other than with respect to the final payment of the Class B
Certificateholder, or the making of any notation hereon.
The Class B Certificates do not represent an obligation of, or an
interest in, the Trustee or any Affiliate thereof. The Class B Certificates are
limited in right of payment to certain collections and recoveries respecting the
Receivables, all as more specifically set forth above in the Agreement. The
right to receive distributions with respect to the Class B Certificates is
subordinate to the prior payment in full of all amounts of principal and
interest due and payable on the Class A Certificates on each Distribution Date.
B-4
<PAGE>
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of [______]
and the Servicer and the rights of the Holders of the Certificates under the
Agreement at any time by the Servicer, [______] and the Trustee with the consent
of the Certificate Insurer and the Holders of Certificates, voting together as a
Class, evidencing not less than a Certificate Majority. Any such consent by the
Holder of this Certificate shall be conclusive and binding on such Holder and
upon all future Holders of this Certificate and of any Certificate issued upon
the transfer hereof or in exchange hereof or in lieu hereof whether or not
notation of such consent is made upon this Certificate. The Agreement also
permits the amendment thereof, in certain limited circumstances, without the
consent of the Holders of any of the Certificates.
The Class B Certificates are issuable only as registered Class B
Certificates without coupons in minimum denominations of $250,000 and integral
multiples of $1,000 in excess thereof; however, one Certificate may be issued in
a denomination representing or including any remaining portion of the initial
Class B Certificate Balance. 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
Class B Percentage Interest, as requested by the Class B Certificateholder
surrendering the same. No service charge will be made for any such registration
of transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or governmental charge payable in connection therewith.
Each Certificateholder by purchase of the Certificates held by it
acknowledges that the Trustee, as partial consideration of the issuance of the
Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Certificateholders. The Certificate
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Policy) upon delivery of a written notice
to the Trustee. The Certificate Insurer may give or withhold any consent
hereunder in its sole and absolute discretion.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option (subject to the consent of the Certificate
Insurer, as described in the Agreement), purchase the corpus of the Trust at a
price specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only on any Determination Date as of which
the Aggregate Principal Balance is less than [_____]% of the Original Aggregate
Principal Balance. In the event of such removal, the entire outstanding Class A
Certificate Balance and the Class B Certificate Balance, together with accrued
interest thereon at the related Class A Percentage or Class B Percentage, as
applicable, will be required to be paid to the Class A Certificateholders and
the Class B Certificateholder on such Distribution Date.
B-5
<PAGE>
The Trustee and any agent of the Trustee may treat the person in
whose name this Class B Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any agent shall be affected by any notice
to the contrary.
B-6
<PAGE>
EXHIBIT C
[FORM OF CLASS C CERTIFICATE]
THIS CERTIFICATE IS SUBORDINATED IN RIGHT OF CERTAIN DISTRIBUTIONS
TO THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES AS DESCRIBED IN THE
AGREEMENT REFERRED TO HEREIN. DISTRIBUTIONS HEREON ARE SUBJECT TO THE PRIOR
RIGHT OF THE CLASS A CERTIFICATEHOLDERS AND THE CLASS B CERTIFICATEHOLDERS TO
RECEIVE AMOUNTS ON DEPOSIT IN THE SPREAD ACCOUNT.
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE IN
RELIANCE UPON EXEMPTIONS PROVIDED BY THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS. NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE
UNLESS SUCH RESALE OR TRANSFER (A) IS MADE IN ACCORDANCE WITH SECTION 7.1 OF THE
POOLING AND SERVICING AGREEMENT AND (B) IS MADE (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (ii) IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS, (iii) TO THE SELLER OR (iv) TO A PERSON WHO THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT THAT IS AWARE THAT THE RESALE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND (C) UPON THE SATISFACTION OF
CERTAIN OTHER REQUIREMENTS SPECIFIED IN THE AGREEMENT. NEITHER [______], THE
SELLER, THE SERVICER, THE TRUST NOR THE TRUSTEE IS OBLIGATED TO REGISTER THE
CERTIFICATES UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS.
NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE UNLESS
THE PROPOSED TRANSFEREE OF THIS CERTIFICATE HAS DELIVERED AN AFFIDAVIT (OR AN
OPINION OF COUNSEL) TO THE EFFECT THAT SUCH A TRANSFER MAY BE MADE PURSUANT TO
AN EXEMPTION FROM THE SECURITIES ACT, INCLUDING RULE 144A THEREUNDER, AND
APPLICABLE STATE SECURITIES LAWS AND (A) SUCH TRANSFEREE WILL NOT ACQUIRE THIS
CERTIFICATE WITH THE ASSETS OF ANY "EMPLOYEE BENEFIT PLAN" AS DEFINED IN SECTION
3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED
("ERISA") OR SECTION 4975(e)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
(THE "CODE"), (B) NO "PROHIBITED TRANSACTION" UNDER ERISA OR THE CODE WILL OCCUR
IN CONNECTION WITH SUCH TRANSFEREE'S ACQUISITION OF THIS CERTIFICATE OR (C) THE
ACQUISITION OF THIS CERTIFICATE IS SUBJECT TO A STATUTORY OR ADMINISTRATIVE
EXEMPTION FROM THE "PROHIBITED TRANSACTION" PROVISIONS OF ERISA AND THE CODE.
C-1
<PAGE>
[__________________] TRUST 200[_]-[_]
[_______________] BACKED CERTIFICATE, CLASS C
This Certificate evidences a fractional undivided interest in the
Class C Percentage Interest of the Trust, as defined below, the property of
which includes a pool of installment sale contracts secured by new and used
automobiles and light trucks and sold to the Trust by [_____________________]
("[______]"). This Certificate does not represent any interest in or obligation
of [______], [____________________] or any of their respective affiliates
thereof. Neither the Class C Certificates nor the Receivables are insured by any
governmental agency.
No. C-1 Percentage
Interest: 100%
THIS CERTIFIES THAT [____________] is the registered owner of a
fractional undivided interest in the Class C Certificates issued by
[__________________] Trust 200[_]-[_] (the "TRUST") formed by [______]. The
Trust was created pursuant to the Pooling and Servicing Agreement (the
"AGREEMENT"), dated as of [_____], 200[_], by and among [______],
[____________________], as servicer, and [_____________________], as trustee of
the Trust (the "TRUSTEE"), a summary of certain of the pertinent provisions of
which is set forth below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them in the
Agreement.
The property of the Trust includes (as more fully described in the
Agreement) a pool of installment sale contracts for new and used automobiles and
light duty trucks (the "RECEIVABLES"), certain monies due thereunder on or after
[_________][_], 200[_], an assignment of security interests in the vehicles
financed thereby, certain bank accounts and the proceeds thereof, property
securing the Receivables and held by the Trustee, proceeds from claims on
physical damage, credit life and disability insurance policies covering vehicles
financed thereby and the obligors thereunder, certain rights against Dealers and
in contracts with Dealers, all right, title and interest of the Depositor in and
to the Unaffiliated Seller's Agreement and all right, title and interest of the
Seller in and to the Purchase Agreement and Assignment and any and all proceeds
of the foregoing.
This Certificate is the duly authorized Certificate designated as
[__________________] Trust 200[_]-[_], [_______________] Backed Certificates,
Class C (the "CLASS C CERTIFICATE") issued under the Agreement. Also issued
under the Agreement are the Class A Certificates and the Class B Certificates.
This Class C Certificate is issued under and is subject to the terms, provisions
and conditions of the Agreement, to which Agreement the Holder of this Class C
Certificate, by virtue of the acceptance hereof, assents and by which such
Holder is bound.
C-2
<PAGE>
IN WITNESS WHEREOF, the Trust has caused this Class C Certificate to
be duly executed.
[__________________] TRUST 200[_]-[_]
_______________________________________
By: [_____________________], not
in its individual capacity, but
solely as Trustee
Date: [________], [_], 200[_]
C-3
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is the Class C Certificate of the Series designated herein,
issued under the within-mentioned Pooling and Servicing Agreement.
[_____________________], not in its
individual capacity but solely as
Trustee
By:____________________________________
This Class C Certificate does not purport to summarize the Agreement
and reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds and duties evidenced hereby
and the rights, duties and immunities of the Trustee. Copies of the Agreement
and all amendments thereto will be provided to any Class C Certificateholder, at
its expense, upon a written request to the Trustee: [_____________________],
[Address], Attention: [________________].
There will be distributed on the [___] day of each month or, if such
[___] day is not a Business Day, the next succeeding Business Day (the
"DISTRIBUTION DATE"), commencing on, to the person in whose name this Class C
Certificate is registered at the close of business on the last day of the prior
calendar month (the "RECORD DATE"), such Class C Certificateholder's fractional
undivided interest in the amount available in the Spread Account in excess of
the Requisite Amount for the next succeeding Distribution Date, after giving
effect to (A) the amounts required to be distributed to the holders of the Class
A Certificates and the Class B Certificates pursuant to the subordination of the
rights of the holders of Class C Certificates, (B) the amount required to be
deposited in the Spread Account and (C) the amounts required to pay the Total
Servicing Fee (including any unpaid Servicing Fees with respect to prior
Collection Periods) payable to the Servicer on such Distribution Date.
Distributions on this Class C Certificate will be made by the
Trustee by check mailed, or upon request of the Holder hereof, by wire transfer
of immediately available funds, to the Class C Certificateholder of record, as
specified by such Certificateholder in accordance with the terms of the
Agreement or by such other means as the Certificateholder entitled thereto and
the Trustee shall agree, without the presentation or surrender of this Class C
Certificate, other than with respect to the final payment of the Class C
Certificateholder, or the making of any notation hereon.
The Class C Certificate does not represent an obligation of, or an
interest in, the Trustee or any Affiliate thereof. The Class C Certificate is
limited in right of payment to certain collections and recoveries respecting the
Receivables, all as more specifically set forth above in the Agreement.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of [______]
and the Servicer and the
C-4
<PAGE>
rights of the Holders of the Certificates under the Agreement at any time by the
Servicer, [______] and the Trustee with the consent of the Certificate Insurer
and the Holders of Certificates, voting together as a Class, evidencing not less
than a Certificate Majority. Any such consent by the Holder of this Certificate
shall be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
The Class C Certificate is issuable only as a registered Class C
Certificate without coupons and without denomination. As provided in the
Agreement and subject to certain limitations therein set forth, this Class C
Certificate is exchangeable for new Class C Certificates evidencing the same
aggregate Class C Percentage Interest, as requested by the Class C
Certificateholder surrendering the same. No service charge will be made for any
such registration of transfer or exchange, but the Trustee may require payment
of a sum sufficient to cover any tax or governmental charge payable in
connection therewith.
Each Certificateholder by purchase of the Certificates held by it
acknowledges that the Trustee, as partial consideration of the issuance of the
Policy, has agreed that the Certificate Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. So long as an Insurer Default has occurred and is continuing, any
provision giving the Certificate Insurer the right to direct, appoint or consent
to, approve of, or take any action under this Agreement shall be inoperative
during the period of such Insurer Default and such right shall instead vest in
the Trustee acting at the direction of the Certificateholders. The Certificate
Insurer may disclaim any of its rights and powers under this Agreement (but not
its duties and obligations under the Policy) upon delivery of a written notice
to the Trustee. The Certificate Insurer may give or withhold any consent
hereunder in its sole and absolute discretion.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option (subject to the consent of the Certificate
Insurer, as described in the Agreement), purchase the corpus of the Trust at a
price specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only on any Determination Date as of which
the Aggregate Principal Balance is less than [_____]% of the Original Aggregate
Principal Balance. In the event of such removal, the entire outstanding Class A
Certificate Balance and the Class B Certificate Balance, together with accrued
interest thereon at the related Class A Percentage or Class B Percentage, will
be required to be paid to the Class A Certificateholders and the Class B
Certificateholder on such Distribution Date.
The Trustee and any agent of the Trustee may treat the person in
whose name this Class C Certificate is registered as the owner hereof for all
purposes, and neither the Trustee or any agent shall be affected by any notice
to the contrary.
C-5
<PAGE>
EXHIBIT D
FORM OF SPREAD ACCOUNT AGREEMENT
[See Spread Account Agreement]
D-1
<PAGE>
EXHIBIT E
FORM OF SERVICER'S CERTIFICATE
[____________________]
Monthly Servicing Report:
[__________________] Trust 200[_]-[_]
Collection Period Ending: dd/mm/yy
I. Original Deal Parameter Inputs
(A) Original Total Portfolio $ -
(B) Class A Certificate Ownership Interest of the Trust 0.00%
(C) Original Class A Certificate Balance $ -
(D) Class A Certificate Rate 0.00%
(E) Class B Certificate Ownership Interest of the Trust
(F) Original Class B Certificate Balance
(G) Class B Certificate Rate
(H) Servicing Fee Rate 0.00%
(I) Original Weighted Average Coupon (WAC) 0.00%
(J) Original Weighted Average Remaining Term (WAM) 0.000
(K) Number of Contracts 0
II. Inputs from Previous Monthly Servicer Reports
(A) Total Portfolio Outstanding $ -
(B) Total Portfolio Pool Factor .0000
(C) Class A Certificate Balance $ -
(D) Class A Principal Factor .0000
(E) Class B Certificate Balance
(F) Class B Principal Factor
III. Inputs from Other Sources
(A) Aggregate Net Losses for Collection Period $ -
E-1
<PAGE>
(B) Number of Vehicles Repossessed During the Collection
Period
IV. Pool Balances and Portfolio Information
Beginning Principal End of
(A) Balances and Principal Factors of Period Distribution Period
--------- ------------ -------
i. Class A Certificate Balance $ - $ - $ -
ii. Class A Principal Factor .0000 .0000
iii. Class B Certificate Balance $ - $ - $ -
iv. Class B Principal Factor .0000 .0000
v. Total Pool Balance $ - $ - $ -
vi. Total Pool Factor .0000
(B) Portfolio Information
i. Weighted Average Coupon (WAC) 0.00%
ii. Weighted Average Remaining
Maturity (WAM) 0.00%
iii. Remaining Number of Contracts 0
V. Collections
(A) Total Principal Payments Received (Excluding $
Repurchases)
(B) Total Interest Payments Received $
(C) Recoveries on Liquidated Receivables $
(D) Principal on Repurchased Receivables $
(E) Compensating Interest $
(F) Late and Penalty Fees $
(G) Other Deposits $_____
Total Available Amount $
VI. Distributions
(A) Principal Payments Received (Excluding Repurchases) $
(B) Principal on Repurchased Contracts $
E-2
<PAGE>
(C) Gross Balance of Liquidated Receivables $
(D) Total Principal Reduction $
(E) Basic Servicing Fee/Supplemental Servicing Fee $
(F) Trustee Fee $
(G) Spread Account Trustee Fee $
(H) Backup Servicer Fee $
(I) Class A Distributable Amount $
i. Class A monthly Interest Distributable Amount $
ii. Monthly Class A Principal Distributable Amount $
Class A Principal Carryover Shortfall $
(J) Insurer Fee $
(K) Spread Account deposits up to Requisite Amount $
(L) Class B Distributable Amount $
i. Class B Monthly Interest Payment $
ii. Monthly Principal to Class B $
Class B Principal Carryover Shortfall $
(M) Remaining Available Funds to Spread Account $_____
VII. Reconciliation of Spread Account
(A) Initial Deposit to Spread Account $
(B) Beginning Spread Account Balance $
(C) Draw for Class A Distributable Amount and Servicing Fee $
(D) Amount Available for Deposit to Spread Account $_____
(E) Spread Account Balance Prior to Release $
(F) Spread Account Requirement $
(G) Spread Account Release to Seller $_____
E-3
<PAGE>
(H) Ending Spread Account Balance $
(I) Ending Spread Account Balance as a % of
Outstanding Portfolio
(J) Requisite Amount $
VIII. Tests for Increase in Spread Account Balance
(A) Average Net Loss Rate
i. Second Preceding Collection Period 0.00%
ii. Preceding Collection Period 0.00%
iii. Current Collection Period 0.00%
iv. Three Month Average 0.00%
(B) Average Default Rate
i. Second Preceding Collection Period 0.00%
ii. Preceding Collection Period 0.00%
iii. Current Collection Period 0.00%
iv. Three Month Average 0.00%
(C) Average Number of Contracts Over 30 Days Delinquent
i. Second Preceding Collection Period 0.00%
ii. Preceding Collection Period 0.00%
iii. Current Collection Period 0.00%
iv. Three Month Average 0.00%
(D) Has Trigger Event Occurred ___Yes
___No
IX. Additional Information
(A) Has Insurance Agreement Event of Default Occurred ___Yes
___No
E-4
<PAGE>
EXHIBIT F
FORM OF POLICY
[See Certificate Insurance Policy]
F-1
<PAGE>
EXHIBIT G
FORM OF UNAFFILIATED SELLER'S AGREEMENT
[See Unaffiliated Seller's Agreement]
<PAGE>
G-1
EXHIBIT H
FORM OF PURCHASE AGREEMENT AND ASSIGNMENT
[See Purchase Agreement]
H-1
<PAGE>
EXHIBIT I
REQUEST BY THE SERVICER [OR SUB-SERVICER] FOR TEMPORARY
RELEASE OF RECEIVABLES AND LIEN CERTIFICATES
TO: [_____________________],
as Trustee
[Address]
Attention: [___________________]
Gentlemen:
In connection with the administration of the Receivables held by you
as Trustee, under the Pooling and Servicing Agreement dated as of [_____],
200[_] among [____________________], as Servicer, [_____________________], as
Depositor, and you, as Trustee and Backup Servicer, the undersigned requests the
temporary release of the Receivables and the related Lien Certificates for the
Receivables identified in the schedule attached to this Request.
[[____________________]]
[__________________]
as [Servicer] [Sub-Servicer]*
By:____________________________________
ACKNOWLEDGED BY:
[_____________________],
as Trustee
By:___________________________________________________________________________
* The signature of the Servicer or either Sub-Servicer will suffice.
I-1
<PAGE>
[__________________]
[_______________________]
Request for Receivables and Lien Certificates
---------------------------------------------
Branch Number_______________________
Account Number______________________
Loan Number_________________________
Account Name________________________
______________________________________________________________________________
______________________________________________________________________________
DOCUMENT(S) NEEDED:
------------------
[ ]__Note
[ ] Automobile Title
Vehicle Identification Number (VIN)_____________________________________
______________________________________________________________________________
______________________________________________________________________________
REASON FOR ITEM REQUEST:
-----------------------
______________________________________________________________________________
______________________________________________________________________________
RETURN DOCUMENT(S) TO BRANCH BY:
-------------------------------
[ ] OVERNIGHT EXPRESS DELIVERY
(e.g., Federal Express)
Address to Send Document: [ ] REGULAR MAIL
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Name (Printed of Individual Requesting Phone Number
Documents)
________________________________________ ______________________________________
Signature of Individual Requesting Date of Request
Documents
I-2
<PAGE>
Attention Branches:
Send this Document to: Send a copy of this Document to:
[Name] [Name]
[Name of Company] [Name of Company]
[Address] [Address]
Fax: [_____________] Fax: [_______________]
I-3
<PAGE>
EXHIBIT J
FORM OF DEFICIENCY NOTICE
NOTICE UNDER MASTER SPREAD ACCOUNT AGREEMENT
[__________________] TRUST
SERIES 200[_]-[_]
[_____________________]
[Address]
[_____________________]
[Address]
The undersigned, a duly authorized officer of [___________________],
as trustee (the "TRUSTEE"), hereby certifies to [____________________] (the
"COLLATERAL AGENT") and [____________________] (the "SERVICER"), with reference
to the Master Spread Account Agreement in respect of the $[_____________]
[__________________] Trust 200[_]-[_], [_______________] Backed Certificates,
Class A (the "OBLIGATIONS"), that:
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of [_____], 200[_] (the "AGREEMENT") among
[_____________________], as Company, [____________________], as
Servicer, and the Trustee, as trustee for the Holders;
(ii) the sum of the amounts payable on the Distribution
Date occurring on _____________ (the "APPLICABLE DISTRIBUTION DATE")
pursuant to clauses (i) through (v) of SECTION 5.5(B) of the Agreement
is $_____________;
(iii) the Available Funds for the Class A Certificates for
the Distribution Date occurring on the Applicable Distribution Date is
$_______________;
(iv) the amount by which (ii) above exceeds (iii) above is
$_______________ (the "DEFICIENCY CLAIM AMOUNT");
(v the Trustee is making a claim under and pursuant to the terms
of the Master Spread Account Agreement for the Deficiency Claim Amount to
be applied to payment of (ii) above for the Applicable Distribution Date
in accordance with the Agreement; and
(vi) the Trustee directs that payment of the Deficiency
Claim Amount be made to the following account by bank wire transfer of
federal or other immediately available funds: Collection Account.
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Master Spread Account
Agreement.
J-1
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Notice under the Master Spread Account Agreement as of [_____][_], 200[_].
[_____________________]
By:____________________________________
Name:
Title:
J-2
<PAGE>
EXHIBIT K
FORM OF NOTICE
TO FINANCIAL GUARANTY INSURANCE
POLICY NUMBER: [______]
NOTICE UNDER FINANCIAL GUARANTY INSURANCE
POLICY NUMBER:
[____________________]
[Address]
The undersigned, a duly authorized officer of
[_____________________], as trustee (the "TRUSTEE"), hereby certifies to
[____________________] (the "INSURER"), with reference to the Financial Guaranty
Insurance Policy Number (the "POLICY") issued by the Insurer in respect of the
$[___________] [__________________] Trust 200[_]-[_], [_______________] Backed
Certificates, Class A (the "OBLIGATIONS"), that:
(i) the Trustee is the trustee under the Pooling and Servicing
Agreement dated as of [_____], 200[_] (the "AGREEMENT") among
[________________], as Company, [________________], as Servicer, and the
Trustee, as trustee for the Holders;
(ii) the Class A Interest Distributable Amount for the
Class A Certificates for the Distribution Date occurring on
_____________ (the "APPLICABLE DISTRIBUTION DATE") is $__________;
(iii) the Class A Principal Distributable Amount for the
Class A Certificates for the Applicable Distribution Date is
$_____________;
(iv) the Amount Available with respect to the Applicable
Distribution Date is $_____________;
(v) the Amount by which the sum of (ii) and (iii) above exceeds
(iv) above is $______________ (the "POLICY CLAIM AMOUNT");
(vi) the Trustee is making a claim under and pursuant to the
terms of the Policy for the Insured Payment to be applied to payment of
the sum of (ii) and (iii) above for the Applicable Distribution Date in
accordance with the Agreement; and
(vii) the Trustee directs that payment of the Policy Claim
Amount be made to the following account by bank wire transfer of
federal or other immediately available funds: Collection Account.
Any capitalized term used in this Notice and not otherwise defined
herein shall have the meaning assigned thereto in the Master Spread Account
Agreement.
K-1
<PAGE>
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Notice under the Policy as of the ___ day of ____________, ____.
[_____________________]
By:____________________________________
Title:
K-2
<PAGE>
EXHIBIT L
FORM OF INVESTMENT LETTER
[____________________]
[Address]
[____________________
[Address]
[____________________
[Address]
Re: [__________________] Trust 200[_]-[_], [____]% [_______________]
Backed Certificates, Class B and [_______________] Backed
Certificate, Class C (the "CERTIFICATES")
Ladies and Gentlemen:
____________________ (the "SELLER") intends to transfer the
captioned Certificates to _________________ (the "PURCHASER"), for
registration in the name of _________________________________.
1. In connection with such transfer, and in accordance with
Section 7.3 of the Pooling and Servicing Agreement, dated as of [_____], 200[_]
(the "AGREEMENT"; all capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Agreement), between
[____________________], [_____________________] and [_____________________], not
in its individual capacity but solely as Trustee (the "TRUSTEE") and Backup
Servicer, pursuant to which the Certificates were issued, the Seller hereby
certifies to you the following facts: Neither the Seller nor anyone acting on
its behalf has offered, transferred, pledged, sold or otherwise disposed of the
Certificates, any interest in the Certificates or any other similar security to,
or solicited any offer to buy or accept a transfer, pledge or other disposition
of the Certificates, any interest in the Certificates or any other similar
security with, any person in any manner, or made any general solicitation by
means of general advertising or in any other manner, or taken any other action
which would constitute a distribution of the Certificates under the Securities
Act of 1933, as amended (the "1933 Act"), or under state securities laws, or
which would render the disposition of the Certificates a violation of Section 5
of the 1933 Act or applicable state securities laws or require registration
pursuant thereto.
2. The Purchaser warrants and represents to, and covenants with,
the Trustee pursuant to Section 7.3 of the Agreement that:
(a) The Purchaser agrees to be bound, as Certificateholder, by all
of the terms, covenants and conditions of the Agreement and the Certificates,
and from and after the date hereof, the Purchaser assumes for the benefit of
each of the Trustee, [____________________]
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<PAGE>
("FINANCIAL SECURITY") and the Seller all of the Seller's obligations as
Certificateholder thereunder;
(b) The Purchaser understands that the Certificates have not been
and may never be registered under the 1933 Act or the securities laws of any
state;
(c) The Purchaser is acquiring the Certificates for investment for
its own account or the account of another qualified institutional buyer (within
the meaning of Rule 144A under the 1933 Act) only and not for any other person
or with a view to the distribution thereof in violation of applicable securities
laws;
(d) The Purchaser is an "ACCREDITED INVESTOR" within the meaning
of Rule 501 under the 1933 Act, and considers itself a substantial,
sophisticated institutional investor having such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of investment in the Certificates;
(e) The Purchaser has been furnished with all information
regarding the Certificates that it has requested from the Seller or the Trustee
and has been afforded the opportunity to ask all questions it reasonably desires
to ask of the Seller (and all such questions have been answered to the
Purchaser's satisfaction); and
(f) Neither the Purchaser nor anyone acting on its behalf has
offered, transferred, pledged, sold or otherwise disposed of the Certificates,
any interest in the Certificates or any other similar security to, or solicited
any offer to buy or accept a transfer, pledge or other disposition of the
Certificates, any interest in the Certificates or any other similar security
from, or otherwise approached or negotiated with respect to the Certificates,
any interest in the Certificates or any other similar security with, any person
in any manner, or made any general solicitation by means of general advertising
or in any other manner, or taken any other action which, with respect to any
such action, would constitute a distribution of the Certificates under the 1933
Act or applicable state securities laws or which would render the disposition of
the Certificates a violation of Section 5 of the 1933 Act or applicable state
securities laws or require registration pursuant thereto, nor will it act, nor
has it authorized or will it authorize any person to act, in such manner with
respect to the Certificates.
3. The Purchaser is not acquiring (or considered to be acquiring)
the Note with the assets of (a) an employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) subject to Title I of ERISA, (b) a plan described in Section 4975 of
the Internal Revenue Code of 1986, as amended, or (c) any entity whose
underlying assets include plan assets by reason of an investment in such entity
by a plan described in (a) or (b) above.
4. The Purchaser agrees that neither the Certificates nor any
interest therein will be sold, transferred or otherwise disposed of (except for
sales to the Company) unless registered under the 1933 Act or similar successor
law, without first having presented to the Seller and the Trustee or their
counsel a written opinion of counsel, satisfactory to the Seller and the Trustee
in form and substance, experienced in securities laws matters and satisfactory
to the Seller and the Trustee, indicating that the proposed transfer will not be
in violation of any of the
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<PAGE>
registration provisions of the 1933 Act or similar successor law. In any event
and regardless of when such sale, transfer or other disposition of the
Certificates or any interest therein takes place (except for sales to the
Company), no such sales, transfers or other dispositions may be made without
first having presented to the Seller and the Trustee or their counsel (i) a
written opinion, satisfactory to the Seller and the Trustee in form and
substance, of such counsel, indicating exemption from or compliance with or
qualification under all applicable state securities, or "blue sky" laws, and
(ii) the Purchaser's indemnification of the Seller against any liabilities,
costs or expenses which might result should such disposition (or any action by
any broker or dealer in connection with the foregoing) violate or be alleged to
violate the 1933 Act, the rules and regulations promulgated thereunder or any
other applicable federal laws or state securities or "blue sky" laws and
regulations or any court or administrative decision, but only as a result of any
act or omission committed by the Purchaser in connection with any such transfer,
sale or other disposition.
4. The Purchaser agrees to indemnify the Seller and hold it
harmless from and against any and all damages suffered and liabilities incurred
by the Seller (including costs of investigation and defense and attorneys' fees)
arising out of any inaccuracy in, or breach of, the agreements, representations,
covenants and warranties which the Purchaser has made herein.
5. The Purchaser agrees that it will obtain from any subsequent
purchaser of the Certificates substantially the same representations,
warranties, covenants and agreements contained herein and acknowledges that any
transfer of the Certificates by the Purchaser will comply with Section 7.3 of
the Agreement.
6. This Investment Letter may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Investment Letter
to be executed by their duly authorized officers as of the date first above
written.
___________________________________, ___________________________________,
Seller Purchaser
By:_________________________________ By:_________________________________
Its:________________________________ Its:________________________________
Taxpayer Identification No. ________ Taxpayer Identification No. ________
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EXHIBIT M
OFFICER'S CERTIFICATE
REQUEST BY THE SERVICER FOR PERMANENT RELEASE
OF RECEIVABLES AND LIEN CERTIFICATES
TO: [_____________________],
as Trustee
[Address]
Attention: [________________]
Gentlemen:
In connection with the payment in full of the Receivables held by
you as Trustee, under the Pooling and Servicing Agreement dated as of [_____],
200[_] among [____________________], as Servicer, [_____________________], as
Depositor, and you, as Trustee and Backup Servicer, the undersigned requests the
release of the Receivables and the Lien Certificates (and the related
Receivables Files if applicable) for the Receivables identified in the schedule
attached to this Request.
The undersigned hereby certifies that any and all payments received
on the Receivables identified in the schedule attached to this Request which are
required to be deposited in the Collection Account pursuant to Section 3.1 of
such Pooling and Servicing Agreement have been so deposited.
[____________________],
as Servicer
By:____________________________________
ACKNOWLEDGED BY:
[_____________________],
as Trustee
By:_________________________________________
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<PAGE>
[____________________]
[______________________________]
Request for Receivables and Lien Certificates
Branch Number_______________________
Account Number______________________
Loan Number_________________________
Account Name________________________
DOCUMENT(S) NEEDED:
------------------
[ ]__Note
[ ] Automobile Title
Vehicle Identification Number (VIN)_____________________________________
______________________________________________________________________________
______________________________________________________________________________
REASON FOR ITEM REQUEST:
-----------------------
[ ]__Loan Paid-in-Full (Date of Pay-Off: _____________)
[ ]__Other (Explain)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
RETURN DOCUMENT(S) TO BRANCH BY:
-------------------------------
[ ] OVERNIGHT EXPRESS DELIVERY
(e.g., Federal Express)
Address to Send Document: [ ] REGULAR MAIL
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
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<PAGE>
________________________________________ ______________________________________
Name (Printed) of Individual Requesting Phone Number
Documents
________________________________________ ______________________________________
Signature of Individual Requesting Date of Request
Documents
Attention Branches:
Send this Document to: Send a copy of this Document to:
[Name] [Name]
[Name of Company] [Name of Company]
[Address] [Address]
Fax: [___________] Fax: [______________]
M-3
Exhibit 4.2
FORM OF TRUST AGREEMENT
between
PAINEWEBBER ASSET ACCEPTANCE CORPORATION,
as Depositor
and
[NAME OF OWNER TRUSTEE],
as Owner Trustee
Dated as of [____________], 200[_]
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Capitalized Terms..............................................1
Section 1.2 Other Definitional Provisions..................................3
ARTICLE II
ORGANIZATION
Section 2.1 Name...........................................................4
Section 2.2 Office.........................................................4
Section 2.3 Purposes and Powers............................................4
Section 2.4 Appointment of Owner Trustee...................................5
Section 2.5 Initial Capital Contribution of Trust Estate...................5
Section 2.6 Declaration of Trust...........................................5
Section 2.7 Liability of the Transferor....................................5
Section 2.8 Title to Trust Property........................................5
Section 2.9 Situs of Trust.................................................6
Section 2.10 Representations and Warranties of the Depositor................6
Section 2.11 Federal Income Taxes...........................................7
Section 2.12 [Reserved].....................................................8
Section 2.13 Covenants of the Holders.......................................8
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.1 Initial Ownership..............................................9
Section 3.2 The Trust Certificates.........................................9
Section 3.3 Authentication of Trust Certificates...........................9
Section 3.4 Registration of Transfer and Exchange of Trust
Certificates..................................................9
Section 3.5 Mutilated, Destroyed, Lost or Stolen Trust Certificates.......12
Section 3.6 Persons Deemed Certificateholders.............................12
Section 3.7 Access to List of Certificateholders' Names and Addresses.....12
Section 3.8 Maintenance of Office or Agency...............................13
Section 3.9 Appointment of Certificate Paying Agent.......................13
Section 3.10 [Reserved]....................................................13
Section 3.11 [Reserved]....................................................14
Section 3.12 [Reserved]....................................................14
Section 3.13 ERISA Restrictions............................................14
Section 3.14 [Reserved]....................................................14
Section 3.15 [Reserved]....................................................14
Section 3.16 [Reserved]....................................................14
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Section 3.17 Original Issuance.............................................14
Section 3.18 Actions of Certificateholders.................................14
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1 Prior Notice to Holders with Respect to Certain Matters.......15
Section 4.2 Action by Certificateholders with Respect to Certain
Matters......................................................15
Section 4.3 Action by Certificateholders with Respect to Bankruptcy.......15
Section 4.4 Restrictions on Certificateholders' Power.....................16
Section 4.5 Majority Control..............................................16
Section 4.6 Rights of Insurer.............................................17
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1 Establishment of Certificate Distribution Account.............17
Section 5.2 Application of Funds in Certificate Distribution Account......18
Section 5.3 [Reserved]....................................................19
Section 5.4 Method of Payment.............................................19
Section 5.5 No Segregation of Monies; No Interest.........................19
Section 5.6 Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service and
Others.......................................................19
Section 5.7 Signature on Returns; Tax Matters Partner.....................20
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1 General Authority.............................................20
Section 6.2 General Duties................................................20
Section 6.3 Action upon Instruction.......................................21
Section 6.4 No Duties Except as Specified in this Agreement or in
Instructions.................................................21
Section 6.5 No Action Except under Specified Documents or Instructions....22
Section 6.6 Restrictions..................................................22
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ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1 Acceptance of Trusts and Duties...............................22
Section 7.2 Furnishing of Documents.......................................23
Section 7.3 Representations and Warranties................................24
Section 7.4 Reliance; Advice of Counsel...................................24
Section 7.5 Not Acting in Individual Capacity.............................25
Section 7.6 Owner Trustee Not Liable for Trust Certificates or
Receivables..................................................25
Section 7.7 Owner Trustee May Own Trust Certificates and Notes............25
Section 7.8 Payments from Owner Trust Estate..............................25
Section 7.9 Doing Business in Other Jurisdictions.........................26
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1 Owner Trustee's Fees and Expenses.............................26
Section 8.2 Indemnification...............................................26
Section 8.3 Payments of Owner Trustee.....................................27
Section 8.4 Non-recourse Obligations......................................27
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
Section 9.1 Termination of Trust Agreement................................27
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEEs
Section 10.1 Eligibility Requirements for Owner Trustee....................28
Section 10.2 Resignation or Removal of Owner Trustee.......................28
Section 10.3 Successor Owner Trustee.......................................29
Section 10.4 Merger or Consolidation of Owner Trustee......................30
Section 10.5 Appointment of Co-Trustee or Separate Trustee.................30
ARTICLE XI
MISCELLANEOUS
Section 11.1 Supplements and Amendments....................................31
Section 11.2 No Legal Title to Owner Trust Estate in Certificateholders....32
Section 11.3 Limitations on Rights of Others...............................33
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Section 11.4 Notices.......................................................33
Section 11.5 [Reserved]....................................................33
Section 11.6 Severability..................................................33
Section 11.7 Separate Counterparts.........................................33
Section 11.8 Third-Party Beneficiaries.....................................34
Section 11.9 [Reserved]....................................................34
Section 11.10 No Petition...................................................34
Section 11.11 No Recourse...................................................34
Section 11.12 Headings......................................................34
Section 11.13 GOVERNING LAW.................................................34
Section 11.14 Agreement Creates No Partnership Except for Tax Purposes......34
Section 11.15 Servicer......................................................35
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<PAGE>
TRUST AGREEMENT dated as of [____________] [__], 200[_] between
[____________________], a PaineWebber Asset Acceptance Corporation, a Delaware
corporation, as Depositor, and [NAME OF OWNER TRUSTEE], a [__________] [banking
corporation], as Owner Trustee.
ARTICLE I
DEFINITIONS
Section 1.1 CAPITALIZED TERMS. For all purposes of this
Agreement, the following terms shall have the meanings set forth below:
"ACTUAL KNOWLEDGE" means, with respect to the Owner Trustee, any
officer within the Corporate Trust Administration office of the Owner Trustee
responsible for administering the Trust hereunder, or under the Basic Documents,
who has actual knowledge of an action taken or an action not taken with regard
to the Trust. Actions taken or actions not taken of which the Owner Trustee
should have had knowledge, and constructive knowledge, do not meet the
definition of Actual Knowledge hereunder.
"AGREEMENT" shall mean this Trust Agreement, as the same may be
amended and supplemented from time to time.
"BASIC DOCUMENTS" shall mean Certificate of Trust, the Trust
Agreement, the Sale and Servicing Agreement, each Subsequent Transfer Agreement,
the Indenture, the Insurance Agreement, the Reserve Account Agreement, the
Custodial Agreement, the Depository Agreement and the other documents and
certificates delivered in connection therewith.
"BENEFIT PLAN" shall have the meaning assigned to such term in
Section 3.13.
"BUSINESS TRUST STATUTE" shall mean 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" means a Trust Certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form of
Exhibit A attached hereto.
"CERTIFICATE DISTRIBUTION ACCOUNT" shall have the meaning assigned
to such term in Section 5.1.
"CERTIFICATE MAJORITY" means over 50% of Holders of the
Certificates.
"CERTIFICATE OF TRUST" shall mean the Certificate of Trust in the
form of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"CERTIFICATE PAYING AGENT" shall mean any paying agent or co-paying
agent appointed pursuant to Section 3.9 and shall initially be the Trustee.
<PAGE>
"CERTIFICATE REGISTER" and "CERTIFICATE REGISTRAR" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"CLOSING DATE" means [____________] [__], 200[_].
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the Treasury Regulations promulgated thereunder.
"CORPORATE TRUST OFFICE" shall mean, with respect to the Owner
Trustee, the principal corporate trust office of the Owner Trustee located at
[_________________________], or at such other address as the Owner Trustee may
designate by notice to the Certificateholders and the Depositor, or the
principal corporate trust office of any successor Owner Trustee (the address of
which the successor owner trustee will notify the Certificateholders and the
Depositor).
"DEFINITIVE TRUST CERTIFICATES" shall mean Trust Certificates issued
in certificated, fully registered form as provided in Section 3.17 hereof.
"DEPOSITOR" shall mean PaineWebber Asset Acceptance Corporation in
its capacity as Depositor hereunder.
"ERISA" shall have the meaning assigned to such term in Section
3.13.
"EXPENSES" shall have the meaning assigned to such term in Section
8.2.
"HOLDER" or "CERTIFICATEHOLDER" shall mean the Person in whose name
a Trust Certificate is registered on the Certificate Register.
"INDEMNIFIED PARTIES" shall have the meaning assigned to such term
in Section 8.2.
"INSURER" shall mean Financial Security Assurance, Inc. its
successors and assigns.
"OWNER TRUST ESTATE" shall mean all right, title and interest of the
Trust in and to the Trust Property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Distribution Account and all
other property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement.
"OWNER TRUSTEE" shall mean [Name of Owner Trustee], a [____________]
[banking corporation], not in its individual capacity but solely as owner
trustee under this Agreement, and any successor Owner Trustee hereunder.
"PERSON" means any individual, corporation, limited liability
company, estate, partnership, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
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<PAGE>
"RECORD DATE" shall mean with respect to any Payment Date, the last
day of the calendar month immediately preceding such Payment Date.
"RESPONSIBLE OFFICER" means, with respect to the Owner Trustee, any
officer within the Corporate Trust Administration office of the Owner Trustee,
including any Vice President, Assistant Vice President, Assistant Treasurer,
Assistant Secretary or any other officer of the Owner Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject.
"SALE AND SERVICING AGREEMENT" shall mean the Sale and Servicing
Agreement among the Trust, [____________________], the Depositor, the Seller,
the Servicer, the Backup Servicer and the Custodian, dated as of [____________]
[__], 200[_], as the same may be amended and supplemented from time to time.
"SECRETARY OF STATE" shall mean the Secretary of State of the
State of [_________].
"TREASURY REGULATIONS" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"TRUST" shall mean the trust established by this Agreement.
"TRUST CERTIFICATE" shall mean a Certificate.
Section 1.2 OTHER DEFINITIONAL PROVISIONS. (a) Capitalized
terms used herein and not otherwise defined have the meanings assigned to them
in the Sale and Servicing Agreement or, if not defined therein, in the
Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
As used in this Agreement and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(c) The words "HEREOF," "HEREIN," "HEREUNDER" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are
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<PAGE>
references to Sections and Exhibits in or to this Agreement unless otherwise
specified; and the term "INCLUDING" shall mean "including without limitation."
(d) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
ARTICLE II
ORGANIZATION
Section 2.1 NAME. There is hereby formed a trust to be known as
"[____________________] Owner Trust 200[_]-[_]" (hereinafter, the "TRUST"), in
which name the Owner Trustee may conduct the business of the Trust, make and
execute contracts and other instruments on behalf of the Trust and sue and be
sued.
Section 2.2 OFFICE. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificateholders and the
Depositor.
Section 2.3 PURPOSES AND POWERS. (a) The purpose of the Trust
is, and the Trust shall have the power and authority, to engage in the
following activities:
(i) to issue the Notes pursuant to the Indenture and the Trust
Certificates pursuant to this Agreement, and to sell the Notes and the
Trust Certificates;
(ii) to enter into the transactions contemplated by the
Sale and Servicing Agreement;
(iii) with the proceeds of the sale of the Notes, to fund the
Pre-Funding Account, the Capitalized Interest Account, the Reserve Account
and the Yield Supplement Account and to pay the organizational, start-up
and transactional expenses of the Trust and to pay the balance to the
Transferor pursuant to the Sale and Servicing Agreement;
(iv) to assign, grant, transfer, pledge, mortgage and convey the
Owner Trust Estate (other than the Certificate Distribution Account) to
the Indenture Trustee pursuant to the Indenture for the benefit of the
Insurer and the Indenture Trustee on behalf of the Noteholders and to
hold, manage and distribute to the Certificateholders and the Transferor
pursuant to the terms of the Sale and Servicing Agreement any portion of
the Owner Trust Estate released from the Lien of, and remitted to the
Trust pursuant to, the Indenture;
(v) to enter into and perform its obligations under the Basic
Documents to which it is a party; 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
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<PAGE>
(vi) subject to compliance with the Basic Documents, to engage in
such other activities as may be required in connection with conservation
of the Owner Trust Estate and the making of distributions to the
Certificateholders and the Noteholders.
(b) The Trust is hereby authorized to engage in the foregoing
activities. The Trust shall not engage in any activity other than in connection
with the foregoing or other than as required or authorized by the terms of this
Agreement or the Basic Documents.
Section 2.4 APPOINTMENT OF OWNER TRUSTEE. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
Section 2.5 INITIAL CAPITAL CONTRIBUTION OF TRUST ESTATE. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of the date hereof, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Distribution Account. The Depositor
shall pay organizational expenses of the Trust as they may arise.
Section 2.6 DECLARATION OF TRUST. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Holders, subject to
the obligations of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Trust Statute and that this Agreement constitute the governing instrument of
such business trust. It is the intention of the parties hereto that, solely for
income and franchise tax purposes, the Trust shall be treated as a partnership
if the Certificates are treated as held by more than one person and a
disregarded entity if the Certificates are treated as held by a single person.
The parties agree that, unless otherwise required by appropriate tax
authorities, the Trust will file or cause to be filed annual or other necessary
returns, reports and other forms consistent with this intention. Effective as of
the date hereof, the Owner Trustee shall have all rights, powers and duties set
forth herein and to the extent not inconsistent herewith, in the Business Trust
Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
Section 2.7 LIABILITY OF THE TRANSFEROR. (a) The Transferor 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.
(b) No Holder, other than to the extent set forth in clause (a),
shall have any personal liability for any liability or obligation of the Trust.
Section 2.8 TITLE TO TRUST PROPERTY. (a) Legal title to all the
Owner Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
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(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions with
respect to their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title or interest by any Certificateholder of its ownership interest in the
Owner Trust Estate shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of the Trust Property.
Section 2.9 SITUS OF TRUST. The Trust will be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. Payments will be received by the Trust only in Delaware or
New York, and payments will be made by the Trust only from Delaware or New York.
The Trust shall not have any employees in any state other than Delaware;
provided however, that nothing herein shall restrict or prohibit the Owner
Trustee, in its individual capacity, the Servicer or any agent of the Trust from
having employees within or without the State of Delaware. The only office of the
Trust will be at the Corporate Trust Office in Delaware.
Section 2.10 REPRESENTATIONS AND WARRANTIES OF THE Depositor. The
Depositor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Policy:
(a) ORGANIZATION AND GOOD STANDING. The Depositor is duly
organized and validly existing as a Delaware corporation with power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted and is proposed to
be conducted pursuant to this Agreement and the Basic Documents.
(b) DUE QUALIFICATION. It is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which the ownership or lease of its
property, the conduct of its business and the performance of its obligations
under this Agreement and the Basic Documents requires such qualification.
(c) POWER AND AUTHORITY. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) NO CONSENT REQUIRED. No consent, license, approval or
authorization or registration or declaration with, any Person or with any
governmental authority, bureau or agency is required in connection with the
execution, delivery or performance of this Agreement and the Basic Documents,
except for such as have been obtained, effected or made.
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(e) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
certificate of incorporation or by-laws of the Depositor, or any material
indenture, agreement or other instrument to which the Depositor is a party or by
which it is bound; nor result in the creation or imposition of any Lien upon any
of its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate any
law or, to the best of the Depositor's knowledge, any order, rule or regulation
applicable to the Depositor of any court or of any Federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to its knowledge threatened against it before any court, regulatory
body, administrative agency or other tribunal or governmental instrumentality
having jurisdiction over it or its properties (A) asserting the invalidity of
this Agreement or any of the Basic Documents, (B) seeking to prevent the
issuance of the Certificates or the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic Documents, (C)
seeking any determination or ruling that might materially and adversely affect
its performance of its obligations under, or the validity or enforceability of,
this Agreement or any of the Basic Documents, or (D) seeking to adversely affect
the Federal, state or local income tax attributes of the Certificates.
Section 2.11 FEDERAL INCOME TAXES. (a) If Certificates are treated
as held by more than one person or the Trust is recharacterized as an entity
separate from its owner, each Certificateholder acknowledges and agrees that the
Trust will be treated as a partnership solely for income tax purposes and that
this Agreement does not create a partnership for any other purpose. No election
to treat the Trust other than as a disregarded entity if the Certificates are
treated as held by a single person or as a partnership if the Certificates are
treated as held by more than one person for Federal income tax purposes or any
relevant state tax purposes shall be made by or on behalf of the Trust, or by
any Certificateholder.
(b) Net income of the Trust for any month as determined for
Federal income tax purposes (and each item of income, gain, loss, credit and
deduction entering into the computation thereof) shall be allocated: to the
extent of available net income and in accordance with Federal income tax
accounting and allocation principles, among the Certificateholders as of the
first Record Date following the end of such month, in proportion to their
ownership of principal amount of Trust Certificates on such date, an amount of
net income up to the sum of (x) the Certificateholders' Monthly Interest
Distributable Amount for such month, (y) interest on the excess, if any, of the
Certificateholders' Interest Distributable Amount for the preceding Payment Date
over the amount in respect of interest at the Certificate Rate that is actually
deposited in the Certificate Distribution Account on such preceding Payment
Date, to the extent permitted by law, at the Certificate Rate from such
preceding Payment Date through the current Payment Date, and (z) the portion of
the market discount on the Receivables accrued during such month that is
allocable to the excess of the initial aggregate principal amount of the Trust
Certificates over their initial aggregate issue price.
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(c) If the net income of the Trust for any month is insufficient
for the allocation described in clause (b) above, subsequent net income shall
first be allocated to make up such shortfall before being allocated as provided
in clause (b).
(d) Net losses of the Trust, if any, for any month as determined
for Federal income tax accounting and allocation purposes (and each item of
income, gain, loss, credit and deduction entering into the computation thereof)
shall be allocated among the Certificateholders as of the first Record Date
following the end of such month in proportion to their ownership of principal
amount of Trust Certificates on such Record Date until the principal balance of
the Trust Certificates is reduced to zero.
Notwithstanding anything provided in this Section 2.11, if the
Certificates are treated as held solely by one person or the Trust has not been
recharacterized as an entity separate from its owner, the application of clause
(b), clause (c) and clause (d) of this section shall be disregarded.
Section 2.12 [Reserved]
Section 2.13 COVENANTS OF THE HOLDERS. Each Holder agrees:
(a) to be bound by the terms and conditions of the Certificates
and of this Agreement, including any supplements or amendments hereto and to
perform the obligations of a Holder as set forth therein or herein, in all
respects as if it were a signatory hereto. This undertaking is made for the
benefit of the Trust, the Insurer, the Owner Trustee and all other Holders
present and future;
(b) to hereby appoint the Owner Trustee as such Holder's agent and
attorney-in-fact to sign any federal income tax information return filed on
behalf of the Trust and agree that, if requested by the Trust, it will sign such
federal income tax information return in its capacity as holder of an interest
in the Trust. Each Holder also hereby agrees that in its tax returns it will not
take any position inconsistent with those taken in any tax returns filed by the
Trust;
(c) to notify the Owner Trustee of any transfer by it of a
Certificate in a taxable sale or exchange, within 30 days of the date of the
transfer; and
(d) until the completion of the events specified in Section 9.1,
not to, for any reason, institute proceedings for the Trust to be adjudicated a
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against the Trust, or file a petition seeking or consenting to
reorganization or relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trust or a substantial
part of its property, or cause or permit the Trust to make any assignment for
the benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or declare or effect a moratorium on its debt or
take any action in furtherance of any such action.
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ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
Section 3.1 INITIAL OWNERSHIP. Upon the formation of the Trust by
the contribution by the Depositor pursuant to Section 2.5 and until the issuance
of the Trust Certificates, the Depositor shall be the sole beneficiary of the
Trust.
Section 3.2 THE TRUST CERTIFICATES. The Trust Certificates shall be
issued in denominations of $1,000 and integral multiples thereof. The Trust
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of an authorized officer of the Owner Trustee. Trust Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures shall have been affixed, authorized to sign on behalf of
the Trust, shall be validly issued and entitled to the benefit of this
Agreement, notwithstanding that such individuals or any of them shall have
ceased to be so authorized prior to the authentication and delivery of such
Trust Certificates or did not hold such offices at the date of authentication
and delivery of such Trust Certificates. A transferee of a Trust Certificate
shall become a Certificateholder, and shall be entitled to the rights and
subject to the obligations of a Certificateholder hereunder, upon due
registration of such Trust Certificate in such transferee's name pursuant to
Section 3.4.
Section 3.3 AUTHENTICATION OF TRUST CERTIFICATES. Concurrently with
the initial transfer of the Receivables to the Trust pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall cause the Trust Certificates in an
aggregate principal amount equal to the initial Certificate Balance to be
executed on behalf of the Trust, authenticated and delivered to or upon the
written order of the Depositor, signed by its chairman of the board, its
president or any vice president, its treasurer or any assistant treasurer
without further corporate action by the Depositor, in authorized denominations.
No Trust Certificate shall entitle its holder to any benefit under this
Agreement, or shall be valid for any purpose, unless there shall appear on such
Trust Certificate a certificate of authentication substantially in the form set
forth in Exhibit A, executed by the Owner Trustee or the Owner Trustee's
authentication agent, by manual signature; such authentication shall constitute
conclusive evidence that such Trust Certificate shall have been duly
authenticated and delivered hereunder. All Trust Certificates shall be dated the
date of their authentication.
Section 3.4 REGISTRATION OF TRANSFER AND EXCHANGE OF TRUST
CERTIFICATES. (a) The Certificate Registrar shall keep or cause to be kept, at
the office or agency maintained pursuant to Section 3.8, a Certificate Register
in which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Trust Certificates
and of transfers and exchanges of Trust Certificates as herein provided. The
Depositor hereby appoints the Indenture Trustee as the initial Certificate
Registrar.
(b) Upon surrender for registration of transfer of any Trust
Certificate at the office or agency maintained pursuant to Section 3.8,
accompanied by the certification appearing on the reverse of the form of the
Certificate relating to Rule 144A, executed by the Holder of such Certificate,
the Owner Trustee shall execute, authenticate and deliver, (or cause the
Certificate Registrar as its authenticating agent to authenticate and deliver)
in the name of the
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Designated transferee or transferees, one or more new Trust Certificates in
authorized denominations of a like class and aggregate face amount dated the
date of authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Trust Certificates may be exchanged for other Trust
Certificates of the same class in authorized denominations of a like aggregate
amount upon surrender of the Trust Certificates to be exchanged at the office or
agency maintained pursuant to Section 3.8.
(c) Every Trust Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Owner Trustee and the
Certificate Registrar duly executed by the Certificateholder or his attorney
duly authorized in writing, with such signature guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate Registrar,
which requirements include membership or participation in the Securities
Transfer Agent's Medallion Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Certificate Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Exchange Act. Each Trust
Certificate surrendered for registration of transfer or exchange shall be
canceled and subsequently disposed of by the Certificate Registrar in accordance
with its customary practice.
(d) No service charge shall be made for any registration of
transfer or exchange of Trust Certificates, but the Owner Trustee or the
Certificate Registrar may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Trust Certificates.
(e) Transfer Restrictions.
(i) No Certificateholder may, in any transaction or series of
transactions, directly or indirectly (each of the following, a
"TRANSFER"), (i) sell, assign or otherwise in any manner dispose of all or
any part of its interest in any Certificate issued to it, whether by act,
deed, merger or otherwise or (ii) mortgage, pledge or create a lien or
security interest in such beneficial interest unless such transfer is made
to a Qualified Institutional Buyer in accordance with Rule 144A, under the
Securities Act. Each Certificateholder (other than the initial Holder
which shall be deemed to have represented that it is an "institutional
accredited investor" under Rule 501 of the Securities Act) by acquiring
any Certificate or any interest therein shall be deemed to represent to
the Issuer and the Owner Trustee that it is a Qualified Institutional
Buyer. Notwithstanding anything contained herein to the contrary, neither
the Certificate Registrar nor shall the Owner Trustee be responsible for
compliance with the Securities Act or applicable securities law.
(ii) At any time during the taxable year of the Trust, there
shall be no more than 100 Holders. The Certificate Registrar shall take
such action as may be necessary to ensure that this Section 3.4(e) is
satisfied, including, without limitation, refusing to register the
transfer of any Certificate. The Certificate Registrar shall comply with
all reasonable written directions given by the Owner Trustee.
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(iii) Each Certificate issued hereunder shall contain the
following legend:
THIS CERTIFICATE IS TRANSFERABLE ONLY UPON COMPLIANCE WITH CERTAIN PROVISIONS OF
A TRUST AGREEMENT BETWEEN [_________________________] AND [NAME OF OWNER
TRUSTEE] (THE "TRUST AGREEMENT"). THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY SECURITIES LAWS, AND ISSUER HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TRUST AGREEMENT AND APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND TO "QUALIFIED
INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), AND
SOLELY WITH RESPECT TO THE INITIAL OFFERING OF THE CERTIFICATES, TO
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) UPON DELIVERY OF A REPRESENTATION LETTER TO THE
TRUSTEE.
NO EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND NO OTHER PLAN SUBJECT TO SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR ANY
ENTITY THE ASSETS OF WHICH CONSTITUTE OR ARE DEEMED FOR PURPOSES OF ERISA OR
SECTION 4975 OF THE CODE TO CONSTITUTE THE ASSETS OF ANY SUCH PLAN, MAY PURCHASE
THIS CERTIFICATE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE AND THE HOLDING OF
THIS CERTIFICATE OR SUCH INTEREST BY SUCH PLAN (OR ANY ENTITY THE ASSETS OF
WHICH CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS SUBJECT TO A STATUTORY OR
ADMINISTRATIVE EXEMPTION. ANY HOLDER HEREOF OR ANY INTEREST HEREIN THAT IS, OR
IS ACTING ON BEHALF OF OR WITH "PLAN ASSETS" OF, AN EMPLOYEE BENEFIT PLAN
SUBJECT TO ERISA OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, AND WITH RESPECT
TO WHICH THE TRUSTEE OR THE OWNER TRUSTEE IS A "PARTY IN INTEREST" OR A
"DISQUALIFIED PERSON", BY PURCHASING THIS CERTIFICATE OR SUCH INTEREST
REPRESENTS THAT ITS PURCHASE OF THIS CERTIFICATE OR SUCH INTEREST IS SUBJECT TO
A STATUTORY OR ADMINISTRATIVE EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND SECTION 4975 OF THE CODE.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF THE ISSUER THAT SUCH
PURCHASER HAS NOT ACQUIRED NOR WILL IT SELL, TRADE, TRANSFER, ASSIGN,
PARTICIPATE, PLEDGE, HYPOTHECATE, CAUSE TO BE MARKETED, OR OTHERWISE DISPOSE OF
THIS CERTIFICATE (OR ANY INTEREST HEREIN) ON OR THROUGH (I) AN "ESTABLISHED
SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(B)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, INCLUDING, WITHOUT LIMITATION, AN OVER-THE-
COUNTER-MARKET OR AN "INTERDEALER QUOTATION SYSTEM" THAT REGULARLY DISSEMINATES
FIRM BUY OR SELL QUOTATIONS, OR (II) A "SECONDARY MARKET
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(OR THE SUBSTANTIAL EQUIVALENT THEREOF)" WITHIN THE MEANING OF CODE SECTION
7704(B)(2). [THE PRINCIPAL OF THIS CERTIFICATE IS PAYABLE IN INSTALLMENTS AS SET
FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS CERTIFICATE
AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.]
Section 3.5 MUTILATED, DESTROYED, LOST OR STOLEN TRUST CERTIFICATES.
If (a) any mutilated Trust Certificate shall be surrendered to the Certificate
Registrar, or if the Owner Trustee and the Certificate Registrar shall receive
evidence to their satisfaction of the destruction, loss or theft of any Trust
Certificate and (b) there shall be delivered to the Certificate Registrar and
the Owner Trustee, such security or indemnity as may be required by them to save
each of them harmless, then in the absence of notice that such Trust Certificate
shall have been acquired by a bona fide purchaser, the Owner Trustee on behalf
of the Trust shall execute and the Owner Trustee or the Owner Trustee's
authentication agent or Certificate Registrar shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust
Certificate, a new Trust Certificate of like class, tenor and denomination. In
connection with the issuance of any new Trust Certificate under this Section,
the Owner Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Trust Certificate issued pursuant to this
Section shall constitute conclusive evidence of an ownership interest in the
Trust, as if originally issued, whether or not the lost, stolen or destroyed
Trust Certificate shall be found at any time.
Section 3.6 PERSONS DEEMED CERTIFICATEHOLDERS. Every Person by
virtue of becoming a Certificateholder in accordance with this Agreement shall
be deemed to be bound by the terms of this Agreement. Prior to due presentation
of a Trust Certificate for registration of transfer, the Owner Trustee, the
Certificate Registrar and any agent of the Owner Trustee and the Certificate
Registrar may treat the Person in whose name any Trust Certificate shall be
registered in the Certificate Register as the Holder of such Trust Certificate
for the purpose of receiving distributions pursuant to Section 5.2 and for all
other purposes whatsoever, and none of the Owner Trustee or the Certificate
Registrar nor any agent of the Owner Trustee or the Certificate Registrar shall
be bound by any notice to the contrary.
Section 3.7 ACCESS TO LIST OF CERTIFICATEHOLDERS' NAMES AND
ADDRESSES. The Certificate Registrar shall furnish or cause to be furnished to
the Owner Trustee, the Insurer, the Servicer or the Depositor, within 15 days
after receipt by the Certificate Registrar of a request therefor from such
Person in writing, a list, of the names and addresses of the Certificateholders
as of the most recent Record Date. If three or more Holders of Trust
Certificates or one or more Holders of Trust Certificates evidencing not less
than 25% of the Certificate Balance apply in writing to the Certificate
Registrar, and such application states that the applicants desire to communicate
with other Certificateholders with respect to their rights under this Agreement
or under the Trust Certificates and such application is accompanied by a copy of
the communication that such applicants propose to transmit, then the Certificate
Registrar shall, within five Business Days after the receipt of such
application, afford such applicants access during normal business hours to the
current list of Certificateholders. Each Holder, by receiving and holding a
Trust Certificate, shall be deemed to have agreed not to hold any of the
Depositor, the Servicer, the Insurer, the Certificate Registrar or the Owner
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Trustee or any agent thereof accountable by reason of the disclosure of its name
and address, regardless of the source from which such information was derived.
Section 3.8 MAINTENANCE OF OFFICE OR AGENCY. The Owner Trustee shall
maintain in The City of New York, an office or offices or agency or agencies
where Trust Certificates may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Owner Trustee in respect
of the Trust Certificates and the Basic Documents may be served. The Owner
Trustee initially designates [____________________],
[_________________________________], as its office for such purposes. The Owner
Trustee shall give prompt written notice to the Depositor, the Insurer and the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
Section 3.9 APPOINTMENT OF CERTIFICATE PAYING AGENT. The Certificate
Paying Agent shall make distributions to Certificateholders from the Certificate
Distribution Account pursuant to Section 5.2 and shall report the amounts of
such distributions to the Owner Trustee. The Certificate Paying Agent shall
invest amounts on deposit in the Certificate Distribution Account in accordance
with Section 5.1 hereof. Any Certificate Paying Agent shall have the revocable
power to withdraw funds from the Certificate Distribution Account for the
purpose of making the distributions referred to above. The Owner Trustee may
revoke such power and remove the Certificate Paying Agent if the Owner Trustee
determines in its sole discretion that the Certificate Paying Agent shall have
failed to perform its obligations under this Agreement in any material respect.
The Certificate Paying Agent shall initially be the Indenture Trustee, and any
co-paying agent chosen by the Owner Trustee, and acceptable to the Servicer. The
Certificate Paying Agent shall be permitted to resign upon 30 days' written
notice to the Owner Trustee and the Servicer. In the event that the Indenture
Trustee shall no longer be the Certificate Paying Agent, the Owner Trustee shall
appoint a successor to act as Certificate Paying Agent (which shall be a bank or
trust company). The Owner Trustee shall cause such successor Certificate Paying
Agent or any additional Certificate Paying Agent appointed by the Owner Trustee
to execute and deliver to the Owner Trustee an instrument in which such
successor Certificate Paying Agent or additional Certificate Paying Agent shall
agree with the Owner Trustee that as Certificate Paying Agent, such successor
Certificate Paying Agent or additional Certificate Paying Agent will hold all
sums, if any, held by it for payment to the Certificateholders in trust for the
benefit of the Certificateholders entitled thereto until such sums shall be paid
to such Certificateholders. The Certificate Paying Agent shall return all
unclaimed funds to the Owner Trustee and upon removal of a Certificate Paying
Agent such Certificate Paying Agent shall also return all funds in its
possession to the Owner Trustee. The provisions of Sections 7.1, 7.3, 7.4, 8.1
and 8.2 shall apply to the Owner Trustee also in its role as Certificate Paying
Agent, for so long as the Owner Trustee shall act as Certificate Paying Agent
and, to the extent applicable, to any other paying agent appointed hereunder.
Any reference in this Agreement to the Certificate Paying Agent shall include
any co-paying agent unless the context requires otherwise. The Indenture
Trustee, in acting as Certificate Registrar and Certificate Paying Agent
hereunder shall be entitled to the benefit of the same protective and
exculpatory provisions and the indemnity and compensation provisions applicable
to the Indenture Trustee in the Indenture and Sale and Servicing Agreement.
Section 3.10 [Reserved]
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Section 3.11 [Reserved]
Section 3.12 [Reserved]
Section 3.13 ERISA RESTRICTIONS. The Certificates may not be
acquired by or for the account of (i) an employee benefit plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title 1 of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1985, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "BENEFIT Plan"). By
accepting and holding a Certificate, the Holder thereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
Section 3.14 [RESERVED]
Section 3.15 [RESERVED]
Section 3.16 [RESERVED]
Section 3.17 ORIGINAL ISSUANCE. The Trust Certificates, upon
original issuance, will be issued in the form of Definitive Trust Certificates
to be delivered by or on behalf of the Trust in accordance with the written
instructions of the Depositor. The Owner Trustee shall recognize the Holders of
the Definitive Trust Certificates as Certificateholders. The Trust Certificate
shall be printed, lithographed or engraved or may be reproduced in any other
manner as so reasonably acceptable to the Owner Trustee, as evidence by its
execution thereof.
Section 3.18 ACTIONS OF CERTIFICATEHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Agreement to be given or taken by the Certificateholders may be embodied in
and evidenced by one or more instruments of substantially similar tenor signed
by such Certificateholders in person or by 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 Owner Trustee
and, when required, to the Depositor or the Servicer. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Agreement and conclusive in favor of the Owner Trustee,
the Depositor and the Servicer, if made in the manner provided in this Section
3.18.
(b) The fact and date of the execution by any Certificateholder of
any such instrument or writing may be proved in any reasonable manner which the
Owner Trustee deems sufficient.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Certificateholder shall bind every Holder of
every Certificate issued upon the registration of transfer thereof or in
exchange therefor or in lieu thereof, in respect of anything done, or omitted to
be done, by the Owner Trustee, the Depositor or the Servicer in reliance
thereon, regardless of whether notation of such action is made upon such
Certificate.
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(d) The Owner Trustee may require such additional proof of any
matter referred to in this Section 3.18 as it shall deem necessary.
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
Section 4.1 PRIOR NOTICE TO HOLDERS WITH RESPECT TO CERTAIN MATTERS.
(a) 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 and the Insurer in writing of
the proposed action and the Certificateholders shall not have notified the Owner
Trustee in writing prior to the 30th day after such notice is given that such
Certificateholders have withheld consent or provided alternative direction:
(i) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under
the Business Trust Statute or unless such amendment would not materially
and adversely affect the interests of the Holders);
(ii) the amendment of the Indenture by a supplemental
indenture in circumstances where the consent of any Noteholder is
required;
(iii) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required and
such amendment materially adversely affects the interest of the
Certificateholders; or
(iv) except pursuant to Section 11.1 of the Sale and Servicing
Agreement, the amendment, change or modification of the Sale and Servicing
Agreement, except to cure any ambiguity or defect or to amend or
supplement any provision in a manner that would not materially adversely
affect the interests of the Certificateholders.
(b) The Owner Trustee shall notify the Certificateholders in
writing of any appointment of a successor Note Registrar, Certificate Paying
Agent or Certificate Registrar within five Business Days of the effective date
of such appointment.
Section 4.2 ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO CERTAIN
MATTERS. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders in accordance with the Basic Documents, to (a) remove
the Servicer under the Sale and Servicing Agreement pursuant to Section 8.1
thereof following payment of the Notes in full or (b) except as expressly
provided in the Basic Documents, sell the Receivables after the termination of
the Indenture. The Owner Trustee shall take the actions referred to in the
preceding sentence only upon written instructions signed by the
Certificateholders and the furnishing of indemnification satisfactory to the
Owner Trustee by the Certificateholders.
Section 4.3 ACTION BY CERTIFICATEHOLDERS WITH RESPECT TO BANKRUPTCY.
The Owner Trustee shall not have the power to, and shall not, institute
proceedings for the Trust to be adjudicated a bankrupt or insolvent, or consent
to the institution of bankruptcy or insolvency proceedings against the Trust, or
file a petition seeking or consenting to reorganization or relief
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under any applicable federal or state law relating to the bankruptcy of the
Trust, or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trust or a substantial
part of the property of the Trust or cause or permit the Trust to make any
assignment for the benefit of creditors, or admit in writing the inability of
the Trust to pay its debts generally as they become due, or declare or effect a
moratorium on the debt of the Trust or take any action in furtherance of any
such action relating to the Trust without the unanimous prior approval of all
Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
Section 4.4 RESTRICTIONS ON CERTIFICATEHOLDERS' POWER. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
(b) No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action, or proceeding in equity or at law upon or under or with respect to this
Agreement or any Basic Document, unless the Certificateholders are the
Instructing Party pursuant to Section 6.3 of this Agreement and unless a
Certificateholder previously shall have given to the Owner Trustee a written
notice of default and of the continuance thereof, as provided in this Agreement,
and also unless Certificateholders evidencing not less than 25% of the
Certificate Balance shall have made written request upon the Owner Trustee to
institute such action, suit or proceeding in its own name as Owner Trustee under
this Agreement and shall have offered to the Owner Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Owner Trustee, for 30 days after its
receipt of such notice, request, and offer of indemnity, shall have neglected or
refused to institute any such action, suit, or proceeding, and during such 30-
day period no request or waiver inconsistent with such written request has been
given to the Owner Trustee pursuant to and in compliance with this Section or
Section 6.3 of this Agreement; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and the Owner Trustee, that no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the
Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right under this Agreement, except in the
manner provided in this Agreement and for the equal, ratable, and common benefit
of all Certificateholders. For the protection and enforcement of the provisions
of this Section 4.4, each and every Certificateholder and the Owner Trustee
shall be entitled to such relief as can be given either at law or in equity.
Section 4.5 MAJORITY CONTROL. No Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Trust except as expressly provided in this Agreement. Except as expressly
provided
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herein, any action that may be taken by the Certificateholders under this
Agreement may be taken by the Holders of each class of Trust Certificates
evidencing not less than a majority of the Certificate Balance or, in the case
of the Class R Certificates, a majority percentage interest. Except as expressly
provided herein, any written notice of the Certificateholders delivered pursuant
to this Agreement shall be effective if signed by Holders of each Class of
Certificates evidencing not less than a majority of the Certificate Balance or,
in the case of the Class R Certificates, a majority percentage interest at the
time of the delivery of such notice.
Section 4.6 RIGHTS OF INSURER. Notwithstanding anything to the
contrary in the Basic Documents, for so long as any Notes are Outstanding under
the Indenture, without the prior written consent of the Insurer (so long as no
Insurer Default shall have occurred and be continuing), the Owner Trustee shall
not (i) remove the Servicer, (ii) initiate any claim, suit or proceeding by the
Trust or compromise any claim, suit or proceeding brought by or against the
Trust, other than with respect to the enforcement of any Receivable or any
rights of the Trust thereunder, (iii) authorize the merger or consolidation of
the Trust with or into any other business trust or other entity (other than in
accordance with Section 3.10 of the Indenture) or (iv) amend the Certificate of
Trust.
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
Section 5.1 ESTABLISHMENT OF CERTIFICATE DISTRIBUTION ACCOUNT. (a)
The Owner Trustee, for the benefit of the Certificateholders, shall establish or
cause to be established and maintain in the name of the Trust an Eligible
Deposit Account (the "Certificate Distribution Account"), bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Certificateholders. The Certificate Distribution Account shall be initially
established with the Certificate Paying Agent.
(b) The Owner Trustee shall possess all right, title and interest
in all funds on deposit from time to time in the Certificate Distribution
Account and in all proceeds thereof. If, at any time, the Certificate
Distribution Account ceases to be an Eligible Deposit Account, the Owner Trustee
shall within five (5) Business Days (or such longer period, not to exceed thirty
(30) calendar days, as to which each Rating Agency may consent) establish or
cause to be established a new Certificate Distribution Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such new
Certificate Distribution Account.
(c) All amounts held in the Certificate Distribution Account
shall, to the extent permitted by applicable laws, rules and regulations, be
invested, by the Certificate Paying Agent at the Servicer's written direction,
in Eligible Investments that mature not later than one (1) Business Day prior to
the Payment Date for the Monthly Period to which such amounts relate.
Investments in Eligible Investments shall be made in the name of the Trust, and
such investments shall not be sold or disposed of prior to their maturity.
Subject to the other provisions hereof, the Owner Trustee shall have sole
control over each such investment and the income thereon, and any certificate or
other instrument evidencing any such investment, if any, shall be delivered
directly to the Owner Trustee. All Investment Earnings on funds in the
Certificate Distribution Account shall be distributed on the next Payment Date
pursuant to Section 5.6 of the Sale and Servicing Agreement.
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Section 5.2 APPLICATION OF FUNDS IN CERTIFICATE DISTRIBUTION
ACCOUNT. (a) On each Payment Date, the Certificate Paying Agent will, based on
the information contained in the Servicer's Certificate delivered on the related
Determination Date pursuant to Section 4.9 of the Sale and Servicing Agreement,
distribute to Certificateholders, to the extent of the funds available, amounts
deposited in the Certificate Distribution Account pursuant to Sections
5.6(b)(vii) of the Sale and Servicing Agreement on such Payment Date in the
following order of priority:
(i) first, to the Class A Certificateholders, on a pro rata
basis, an amount equal to the Certificateholders' Principal
Distributable Amount; and
(ii) second, to the Class R Certificateholders, in accordance
with the percentage interest held, an amount equal to the remaining
amounts on deposit in the Certificate Distribution Account.
(b) On the Payment Date following the date on which amounts
received in respect of the Transferor's exercise of its option to purchase the
corpus of the Trust pursuant to Section 9.1(a) of the Sale and Servicing
Agreement are deposited in the Certificate Distribution Account, the Certificate
Paying Agent will distribute such amounts taking into account any concurrent
distribution made pursuant to Section 5.2(a):
(i) first, to the Class A Certificateholders, on a pro rata
basis, an amount equal to the Certificateholders' Principal
Distributable Amount; and
(ii) second, to the Class R Certificateholders, in accordance
with the percentage interest held, remaining amounts on deposit in the
Certificate Distribution Account.
(c) On the Payment Date following the date on which the Indenture
Trustee makes payments of money or property in respect of liquidation of the
Trust Property pursuant to Section 5.6 of the Indenture and deposits funds
received in connection with such liquidation in the Certificate Distribution
Account, the Certificate Paying Agent will distribute such funds taking into
account any concurrent distribution made pursuant to Section 5.2(a):
(i) first, to the Class A Certificateholders, on a pro rata
basis, an amount equal to the Certificateholders' Principal
Distributable Amount; and
(ii) second, to the Class R Certificateholders, in accordance
with the percentage interest held, remaining amounts on deposit in the
Certificate Distribution Account.
(d) On each Payment Date, the Certificate Paying Agent shall send
to each Certificateholder the statement provided to the Owner Trustee by the
Servicer pursuant to Section 5.8 of the Sale and Servicing Agreement on such
Payment Date.
(e) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Certificateholder, such tax
shall reduce the amount otherwise distributable to the Certificateholder in
accordance with this Section. The Certificate Paying Agent is hereby authorized
and directed to retain from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any tax that is legally
owed by the Trust
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(but such authorization shall not prevent the Owner Trustee or Certificate
Paying Agent from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such Certificateholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Certificate Paying Agent may in it sole discretion
withhold such amounts in accordance with this clause (e). In the event that an
Holder wishes to apply for a refund of any such withholding tax, the Owner
Trustee or Certificate Paying Agent shall reasonably cooperate with such
Certificateholder in making such claim so long as such Certificateholder agrees
to reimburse the Owner Trustee or Certificate Paying Agent for any out-of-pocket
expenses incurred.
Section 5.3 [RESERVED]
Section 5.4 METHOD OF PAYMENT. Subject to Section 9.1(c),
distributions required to be made to Certificateholders on any Payment Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if (i)
such Certificateholder shall have provided to the Certificate Registrar
appropriate written instructions at least five Business Days prior to such
Payment Date and such Holder's Trust Certificates in the aggregate evidence a
denomination of not less than $1,000,000 or (ii) such Certificateholder is the
Depositor, or an Affiliate thereof or of the Servicer, or, if not, by check
mailed to such Certificateholder at the address of such holder appearing in the
Certificate Register. Notwithstanding the foregoing, the final distribution in
respect of any Trust Certificate (whether on the Final Scheduled Payment Date or
otherwise) will be payable only upon presentation and surrender of such Trust
Certificate at the office or agency maintained for that purpose by the Owner
Trustee pursuant to Section 3.8.
Section 5.5 NO SEGREGATION OF MONIES; NO INTEREST. Subject to
Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law and may be
deposited under such general conditions as may be prescribed by law, and the
Owner Trustee shall not be liable for any interest thereon.
Section 5.6 ACCOUNTING AND REPORTS TO THE NOTEHOLDERS,
CERTIFICATEHOLDERS, THE INTERNAL REVENUE SERVICE AND OTHERS. Subject to Article
X of the Sale and Servicing Agreement and to Section 2.11 herein, the Owner
Trustee shall (a) maintain (or cause to be maintained) the books of the Trust on
a calendar year basis on the accrual method of accounting, (b) deliver (or cause
to be delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1, if applicable) to enable the Certificateholders to prepare their
Federal and state income tax returns, (c) file or cause to be filed such tax
returns relating to the Trust (including a partnership information return, Form
1065, if applicable) and direct the Owner Trustee to make such elections as may
from time to time be required or appropriate under any applicable state or
Federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a disregarded entity if the Certificates are treated as held
by a single person or as a partnership if the Certificates are treated as held
by more than one person for Federal income tax purposes and
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(d) collect or cause to be collected any withholding tax as described in and in
accordance with Section 5.2(e) with respect to income or distributions to
Certificateholders. The Owner Trustee shall make all elections pursuant to this
Section as directed by the "tax matters partner". The Owner Trustee shall sign
any tax information returns filed pursuant to this Section 5.6 and any other
returns as may be required by law, and in doing so shall rely entirely upon, and
shall have no liability for information provided by, or calculations provided
by, the "tax matters partner". The Owner Trustee shall elect under Section 1278
of the Code to include in income currently any market discount that accrues with
respect to the Receivables. The Owner Trustee shall make the election provided
under Section 754 of the Code only upon written request of the Holder of the
Class R Certificate.
Section 5.7 SIGNATURE ON RETURNS; TAX MATTERS PARTNER. (a)
Notwithstanding the provisions of Section 5.6, the Owner Trustee shall sign on
behalf of the Trust any tax returns of the Trust, unless applicable law requires
a Certificateholder to sign such documents, in which case such documents shall
be signed by the Holder of the Class R Certificate.
(b) If the Trust is characterized as a partnership for U.S.
Federal income tax purposes, the Holder of the Class R Certificate shall be the
"tax matters partner" of the Trust pursuant to the Code.
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 6.1 GENERAL AUTHORITY. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is named as a party and
any amendment thereto, in each case, in such form as the Depositor shall approve
as evidenced conclusively by the Owner Trustee's execution thereof, and on
behalf of the Trust, to direct the Indenture Trustee to authenticate and deliver
the Class A-1 Notes, Class A-2 Notes and Class A-3 Notes in the aggregate
principal amounts, of $[____________], $[____________] and $[____________],
respectively. In addition to the foregoing, the Owner Trustee is authorized, but
shall not be obligated, to take all actions required of the Trust pursuant to
the Basic Documents. The Owner Trustee is further authorized from time to time
to take such action as the Instructing Party recommends with respect to the
Basic Documents so long as such activities are consistent with the terms of the
Basic Documents.
Section 6.2 GENERAL DUTIES. It shall be the duty of the Owner
Trustee to discharge (or cause to be discharged) all of its responsibilities
pursuant to the terms of this Agreement and the Sale and Servicing Agreement and
to administer the Trust in the interest of the Holders, subject to the Basic
Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Servicer has agreed in the Sale and Servicing
Agreement to perform any act or to discharge any duty of the Owner Trustee
hereunder or under any Basic Document, and the Owner Trustee shall not be liable
for the default or failure of the Servicer to carry out its obligations under
the Sale and Servicing Agreement.
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Section 6.3 ACTION UPON INSTRUCTION. (a) Subject to Article IV, the
Holders of a majority of the Outstanding Amount of the Class A Certificates and
a majority percentage interest of the Class R Certificates shall have the
exclusive right to direct the actions of the Owner Trustee in the management of
the Trust, so long as such instructions are not inconsistent with the express
terms set forth herein or in any Basic Document. Such majority of
Certificateholders shall not instruct the Owner Trustee in a manner inconsistent
with this Agreement or the Basic Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement or any Basic Document, the Owner Trustee shall promptly give notice
(in such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Certificateholders received, the Owner
Trustee shall not be liable on account of such action to any Person. If the
Owner Trustee shall not have received appropriate instruction within ten days of
such notice (or within such shorter period of time as reasonably may be
specified in such notice or may be necessary under the circumstances) it may,
but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the Basic Documents, as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
(d) In the event that the Owner Trustee is unsure as to the
application of any provision of this Agreement or any Basic Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the
Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten (10) days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action, not inconsistent with this Agreement or the
Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
Section 6.4 NO DUTIES EXCEPT AS SPECIFIED IN THIS AGREEMENT OR IN
INSTRUCTIONS. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document
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contemplated hereby to which the Owner Trustee is a party, except as expressly
provided by the terms of this Agreement or in any document or written
instruction received by the Owner Trustee pursuant to Section 6.3; and no
implied duties or obligations shall be read into this Agreement or any Basic
Document against the Owner Trustee. The Owner Trustee shall have no
responsibility for filing any financing or continuation statement in any public
office at any time or to otherwise perfect or maintain the perfection of any
security interest or lien granted to it hereunder or to prepare or file any
Commission filing for the Trust or to record this Agreement or any Basic
Document. The Owner Trustee nevertheless agrees that it will, at its own cost
and expense, promptly take all action as may be necessary to discharge any Liens
on any part of the Owner Trust Estate that result from actions by, or claims
against, the Owner Trustee (solely in its individual capacity) and that are not
related to the ownership or the administration of the Owner Trust Estate.
Section 6.5 NO ACTION EXCEPT UNDER SPECIFIED DOCUMENTS OR
INSTRUCTIONS. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
Section 6.6 RESTRICTIONS. The Owner Trustee shall not take any
action that is inconsistent with the purposes of the Trust set forth in Section
2.3 or (b) that, to the actual knowledge of the Owner Trustee would result in
the Trust becoming taxable as a corporation for Federal income tax purposes. The
Certificateholders shall not direct the Owner Trustee to take action that would
violate the provisions of this Section.
ARTICLE VII
CONCERNING THE OWNER TRUSTEE
Section 7.1 ACCEPTANCE OF 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, in its individual capacity, and the Certificate Paying Agent also agree
to disburse all moneys actually received by them constituting part of the Owner
Trust Estate upon the terms of the Basic Documents and this Agreement. The Owner
Trustee in its individual capacity shall not be answerable or accountable
hereunder or under any Basic Document under any circumstances, except (i) for
its own willful misconduct, bad faith or gross negligence, (ii) in the case of
the inaccuracy of any representation or warranty contained in Section 7.3
expressly made by the Owner Trustee, in its individual capacity, (iii) for
liabilities arising from the failure of the Owner Trustee to perform obligations
expressly undertaken by it in the last sentence of Section 6.4 hereof, (iv) for
any investments issued by the Owner Trustee or any branch or affiliate thereof
in its commercial capacity or (v) for taxes, fees or other charges on, based on
or measured by, any fees, commissions or compensation received by the Owner
Trustee, in its individual capacity. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
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(a) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the instructions of
the Servicer or any Certificateholder;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur any
financial liability in the performance of any of its rights or powers hereunder
or under any Basic Document if the Owner Trustee shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Basic Documents, including
the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution hereof
by the Depositor or for the form, character, genuineness, sufficiency, value or
validity of any of the Owner Trust Estate or for or in respect of the validity
or sufficiency of the Basic Documents, other than the certificate of
authentication on the Trust Certificates, and the Owner Trustee shall in no
event assume or incur any liability, duty or obligation to the Insurer,
Indenture Trustee, any Noteholder or to any Certificateholder, other than as
expressly provided for herein and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Insurer, Indenture Trustee or the Servicer under any of the
Basic Documents or otherwise and the Owner Trustee shall have no obligation or
liability to perform the obligations of the Trust under this Agreement or the
Basic Documents that are required to be performed by the Indenture Trustee under
the Indenture or the Servicer under the Sale and Servicing Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement or otherwise or in relation to
this Agreement or any Basic Document, at the request, order or direction of any
of the Certificateholders, unless such Certificateholders have offered to the
Owner Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Owner Trustee therein or
thereby. The right of the Owner Trustee to perform any discretionary act
enumerated in this Agreement or in any Basic Document shall not be construed as
a duty, and the Owner Trustee shall not be answerable for other than its gross
negligence, bad faith or willful misconduct in the performance of any such act.
Section 7.2 FURNISHING OF DOCUMENTS. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
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Section 7.3 REPRESENTATIONS AND WARRANTIES. The Owner Trustee in its
individual capacity hereby represents and warrants to the Depositor and to the
Holders and the Insurer (which shall have relied on such representations and
warranties in issuing the Policy), that:
(a) It is a [____________] [banking corporation], duly organized
and validly existing in good standing under the laws of the State of
[____________]. It has all requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to execute
and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby
nor compliance by it with any of the terms or provisions hereof will contravene
any federal or [____________] state law, governmental rule or regulation
governing the banking or trust powers of the Owner Trustee or any judgment or
order binding on it, or constitute any default under its charter documents or
by-laws or any indenture, mortgage, contract, agreement or instrument to which
it is a party or by which any of its properties may be bound.
(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
[____________] or the United States of America regulating the banking or trust
powers 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
a proceeding in equity or at law.
Section 7.4 RELIANCE; ADVICE OF COUNSEL. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Owner Trustee for any action
taken or omitted to be taken by it in good faith in reliance thereon.
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(b) In the exercise or administration of the trusts hereunder and
in the performance of its duties and obligations under this Agreement or the
Basic Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the opinion or advice of any such counsel,
accountants or other such persons and such opinion or advice is not contrary to
this Agreement or any Basic Document herein.
Section 7.5 NOT ACTING IN INDIVIDUAL CAPACITY. Except as provided
herein or in any other Basic Document, in accepting the trusts hereby created
Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its
individual capacity and all Persons having any claim against the Owner Trustee
by reason of the transactions contemplated by this Agreement or any Basic
Document shall look only to the Owner Trust Estate for payment or satisfaction
thereof.
Section 7.6 OWNER TRUSTEE NOT LIABLE FOR TRUST CERTIFICATES OR
RECEIVABLES. The recitals contained herein and in the Trust Certificates (other
than the signature and countersignature of the Owner Trustee on the Trust
Certificates) shall be taken as the statements of the Depositor and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Agreement, of
any Basic Document or of the Trust Certificates (other than the signature and
countersignature of the Owner Trustee on the Trust Certificates) or the Notes,
or of any Receivable or related documents. The Owner Trustee shall at no time
have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Receivable, or the perfection and priority of
any security interest created by any Receivable in any Financed Vehicle or the
maintenance of any such perfection and priority, or for or with respect to the
sufficiency of the Owner Trust Estate or its ability to generate the payments to
be distributed to Certificateholders under this Agreement or the Noteholders
under the Indenture, including, without limitation: the existence, condition and
ownership of any Financed Vehicle; the existence and enforceability of any
insurance thereon; the existence and contents of any Receivable on any computer
or other record thereof; the validity of the assignment of any Receivable to the
Trust or of any intervening assignment; the completeness of any Receivable; the
performance or enforcement of any Receivable; the compliance by the Depositor or
the Servicer with any warranty or representation made under any Basic Document
or in any related document or the accuracy of any such warranty or
representation or any action of the Trustee or the Servicer or any subservicer
taken in the name of the Owner Trustee.
Section 7.7 OWNER TRUSTEE MAY OWN TRUST CERTIFICATES AND NOTES. The
Owner Trustee in its individual or any other capacity may become the owner or
pledgee of Trust Certificates or Notes and may deal with the Depositor, the
Trustee and the Servicer in banking transactions with the same rights as it
would have if it were not Owner Trustee.
Section 7.8 PAYMENTS FROM OWNER TRUST ESTATE. All payments to be
made by the Owner Trustee under this Agreement or any of the Basic Documents to
which the Trust or
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the Owner Trustee is a party shall be made only from the income and proceeds of
the Owner Trust Estate and only to the extent that the Owner Trust shall have
received income or proceeds from the Owner Trust Estate to make such payments in
accordance with the terms hereof. Wilmington Trust Company, or any successor
thereto, in its individual capacity, shall not be liable for any amounts payable
under this Agreement or any of the Basic Documents to which the Trust or the
Owner Trustee is a party.
Section 7.9 DOING BUSINESS IN OTHER JURISDICTIONS. Notwithstanding
anything contained to the contrary, neither [Name of Owner Trustee] or any
successor thereto, nor the Owner Trustee shall be required to take any action in
any jurisdiction other than in the State of [____________] if the taking of such
action will, even after the appointment of a co-trustee or separate trustee in
accordance with Section 10.5 hereof, (i) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or the taking of any other action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of [____________];
(ii) result in any fee, tax or other governmental charge under the laws of the
State of [____________] becoming payable by [Name of Owner Trustee] (or any
successor thereto); or (iii) subject [Name of Owner Trustee] (or any successor
thereto) to personal jurisdiction in any jurisdiction other than the State of
[____________] for causes of action arising from acts unrelated to the
consummation of the transactions by [Name of Owner Trustee] (or any successor
thereto) or the Owner Trustee, as the case may be, contemplated hereby.
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
Section 8.1 OWNER TRUSTEE'S FEES AND EXPENSES. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof, payable in accordance with the
provisions of the Sale and Servicing Agreement, and the Owner Trustee shall be
entitled to be reimbursed in accordance with the terms of the Sale and Servicing
Agreement 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.
Section 8.2 INDEMNIFICATION. The Owner Trustee and its successors,
assigns, agents and servants (collectively, the "INDEMNIFIED PARTIES") shall be
indemnified 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
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Owner Trustee shall not be indemnified from and against Expenses
arising or resulting from any of the matters described in the third sentence of
Section 7.1. The indemnities contained in this Section shall survive the
resignation or termination of the Owner Trustee or the termination of this
Agreement. All amounts payable to the Owner Trustee
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under this Section 8.2 shall be paid in accordance with the terms of the Sale
and Servicing Agreement.
Section 8.3 PAYMENTS OF OWNER TRUSTEE. Any amounts paid to the Owner
Trustee pursuant to this Article VIII shall be deemed not to be a part of the
Owner Trust Estate immediately after such payment.
Section 8.4 NON-RECOURSE OBLIGATIONS. Notwithstanding anything in
this Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Holder.
ARTICLE IX
TERMINATION OF TRUST AGREEMENT
Section 9.1 TERMINATION OF TRUST AGREEMENT. (a) This Agreement and
the Trust shall terminate and be of no further force or effect upon the latest
of (i) the maturity or other liquidation of the last Receivable (including the
purchase by the Servicer at its option of the corpus of the Trust as described
in Section 9.1 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Receivables as provided in the Basic
Documents and (ii) six (6) months after distributions of all moneys and other
property or proceeds of Owner Trust Estate in accordance with the Indenture,
Sale and Servicing Agreement and Article V of this Agreement, including the
payment to Certificateholders of all amounts required to be paid to them
pursuant to this Agreement; provided, however, that the rights to
indemnification under Section 8.2 shall survive the termination of the Trust.
The Servicer shall promptly notify the Owner Trustee of any prospective
termination pursuant to this Section 9.1. The bankruptcy, liquidation,
dissolution, death or incapacity of any Certificateholder, shall not (x) operate
to terminate this Agreement or the Trust, nor (y) entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate nor (z) otherwise affect the
rights, obligations and liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Depositor nor
any Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment
Date upon which the Certificateholders shall surrender their Trust Certificates
to the Certificate Paying Agent for payment of the final distribution and
cancellation, shall be given by the Owner Trustee by letter to
Certificateholders mailed within five (5) Business Days of receipt of notice of
such termination from the Servicer given pursuant to Section 9.1(c) of the Sale
and Servicing Agreement, stating (i) the Payment Date upon or with respect to
which final payment of the Trust Certificates shall be made upon presentation
and surrender of the Trust Certificates at the office of the Certificate Paying
Agent therein designated, (ii) the amount of any such final payment and (iii)
that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Trust Certificates
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at the office of the Certificate Paying Agent therein specified. The Owner
Trustee shall give such notice to the Certificate Registrar (if other than the
Owner Trustee) and the Certificate Paying Agent at the time such notice is given
to Certificateholders. Upon presentation and surrender of the Trust
Certificates, the Certificate Paying Agent shall cause to be distributed to
Certificateholders amounts distributable on such Payment Date pursuant to
Section 5.2.
In the event that all of the Certificateholders shall not surrender their Trust
Certificates for cancellation within six months after the date specified in the
above mentioned written notice, the Owner Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Trust Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice all the Trust Certificates shall not
have been surrendered for cancellation, the Owner Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Trust Certificates,
and the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Owner Trustee to the Depositor.
(d) Any funds remaining in the Trust after funds for final
distribution have been distributed or set aside for distribution shall be
distributed by the Owner Trustee to the Class R Certificateholder.
(e) Upon the winding up of the Trust and its termination, the
Owner Trustee shall upon the written direction of the Depositor 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.
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 10.1 ELIGIBILITY REQUIREMENTS FOR OWNER TRUSTEE. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; and (iii) having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by Federal or State
authorities and (iv) acceptable to the Insurer in its sole discretion, so long
as an Insurer Default shall not have occurred and be continuing. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2.
Section 10.2 RESIGNATION OR REMOVAL OF OWNER TRUSTEE. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Insurer, the Certificateholders, the
Depositor and the Servicer. Upon receiving such notice of resignation, the
Depositor or a Certificate Majority shall, with the prior written
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consent of the Insurer, promptly appoint a successor Owner Trustee by written
instrument, in duplicate, one copy of which instrument shall be delivered to the
resigning Owner Trustee and one copy to the successor Owner Trustee, provided
that the Depositor shall have received written confirmation from each of the
Rating Agencies that the proposed appointment will not result in an increased
capital charge to the Insurer by either of the Rating Agencies. If no successor
Owner Trustee shall have been so appointed and have accepted appointment within
30 days after the giving of such notice of resignation, the resigning Owner
Trustee or the Insurer may petition any court of competent jurisdiction for the
appointment of a successor the Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Depositor or a Certificate Majority, 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 Depositor or a Certificate Majority may
remove the Owner Trustee. If the Depositor or a Certificate Majority shall
remove the Owner Trustee under the authority of the immediately preceding
sentence, the Depositor or a Certificate Majority, as applicable, with the prior
written consent of the Insurer, so long as no Insurer Default has occurred and
is continuing, 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 Depositor, if the
Certificate Majority is acting, and one copy to the successor Owner Trustee and
payment of all fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee and to each of the Rating Agencies.
Section 10.3 SUCCESSOR OWNER TRUSTEE. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor 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.
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No successor Owner Trustee shall accept appointment as provided in
this Section unless at the time of such acceptance such successor Owner Trustee
shall be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating
Agencies. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the Servicer.
Section 10.4 MERGER OR CONSOLIDATION OF OWNER TRUSTEE. Any Person
into which the Owner 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 Owner Trustee shall be a party, or any Person
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such Person shall be eligible pursuant to Section 10.1, without the execution or
filing of any instrument or any further act on the part of any of the parties
hereto, anything herein to the contrary notwithstanding, provided further that
the Owner Trustee shall mail notice of any such merger or consolidation to the
Rating Agencies.
Section 10.5 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Servicer and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Owner Trustee, and if Notes are Outstanding, the Insurer to act as co-
trustee, jointly with the Owner Trustee, or separate trustee or separate
trustees, of all or any part of the Owner Trust Estate, and to vest in such
Person, in such capacity, such title to the Trust, or any part thereof, and,
subject to the other provisions of this Section, such powers, duties,
obligations, rights and trusts as the Servicer and the Owner Trustee may
consider necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, the
Owner Trustee subject, unless an Insurer Default shall have occurred and be
continuing or no Notes remain Outstanding, to the approval of the Insurer (which
approval shall not be unreasonably withheld) shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.1 and no notice of the appointment of any co-trustee or separate
trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee is
not authorized to act separately without the Owner Trustee joining in such
act), except to the extent that under any law of any jurisdiction in which
any
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particular act or acts are to be performed, the Owner Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties and obligations (including the holding of
title to the Trust or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or co-trustee,
but solely at the direction of the Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and co-
trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the 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 Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
MISCELLANEOUS
Section 11.1 SUPPLEMENTS AND AMENDMENTS. (a) This Agreement may be
amended by the Depositor and the Owner Trustee, with the prior written consent
of the Insurer (so long as any Notes are Outstanding and an Insurer Default
shall not have occurred and be continuing) and with prior written notice to the
Rating Agencies, without the consent of any of the Noteholders or the
Certificateholders, (i) to cure any ambiguity or defect or (ii) to correct,
supplement or modify any provisions in this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended by the Depositor and the
Owner Trustee from time to time, (i) with the prior written consent of the
Insurer (so long as any Notes are Outstanding and an Insurer Default shall not
have occurred and be continuing) but without the consent of any Noteholders or
Certificateholders or, (ii) if an Insurer Default shall have
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occurred and be continuing, with (x) the consent of a Note Majority, if Notes
are Outstanding and to the extent such amendment materially and adversely
affects the interests of the Noteholders, and (y) the consent of the Holders of
Certificates evidencing not less than a majority of the Certificate Balance
(which consent of any Holder of a Certificate or Note given pursuant to this
Section or pursuant to any other provision of this Agreement shall be conclusive
and binding on such Holder and on all future Holders of such Certificate or Note
and of any Certificate or Note issued upon the transfer thereof or in exchange
thereof or in lieu thereof whether or not notation of such consent is made upon
the Certificate or Note) with prior written notice to the Rating Agencies, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the rights
of the Noteholders or the Certificateholders; provided, however, that, subject
to the express rights of the Insurer under the Basic Documents, no such
amendment shall (a) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, collections of payments on Receivables or
distributions that shall be required to be made for the benefit of the
Noteholders or the Certificateholders or (b) reduce the aforesaid percentage of
the Outstanding Amount of the Notes and the Certificate Balance required to
consent to any such amendment, without the consent of the Holders of all the
outstanding Notes and Holders of all outstanding Certificates; provided,
further, that no such amendment shall affect the rights or obligations of the
Certificate Registrar or Certificate Paying Agent without its consent.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe.
Promptly after the execution of any amendment to the Certificate of
Trust, the Owner Trustee shall cause the filing of such amendment with the
Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
Section 11.2 NO LEGAL TITLE TO OWNER TRUST ESTATE IN
CERTIFICATEHOLDERS. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided ownership interest therein
only in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest of the Certificateholders to and in
their
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ownership interest in the Owner Trust Estate shall operate to terminate this
Agreement or the trusts hereunder or entitle any transferee to an accounting or
to the transfer to it of legal title to any part of the Owner Trust Estate.
Section 11.3 LIMITATIONS ON RIGHTS OF OTHERS. Except for Section
2.7, the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Certificateholders, the Servicer and, to the extent
expressly provided herein, the Indenture Trustee, the Insurer and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
Section 11.4 NOTICES. (a) Unless otherwise expressly
specified or permitted by the terms hereof, all notices shall be in writing and
shall be deemed given upon receipt personally delivered, delivered by overnight
courier or mailed first class mail or certified mail, in each case return
receipt requested, and shall be deemed to have been duly given upon receipt, if
to the Owner Trustee, addressed to [Name of Owner Trustee], at its Corporate
Trust Office, Attention: [____________________]; if to the Insurer, addressed to
Insurer, [____________________], [____________________], Attention:
[____________________], Telex No.: [_____________], Confirmation:
[____________], Telecopy Nos.: [____________], [____________] (in each case in
which notice or other communication to [____________________] refers to an Event
of Default, a claim on the Policies or with respect to which failure on the part
of [____________________] to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication should also be
sent to the attention of the General Counsel and the [____________________]
"URGENT MATERIAL ENCLOSED"); or, as to each party, at such other address as
shall be designated by such party in a written notice to each other party.
(b) Any notice required or permitted to be given to a
Certificateholder shall be given by personal delivery, overnight courier or by
first-class mail, postage prepaid, at the address of such Holder as shown in the
Certificate Register. Any notice so given within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Certificateholder receives such notice.
Section 11.5 [Reserved]
Section 11.6 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.7 SEPARATE COUNTERPARTS. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
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Section 11.8 THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Except as otherwise provided in this
Agreement, no other Person shall have any right or obligation hereunder. Upon
issuance of the Policy, this Agreement shall also inure to the benefit of the
Insurer for so long as an Insurer Default shall not have occurred and be
continuing. Without limiting the generality of the foregoing, all covenants and
agreements in this Agreement which confer rights upon the Insurer shall be for
the benefit of and run directly to the Insurer and the Insurer shall be entitled
to rely on and enforce such covenants, subject, however, to the limitations on
such rights provided in this Agreement and the Basic Documents. The Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Policy) upon delivery of a written notice to the Owner
Trustee.
Section 11.9 [RESERVED]
Section 11.10 NO PETITION. The Owner Trustee (not in its individual
capacity but solely as 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
covenants and agrees that they will not at any time institute against the
Depositor, or join in any institution against 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
in connection with any obligations relating to the Trust Certificates, the
Notes, this Agreement or any of the Basic Documents.
Section 11.11 NO RECOURSE. Each Certificateholder by accepting a
Trust Certificate acknowledges that such Certificateholder's Trust Certificates
represent beneficial interests in the Trust only and do not represent interests
in or obligations of the Seller, the Servicer, the Transferor, the Depositor,
the Owner Trustee, the Indenture Trustee, the Insurer or any Affiliate thereof
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated in this Agreement, the Trust Certificates
or the Basic Documents.
Section 11.12 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 11.13 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 11.14 AGREEMENT CREATES NO PARTNERSHIP EXCEPT FOR TAX
PURPOSES. Except as provided in Section 2.11, by acceptance of their
Certificates, each Holder and transferee of a Certificate acknowledges that it
understands and intends that if the Certificates are treated as held by two or
more persons, the arrangement created hereby is a partnership for income tax
purposes and that it intends and expects to be treated as a partner for such
purposes. The provisions of the agreement shall be interpreted and applied in a
manner consistent with
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such intent. Each Holder acknowledges and agrees that if the Certificates are
treated as held by two or more persons, any tax partnership created hereby is
created solely for income tax purposes and that this Agreement does not create a
partnership for any other purpose.
Section 11.15 SERVICER. The Servicer is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Trust all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust or Owner Trustee to prepare, file or deliver pursuant
to the Basic Documents. Upon written request, the Owner Trustee shall execute
and deliver to the Servicer a limited power of attorney appointing the Servicer
the Trust's agent and attorney-in-fact to prepare, or cause to be prepared,
execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.
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IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed by their respective officers hereunto duly
authorized as of the day and year first above written.
[NAME OF OWNER TRUSTEE],
Owner Trustee
By:____________________________________
Name:
Title:
PAINEWEBBER ASSET
ACCEPTANCE CORPORATION,
as Depositor
By:____________________________________
Name:
Title:
[___________________________________],
with respect to Section 11.4, as
Servicer
By:____________________________________
Name:
Title:
Acknowledged and Agreed
Indenture Trustee
[NAME OF INDENTURE TRUSTEE]
As Certificate Paying Agent and Certificate Registrar
By:_________________________________
Name:
Title:
<PAGE>
EXHIBIT A
$_______ NUMBER A-
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE ONLY UPON COMPLIANCE WITH CERTAIN PROVISIONS OF
A TRUST AGREEMENT BETWEEN [__________________________] AND [NAME OF OWNER
TRUSTEE] (THE "TRUST AGREEMENT"). THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY SECURITIES LAWS, AND ISSUER HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TRUST INDENTURE AND APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND TO "QUALIFIED
INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), AND
SOLELY WITH RESPECT TO THE INITIAL OFFERING OF THE CERTIFICATES, TO
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) UPON DELIVERY OF A REPRESENTATION LETTER TO THE
TRUSTEE.
NO EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND NO OTHER PLAN SUBJECT TO SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR ANY
ENTITY THE ASSETS OF WHICH CONSTITUTE OR ARE DEEMED FOR PURPOSES OF ERISA OR
SECTION 4975 OF THE CODE TO CONSTITUTE THE ASSETS OF ANY SUCH PLAN, MAY PURCHASE
THIS CERTIFICATE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE AND THE HOLDING OF
THIS CERTIFICATE OR SUCH INTEREST BY SUCH PLAN (OR ANY ENTITY THE ASSETS OF
WHICH CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS SUBJECT TO A STATUTORY OR
ADMINISTRATIVE EXEMPTION. ANY HOLDER HEREOF OR ANY INTEREST HEREIN THAT IS, OR
IS ACTING ON BEHALF OF OR WITH "PLAN ASSETS" OF, AN EMPLOYEE BENEFIT PLAN
SUBJECT TO ERISA OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, AND WITH RESPECT
TO WHICH THE TRUSTEE OR THE OWNER TRUSTEE IS A "PARTY IN INTEREST" OR A
"DISQUALIFIED PERSON", BY PURCHASING THIS CERTIFICATE OR SUCH INTEREST
REPRESENTS THAT ITS PURCHASE OF THIS CERTIFICATE OR SUCH INTEREST IS SUBJECT TO
A STATUTORY OR ADMINISTRATIVE EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND SECTION 4975 OF THE CODE.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF THE ISSUER THAT SUCH
PURCHASER HAS NOT ACQUIRED NOR WILL IT SELL, TRADE, TRANSFER, ASSIGN,
PARTICIPATE, PLEDGE, HYPOTHECATE, CAUSE TO BE MARKETED, OR OTHERWISE DISPOSE OF
THIS CERTIFICATE (OR ANY INTEREST HEREIN) ON OR THROUGH (I) AN "ESTABLISHED
SECURITIES MARKET" WITHIN
A-1
<PAGE>
THE MEANING OF SECTION 7704(B)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN
"INTERDEALER QUOTATION SYSTEM" THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS, OR (II) A "SECONDARY MARKET (OR THE SUBSTANTIAL EQUIVALENT THEREOF)"
WITHIN THE MEANING OF CODE SECTION 7704(B)(2). THE PRINCIPAL OF THIS CERTIFICATE
IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING
PRINCIPAL AMOUNT OF THIS CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
A-2
<PAGE>
[___________________________________] OWNER TRUST 200[_]-[_]
CLASS A ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of motor vehicle
loans secured by new or used automobiles, vans or light duty trucks and
transferred to the Trust by [____________________].
(This Trust Certificate does not represent an interest in or
obligation of [____________________], [Name of Owner Trustee], the Owner Trustee
or any of their Affiliates, except to the extent described below.)
THIS CERTIFIES THAT [____________________] is the registered
owner of [___________________________________] ($[____________])
nonassessable, fully-paid, beneficial ownership interest in certain
distributions of [____________________________] Owner Trust 200[_]-[_] (the
"Trust") formed by [______________________________].
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-
mentioned Trust Agreement.
[NAME OF OWNER TRUSTEE], not in its [NAME OF OWNER TRUSTEE], not in
indvidual capacity but solely as Owner its individual capacity but solely
Trustee or as Owner Trustee
By__________________________________ By_______________________________
Authenticating Agent
By__________________________________
The Trust was created pursuant to a Trust Agreement dated as of
[__________] [__], 200[_] (the "TRUST AGREEMENT"), between the Depositor and
[Name of Owner Trustee], as owner trustee (the "OWNER TRUSTEE"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Trust Certificates
designated as a Class A Asset Backed Certificates (together with the Class R
Asset Backed Certificates, the "TRUST CERTIFICATES"). Also issued under the
Indenture dated as of [__________] [__], 200[_], among the Trust,
[_____________________________], as trustee and indenture collateral agent, are
three classes of Notes designated as "Class A-1 [_______]% Asset Backed Notes"
(the "CLASS A-1 NOTES"), "Class A-2 [_______]% Asset Backed Notes" (the "CLASS
A-2 NOTES"), the "Class A-3 [_______]% Asset Backed Notes (the "CLASS A-3 NOTES"
and together with the Class A-1 Notes and the Class A-2 Notes, the "NOTES").
This Trust Certificate is issued under and is subject to the terms, provisions
and conditions of the Trust Agreement, to which Trust Agreement the holder of
this Trust Certificate by virtue of the acceptance hereof assents and by which
such holder is bound. The property of the Trust includes a pool of retail
installment loan
A-3
<PAGE>
contracts secured by new and used automobiles, vans or light duty trucks (the
"RECEIVABLES"), all monies due or to become due thereunder on or after Initial
Cutoff Date, security interests in the vehicles financed thereby, certain bank
accounts and the proceeds thereof, proceeds from claims on certain insurance
policies and certain other rights under the Trust Agreement and the Sale and
Servicing Agreement and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the
fifteenth day of each month or, if such fifteenth day is not a Business Day, the
next succeeding Business Day (the "PAYMENT DATE"), commencing in [__________]
[__], 200[_], to the Person in whose name this Trust Certificate is registered
at the close of business on the Business Day preceding such Payment Date (the
"Record Date") such Certificateholder's fractional undivided interest in the
amount to be distributed to Certificateholders on such Payment Date. No
principal will be paid on the Trust Certificate until the Class A Notes have
been paid in full.
The holder of this Trust Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders as described in the Sale and
Servicing Agreement, the Indenture and the Trust Agreement, as applicable.
It is the intent of the Seller, Servicer, the Depositor and
Certificateholders that, for purposes of Federal income taxes, if the
Certificates are treated as held by a single person, the Trust will be
disregarded as an entity separate from its owner and if the Certificates are
treated or held by two or more persons, the Trust will be treated as a
partnership and the Certificateholders will be treated as partners in that
partnership. The Certificateholders by acceptance of a Trust Certificate, agree
to treat, and to take no action inconsistent with such treatment of, the Trust
Certificates for such tax purposes.
Each Certificateholder, by its acceptance of a Trust Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Trust, the Transferor or the Depositor, or join in any institution
against the Trust, the Transferor or 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
in connection with any obligations relating to the Trust Certificates, the
Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in
the Trust Agreement by or on behalf of the Owner Trustee by wire transfer or
check mailed to the Certificateholder of record in the Trust Certificate
Register without the presentation or surrender of this Trust Certificate or the
making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this Trust
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this Trust
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Borough of Manhattan, The City of New York.
A-4
<PAGE>
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the holder hereof to any benefit under
the Trust Agreement or the Sale and Servicing Agreement or be valid for any
purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-5
<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.
[__________________________________]
OWNER TRUST 200[_]-[_]
By: [NAME OF OWNER TRUSTEE], not in
its individual capacity but solely as
Owner Trustee
Dated:_______________________ By:_________________________________
A-6
<PAGE>
(Reverse of Trust Certificate)
The Trust Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Transferor, the Depositor, the Owner
Trustee or any Affiliates of any of them and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated
herein or in the Trust Agreement, the Indenture or the Basic Documents. In
addition, this Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Receivables, all as more specifically set forth herein and in the
Sale and Servicing Agreement. The Trust Certificates are limited in right of
payment to certain collections and recoveries respecting the Receivables, all as
more specifically set forth in the Sale and Servicing Agreement. A copy of each
of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Seller, and at such
other places, if any, designated by the Seller, by any Certificateholder upon
written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Seller and the rights of the Certificateholders under the
Trust Agreement at any time by the Seller and the Owner Trustee with the consent
of the holders of the Notes and the Trust Certificates evidencing not less than
a majority of the outstanding Notes and the Certificate Balance. Any such
consent by the holder of this Trust Certificate shall be conclusive and binding
on such holder and on all future holders of this Trust Certificate and of any
Trust Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Trust
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the holders of any of the Trust
Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Trust Certificate is
registerable in the Certificate Register upon surrender of this Trust
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new Trust Certificates in authorized
denominations evidencing the same aggregate interest in the Trust will be issued
to the designated transferee. The initial Certificate Registrar appointed under
the Trust Agreement is Norwest Bank Minnesota, National Association.
The Class A Certificates are issuable only as registered Trust
Certificates without coupons in denominations of $1,000 or integral multiples
thereof; except as otherwise provided in the Trust Agreement. As provided in the
Trust Agreement and subject to certain limitations therein set forth, Trust
Certificates are exchangeable for new Trust Certificates in authorized
denominations evidencing the same aggregate denomination, as requested by the
holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any Tax or
governmental charge payable in connection therewith.
A-7
<PAGE>
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the person in whose name
this Trust Certificate is registered as the owner hereof for all purposes, and
none of the Owner Trustee, the Certificate Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the disposition of all
property held as part of the Trust. The Transferor of the Receivables may at its
option purchase the corpus of the Trust at a price specified in the Sale and
Servicing Agreement, and such purchase of the Receivables and other property of
the Trust will effect early retirement of the Trust Certificates; however, such
right of purchase is exercisable, subject to certain restrictions, only as of
the last day of any Monthly Period as of which the Pool Balance is 15% or less
of the Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title 1 of ERISA, (b) a plan described in Section 4975(e) (l) of
the Code or (c) any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity (each, a "BENEFIT PLAN"). By accepting and
holding this Trust Certificate, the Holder hereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of
the Depositor or the Servicer, as the case may be, and the Owner Trustee assumes
no responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Receivable or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
A-8
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please
print or type name and address, including postal zip code, of assignee) the
within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________________
Attorney to transfer said Trust Certificate on the books of the Trust
Certificate Registrar, with full power of substitution in the premises.
The undersigned has requested an exchange or transfer of this
Certificate in the form of an equal principal amount of Certificates evidenced
by one or more Definitive Certificates, to be delivered to the undersigned or,
in the case of a transfer of such Certificate, to such Person as the undersigned
instructs the Trustee.
In connection with such request and in respect of the Certificates
surrendered to the Trustee herewith for transfer (the "SURRENDERED
CERTIFICATE"), the Holder of such Surrendered Certificates hereby certifies that
the Surrendered Certificate is being transferred pursuant to and in accordance
with Rule 144A under the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), and, accordingly, the undersigned reasonably believes is
purchasing the Surrendered Certificates for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting the requirements
of Rule 144 and the Surrendered Certificate is being transferred in compliance
with any applicable blue sky or securities laws of any state of the United
States or any other applicable jurisdiction.
This certificate and the statements contained herein are made for
the benefit of the Issuer and the Owner Trustee. The undersigned acknowledges
that the Issuer and the Owner Trustee will rely upon the undersigned's
confirmation, acknowledgements and agreements set forth herein, and the
undersigned agrees to notify the Owner Trustee promptly in writing if any of the
undersigned's representations or warranties herein ceases to be accurate and
complete.
Dated: _______________________ *______________________________________
Signature Guaranteed:
[FN]
______________________
* NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate in
every particular, without alteration, enlargement or any change whatever.
Such signature must be guaranteed by an "eligible guarantor institution"
meeting the requirements of the Certificate Registrar, which requirements
include membership or participation in STAMP or such other "signature
guarantee program" as may be determined by the Certificate Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
</FN>
A-9
<PAGE>
EXHIBIT A
- --------%
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFICATE IS TRANSFERABLE ONLY UPON COMPLIANCE WITH CERTAIN PROVISIONS OF
A TRUST AGREEMENT BETWEEN [__________________________] AND [NAME OF OWNER
TRUSTEE] (THE "TRUST AGREEMENT"). THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY SECURITIES LAWS, AND ISSUER HAS NOT BEEN REGISTERED UNDER THE UNITED
STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH THE TRUST INDENTURE AND APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND TO "QUALIFIED
INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), AND
SOLELY WITH RESPECT TO THE INITIAL OFFERING OF THE CERTIFICATES, TO
INSTITUTIONAL "ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A) (1), (2), (3) OR
(7) UNDER THE SECURITIES ACT) UPON DELIVERY OF A REPRESENTATION LETTER TO THE
TRUSTEE.
NO EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED ("ERISA") AND NO OTHER PLAN SUBJECT TO SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), OR ANY
ENTITY THE ASSETS OF WHICH CONSTITUTE OR ARE DEEMED FOR PURPOSES OF ERISA OR
SECTION 4975 OF THE CODE TO CONSTITUTE THE ASSETS OF ANY SUCH PLAN, MAY PURCHASE
THIS CERTIFICATE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASE AND THE HOLDING OF
THIS CERTIFICATE OR SUCH INTEREST BY SUCH PLAN (OR ANY ENTITY THE ASSETS OF
WHICH CONSTITUTE "PLAN ASSETS" OF ANY SUCH PLAN) IS SUBJECT TO A STATUTORY OR
ADMINISTRATIVE EXEMPTION. ANY HOLDER HEREOF OR ANY INTEREST HEREIN THAT IS, OR
IS ACTING ON BEHALF OF OR WITH "PLAN ASSETS" OF, AN EMPLOYEE BENEFIT PLAN
SUBJECT TO ERISA OR A PLAN SUBJECT TO SECTION 4975 OF THE CODE, AND WITH RESPECT
TO WHICH THE TRUSTEE OR THE OWNER TRUSTEE IS A "PARTY IN INTEREST" OR A
"DISQUALIFIED PERSON", BY PURCHASING THIS CERTIFICATE OR SUCH INTEREST
REPRESENTS THAT ITS PURCHASE OF THIS CERTIFICATE OR SUCH INTEREST IS SUBJECT TO
A STATUTORY OR ADMINISTRATIVE EXEMPTION FROM THE PROHIBITED TRANSACTION RULES OF
ERISA AND SECTION 4975 OF THE CODE.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF THE ISSUER THAT SUCH
PURCHASER HAS NOT ACQUIRED NOR WILL IT SELL, TRADE, TRANSFER, ASSIGN,
PARTICIPATE, PLEDGE, HYPOTHECATE, CAUSE TO BE MARKETED, OR OTHERWISE DISPOSE OF
THIS CERTIFICATE (OR ANY INTEREST HEREIN) ON OR THROUGH (I) AN "ESTABLISHED
SECURITIES MARKET" WITHIN
A-10
<PAGE>
THE MEANING OF SECTION 7704(B)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER MARKET OR AN
"INTERDEALER QUOTATION SYSTEM" THAT REGULARLY DISSEMINATES FIRM BUY OR SELL
QUOTATIONS, OR (II) A "SECONDARY MARKET (OR THE SUBSTANTIAL EQUIVALENT THEREOF)"
WITHIN THE MEANING OF CODE SECTION 7704(B)(2).
A-11
<PAGE>
[____________________________________] OWNER TRUST 200[_]-[_]
CLASS R ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of motor vehicle
loans secured by new or used automobiles, vans or light duty trucks and
transferred to the Trust by [____________________].
(This Trust Certificate does not represent an interest in or
obligation of [____________________], [Name of Owner Trustee], the Owner Trustee
or any of their Affiliates, except to the extent described below.)
THIS CERTIFIES THAT [____________________] is the registered owner
of a beneficial ownership interest in certain distributions of
[____________________] Owner Trust 200[_]-[_] (the "Trust") formed by
[_____________________________].
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Trust Certificates referred to in the within-
mentioned Trust Agreement.
[NAME OF OWNER TRUSTEE], not in its [NAME OF OWNER TRUSTEE], not in
indvidual capacity but solely as Owner its individual capacity but solely
Trustee or as Owner Trustee
By__________________________________ By_______________________________
Authenticating Agent
By__________________________________
The Trust was created pursuant to a Trust Agreement dated as of
[__________] [__], 200[_] (the "TRUST AGREEMENT"), between the Depositor and
[Name of Owner Trustee], as owner trustee (the "OWNER TRUSTEE"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Trust Certificates
designated as a Class R Asset Backed Certificates (together with the Class A
Asset Backed Certificates, the "TRUST CERTIFICATES"). Also issued under the
Indenture dated as of [_______________________] [__], 200[_], among the Trust,
[_____________________________], as trustee and indenture collateral agent, are
three classes of Notes designated as "Class A-1 [_____]% Asset Backed Notes"
(the "CLASS A-1 NOTES"), "Class A-2 [_____]% Asset Backed Notes" (the "CLASS A-2
NOTES"), the "Class A-3 [_____]% Asset Backed Notes (the "CLASS A-3 NOTES" and
together with the Class A-1 Notes and the Class A-2 Notes, the "NOTES"). This
Trust Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Trust Certificate by virtue of the acceptance hereof assents and by which such
holder is bound. The property of the Trust includes a pool of retail installment
loan contracts secured by new and used automobiles, vans or light duty trucks
(the "RECEIVABLES"), all
A-12
<PAGE>
monies due or to become due thereunder on or after Initial Cutoff Date, security
interests in the vehicles financed thereby, certain bank accounts and the
proceeds thereof, proceeds from claims on certain insurance policies and certain
other rights under the Trust Agreement and the Sale and Servicing Agreement and
all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the
fifteenth day of each month or, if such fifteenth day is not a Business Day, the
next succeeding Business Day (the "PAYMENT DATE"), commencing in [__________]
[__], 200[_], to the Person in whose name this Trust Certificate is registered
at the close of business on the Business Day preceding such Payment Date (the
"RECORD DATE") such Certificateholder's fractional undivided interest in the
amount to be distributed to Class R Certificateholders, if any on such Payment
Date. No payments will be paid on this Class R Certificate until the Class A
Notes and the Class A Certificates have been paid in full.
The holder of this Trust Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Trust Certificate are
subordinated to the rights of the Noteholders and the Class A Certificateholders
as described in the Sale and Servicing Agreement, the Indenture and the Trust
Agreement, as applicable.
It is the intent of the Seller, Servicer, the Depositor and
Certificateholders that, for purposes of Federal income taxes, if the
Certificates are treated as held by a single person, the Trust will be
disregarded as an entity separate from its owner and if the Certificates are
treated or held by two or more persons, the Trust will be treated as a
partnership and the Certificateholders will be treated as partners in that
partnership. The Certificateholders by acceptance of a Trust Certificate, agree
to treat, and to take no action inconsistent with such treatment of, the Trust
Certificates for such tax purposes.
Each Certificateholder, by its acceptance of a Trust Certificate,
covenants and agrees that such Certificateholder will not at any time institute
against the Trust, the Transferor or the Depositor, or join in any institution
against the Trust, the Transferor or 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
in connection with any obligations relating to the Trust Certificates, the
Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Trust Certificate will be made as provided in
the Trust Agreement by or on behalf of the Owner Trustee by wire transfer or
check mailed to the Certificateholder of record in the Trust Certificate
Register without the presentation or surrender of this Trust Certificate or the
making of any notation hereon. Except as otherwise provided in the Trust
Agreement and notwithstanding the above, the final distribution on this Trust
Certificate will be made after due notice by the Owner Trustee of the pendency
of such distribution and only upon presentation and surrender of this Trust
Certificate at the office or agency maintained for the purpose by the Owner
Trustee in the Borough of Manhattan, The City of New York.
A-13
<PAGE>
Reference is hereby made to the further provisions of this Trust
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Trust Certificate shall not entitle the holder hereof to any benefit under
the Trust Agreement or the Sale and Servicing Agreement or be valid for any
purpose.
THIS TRUST CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and
not in its individual capacity, has caused this Trust Certificate to be duly
executed.
[_______________________________]
OWNER TRUST 200[_]-[_]
By: [NAME OF OWNER TRUSTEE], not in
its individual capacity but solely as
Owner Trustee
Dated: _______________________ By:____________________________________
A-14
<PAGE>
(Reverse of Trust Certificate)
The Trust Certificates do not represent an obligation of, or an
interest in, the Seller, the Servicer, the Transferor, the Depositor, the Owner
Trustee or any Affiliates of any of them and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated
herein or in the Trust Agreement, the Indenture or the Basic Documents. In
addition, this Trust Certificate is not guaranteed by any governmental agency or
instrumentality and is limited in right of payment to certain collections with
respect to the Receivables, all as more specifically set forth herein and in the
Sale and Servicing Agreement. The Trust Certificates are limited in right of
payment to certain collections and recoveries respecting the Receivables, all as
more specifically set forth in the Sale and Servicing Agreement. A copy of each
of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Seller, and at such
other places, if any, designated by the Seller, by any Certificateholder upon
written request.
The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Seller and the rights of the Certificateholders under the
Trust Agreement at any time by the Seller and the Owner Trustee with the consent
of the holders of the Notes and the Trust Certificates evidencing not less than
a majority of the outstanding Notes and the Certificate Balance. Any such
consent by the holder of this Trust Certificate shall be conclusive and binding
on such holder and on all future holders of this Trust Certificate and of any
Trust Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this Trust
Certificate. The Trust Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the holders of any of the Trust
Certificates.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Trust Certificate is
registerable in the Certificate Register upon surrender of this Trust
Certificate for registration of transfer at the offices or agencies of the
Certificate Registrar maintained by the Owner Trustee in the Borough of
Manhattan, The City of New York, accompanied by a written instrument of transfer
in form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the holder hereof or such holder's attorney duly authorized in
writing, and thereupon one or more new Trust Certificates in authorized
denominations evidencing the same aggregate interest in the Trust will be issued
to the designated transferee. The initial Certificate Registrar appointed under
the Trust Agreement is Norwest Bank Minnesota, National Association.
As provided in the Trust Agreement and subject to certain
limitations therein set forth, Trust Certificates are exchangeable for new Trust
Certificates in authorized denominations evidencing the same aggregate
denomination, as requested by the holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Owner Trustee or the Certificate Registrar may require payment of a sum
sufficient to cover any Tax or governmental charge payable in connection
therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the person in whose name
this Trust Certificate is registered
A-15
<PAGE>
as the owner hereof for all purposes, and none of the Owner Trustee, the
Certificate Registrar, nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Trust Agreement and the Sale and Servicing Agreement and the disposition of all
property held as part of the Trust. The Transferor may at its option purchase
the corpus of the Trust at a price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect early retirement of the Trust Certificates; however, such right of
purchase is exercisable, subject to certain restrictions, only as of the last
day of any Monthly Period as of which the Pool Balance is 15% or less of the
Original Pool Balance.
The Trust Certificates may not be acquired by (a) an employee
benefit plan (as defined in Section 3(3) of ERISA) that is subject to the
provisions of Title 1 of ERISA, (b) a plan described in Section 4975(e) (l) of
the Code or (c) any entity whose underlying assets include plan assets by reason
of a plan's investment in the entity (each, a "Benefit Plan"). By accepting and
holding this Trust Certificate, the Holder hereof shall be deemed to have
represented and warranted that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of
the Depositor, the Transferor or the Servicer, as the case may be, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Certificate
or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
A-16
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (Please
print or type name and address, including postal zip code, of assignee) the
within Trust Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing _______________________________________________
Attorney to transfer said Trust Certificate on the books of the Trust
Certificate Registrar, with full power of substitution in the premises.
The undersigned has requested an exchange or transfer of this
Certificate in the form of an equal principal amount of Certificates evidenced
by one or more Definitive Certificates, to be delivered to the undersigned or,
in the case of a transfer of such Certificate, to such Person as the undersigned
instructs the Trustee.
In connection with such request and in respect of the Certificates
surrendered to the Trustee herewith for transfer (the "SURRENDERED
CERTIFICATE"), the Holder of such Surrendered Certificates hereby certifies that
the Surrendered Certificate is being transferred pursuant to and in accordance
with Rule 144A under the United States Securities Act of 1933, as amended (the
"SECURITIES ACT"), and, accordingly, the undersigned reasonably believes is
purchasing the Surrendered Certificates for its own account, or for one or more
accounts with respect to which such Person exercises sole investment discretion,
and such Person and each such account is "qualified institutional buyer" within
the meaning of Rule 144A, in each case in a transaction meeting the requirements
of Rule 144 and the Surrendered Certificate is being transferred in compliance
with any applicable blue sky or securities laws of any state of the United
States or any other applicable jurisdiction.
This certificate and the statements contained herein are made for
the benefit of the Issuer and the Owner Trustee. The undersigned acknowledges
that the Issuer and the Owner Trustee will rely upon the undersigned's
confirmation, acknowledgements and agreements set forth herein, and the
undersigned agrees to notify the Owner Trustee promptly in writing if any of the
undersigned's representations or warranties herein ceases to be accurate and
complete.
Dated: _______________________ * _____________________________________
Signature Guaranteed:
(*) NOTICE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Certificate
in every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Certificate Registrar, which
requirements include membership or participation in STAMP or such other
"signature guarantee program" as may be determined by the Certificate
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.
A-17
<PAGE>
EXHIBIT B
[FORM OF]
CERTIFICATE OF TRUST OF
[______________________________]
OWNER TRUST 200[_]-[_]
THIS Certificate of Trust of [____________________________] Owner
Trust 200[_]-[_] (the "TRUST"), dated as of __________ __, 200[_], is being duly
executed and filed by _____________________ , a _______________ and ____________
[______________], an individual, as trustees, to form a business trust under the
Delaware Business Trust Act (12 Del. Code, (S) 3801 ET SEQ.).
1. Name. The name of the business trust formed hereby is
[____________________] Owner Trust 200[_]-[_].
2. This Certificate of Trust will be effective __________,
200[_].
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
[NAME OF OWNER TRUSTEE], not in its
individual capacity but solely as Owner
Trustee of the Trust.
By:____________________________________
Name:
Title:
B-1
===============================================================================
Exhibit 4.3
[___________] OWNER TRUST 200[__]-[__]
Class A-1 [__]% Asset Backed Notes
Class A-2 [__]% Asset Backed Notes
Class A-3 [__]% Asset Backed Notes
_____________________
FORM OF INDENTURE
Dated as of [_______], 200[__]
_____________________
[NAME OF INDENTURE TRUSTEE]
Indenture Trustee
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 Definitions....................................................2
Section 1.2 Incorporation by Reference of Trust Indenture Act.............10
Section 1.3 Rules of Construction.........................................10
ARTICLE II
THE NOTES
Section 2.1 Form..........................................................10
Section 2.2 Execution, Authentication and Delivery........................11
Section 2.3 Temporary Notes...............................................11
Section 2.4 Registration; Registration of Transfer and Exchange...........12
Section 2.5 Mutilated, Destroyed, Lost or Stolen Notes....................13
Section 2.6 Persons Deemed Owner..........................................14
Section 2.7 Payment of Principal and Interest; Defaulted Interest.........14
Section 2.8 Cancellation..................................................15
Section 2.9 Release of Collateral.........................................15
Section 2.10 Book-Entry Notes..............................................15
Section 2.11 Notices to Clearing Agency....................................16
Section 2.12 Definitive Notes..............................................16
ARTICLE III
COVENANTS
Section 3.1 Payment of Principal and Interest.............................17
Section 3.2 Maintenance of Office or Agency...............................17
Section 3.3 Money for Payments To Be Held in Trust........................17
Section 3.4 Existence.....................................................19
Section 3.5 Protection of Trust Fund......................................19
Section 3.6 Opinions as to Trust Fund.....................................20
Section 3.7 Performance of Obligations; Servicing of Receivables..........20
Section 3.8 Negative Covenants............................................22
Section 3.9 Annual Statement as to Compliance.............................23
Section 3.10 Issuer May Consolidate, Etc...................................23
Section 3.11 Successor or Transferee.......................................25
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<PAGE>
Section 3.12 No Other Business.............................................25
Section 3.13 No Borrowing..................................................25
Section 3.14 Servicer's Obligations........................................25
Section 3.15 Guarantees, Loans, Advances and Other Liabilities.............25
Section 3.16 Capital Expenditures..........................................26
Section 3.17 Compliance with Laws..........................................26
Section 3.18 Restricted Payments...........................................26
Section 3.19 Notice of Events of Default...................................26
Section 3.20 Further Instruments and Acts..................................26
Section 3.21 Amendments of Sale and Servicing Agreement and Trust
Agreement....................................................26
Section 3.22 Income Tax Characterization...................................26
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 Satisfaction and Discharge of Indenture.......................27
Section 4.2 Application of Trust Money....................................28
Section 4.3 Repayment of Moneys Held by Paying Agent......................28
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.1 Events of Default.............................................28
Section 5.2 Rights Upon Event of Default..................................30
Section 5.3 Collection of Indebtedness and Suits for Enforcement by
Indenture Trustee............................................31
Section 5.4 Remedies......................................................33
Section 5.5 Optional Preservation of the Trust Fund.......................34
Section 5.6 Priorities....................................................34
Section 5.7 Limitation of Suits...........................................35
Section 5.8 Unconditional Rights of Noteholders To Receive Principal
and Interest.................................................36
Section 5.9 Restoration of Rights and Remedies............................36
Section 5.10 Rights and Remedies Cumulative................................36
Section 5.11 Delay or Omission Not a Waiver................................36
Section 5.12 Control by Noteholders........................................37
Section 5.13 Waiver of Past Defaults.......................................37
Section 5.14 Undertaking for Costs.........................................38
Section 5.15 Waiver of Stay or Extension Laws..............................38
Section 5.16 Action on Notes...............................................38
Section 5.17 Performance and Enforcement of Certain Obligations............38
Section 5.18 Claims Under Policy...........................................39
Section 5.19 Preference Claims.............................................40
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<PAGE>
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.1 Duties of Indenture Trustee...................................41
Section 6.2 Rights of Indenture Trustee...................................42
Section 6.3 Individual Rights of Indenture Trustee........................44
Section 6.4 Indenture Trustee's Disclaimer................................44
Section 6.5 Notice of Defaults............................................44
Section 6.6 Reports by Indenture Trustee to Holders.......................44
Section 6.7 Compensation and Indemnity....................................44
Section 6.8 Replacement of Indenture Trustee..............................45
Section 6.9 Successor Indenture Trustee by Merger.........................47
Section 6.10 Appointment of Co-Indenture Trustee or Separate Indenture
Trustee......................................................47
Section 6.11 Eligibility; Disqualification.................................48
Section 6.12 Preferential Collection of Claims Against Issuer..............48
Section 6.13 Appointment and Powers........................................49
Section 6.14 Performance of Duties.........................................49
Section 6.15 Limitation on Liability.......................................49
Section 6.16 Reliance Upon Documents.......................................50
Section 6.17 [RESERVED]....................................................50
Section 6.18 [RESERVED]....................................................50
Section 6.19 Representations and Warranties of the Indenture Trustee.......50
Section 6.20 Waiver of Setoffs.............................................51
Section 6.21 Control by the Controlling Party..............................51
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.1 Issuer To Furnish To Indenture Trustee Names and
Addresses of Noteholders.....................................51
Section 7.2 Preservation of Information; Communications to Noteholders....51
Section 7.3 Reports by Issuer.............................................52
Section 7.4 Reports by Indenture Trustee..................................52
Section 7.5 Fiscal Year...................................................52
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.1 Collection of Money...........................................52
Section 8.2 Trust Accounts................................................53
Section 8.3 General Provisions Regarding Accounts.........................53
Section 8.4 Release of Trust Fund.........................................54
Section 8.5 Opinion of Counsel............................................54
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<PAGE>
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 Supplemental Indentures.......................................55
Section 9.2 Supplemental Indentures with Consent of Noteholders...........56
Section 9.3 Execution of Supplemental Indentures..........................57
Section 9.4 Effect of Supplemental Indenture..............................57
Section 9.5 Conformity With Trust Indenture Act...........................58
Section 9.6 Reference in Notes to Supplemental Indentures.................58
ARTICLE X
REDEMPTION OF NOTES
Section 10.1 Redemption....................................................58
Section 10.2 Form of Redemption Notice.....................................59
Section 10.3 Notes Payable on Redemption Date..............................59
ARTICLE XI
MISCELLANEOUS
Section 11.1 Compliance Certificates and Opinions, etc.....................60
Section 11.2 Form of Documents Delivered to Indenture Trustee..............61
Section 11.3 Acts of Noteholders...........................................62
Section 11.4 Notices, etc., to Indenture Trustee, Issuer, Insurer and
Rating Agencies..............................................62
Section 11.5 Notices to Noteholders; Waiver................................63
Section 11.6 Alternate Payment and Notice Provisions.......................64
Section 11.7 Conflict with Trust Indenture Act.............................64
Section 11.8 Effect of Headings and Table of Contents......................64
Section 11.9 Successors and Assigns........................................65
Section 11.10 Separability..................................................65
Section 11.11 Benefits of Indenture.........................................65
Section 11.12 Legal Holidays................................................65
Section 11.13 GOVERNING LAW.................................................65
Section 11.14 Counterparts..................................................65
Section 11.15 Recording of Indenture........................................65
Section 11.16 Trust Obligation..............................................65
Section 11.17 No Petition...................................................66
Section 11.18 Inspection....................................................66
Exhibit A - Schedule of Receivables
Exhibit B-1 - Form of Class A-1 Note
Exhibit B-2 - Form of Class A-2 Note
Exhibit B-3 - Form of Class A-3 Note
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<PAGE>
CROSS-REFERENCE TABLE
TIA INDENTURE SECTION
- ------------- -------
310 (a)(1)............................................... 6.11
(a)(2)............................................... 6.11
(a)(3)...............................................6.10; 6.11
(a)(4)............................................... N.A.
(a)(5)............................................... 6.11
(b).................................................. 6.8; 6.11
(c).................................................. N.A.
311 (a).................................................. 6.12
(b).................................................. 6.12
(c).................................................. N.A.
312 (a).................................................. 7.1
(b).................................................. 7.2
(c).................................................. 7.2
313 (a).................................................. 7.4
(b)(1)............................................... 7.4
(b)(2)............................................... 7.4
(c).................................................. 11.5
(d).................................................. 7.3
314 (a).................................................. 3.9; 7.3
(b).................................................. 11.15
(c)(1)............................................... 11.1
(c))2)............................................... 11.1
(c)(3)............................................... 11.1
(d).................................................. 11.1
(e).................................................. 11.1
(f).................................................. 1.1; 11.1
315 (a).................................................. 6.1
(b).................................................. 6.5; 11.5
(c).................................................. 6.1
(d).................................................. 6.1
(e).................................................. 5.14
316 (last sentence)...................................... 1.1
(a)(1)(A)............................................ 5.12
(a)(1)(B)............................................ 5.13
(a)(2)............................................... N.A.
(b).................................................. 5.7; 5.8
(c).................................................. N.A.
317 (a)(1)............................................... 5.3
(a)(2)............................................... 5.3
(b).................................................. 3.3
-v-
<PAGE>
TIA INDENTURE SECTION
- ------------- -------
318 (a).................................................. 11.7
(b).................................................. N.A.
(c).......................................... 11.7
- ------------
1. Note: This Cross Reference Table shall not, for any purpose, be deemed to
be part of this Indenture.
2. N.A. means Not Applicable.
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<PAGE>
INDENTURE dated as of [_______], [__], 200[__], between
[____________] OWNER TRUST 200[__]-[__], a Delaware business trust (the
"ISSUER") and [Name of Indenture Trustee], a [Name of State] [National] banking
association, as trustee (the "INDENTURE TRUSTEE").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Issuer's Class A-1
[___]% Asset Backed Notes, Class A-2 [___]% Asset Backed Notes and the Class A-3
[___]% Asset Backed Notes:
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Collateral (as defined below) as collateral to the Indenture Trustee on
behalf of the Noteholders.
[_________], a [_________] financial guaranty insurance company (the
"INSURER"), has issued and delivered a financial guaranty insurance policy,
dated the Closing Date (with endorsements, the "POLICY"), pursuant to which the
Insurer guarantees Scheduled Payments, as defined in the Policy.
As an inducement to the Insurer to issue and deliver the Policy, the
Issuer and the Insurer have executed and delivered the Insurance and Indemnity
Agreement, dated as of [__________] [__], 2000 (as amended from time to time,
the "INSURANCE AGREEMENT"), among the Insurer, the Issuer, the Transferor and
[__________].
As an additional inducement to the Insurer to issue the Policy, and
as security for the performance by the Issuer of the Insurer Secured Obligations
and as security for the performance by the Issuer of the Indenture Trustee
Secured Obligations, the Issuer has agreed to assign the Collateral (as defined
below) as collateral to the Indenture Trustee for the benefit of the Issuer
Secured Parties, as their respective interests may appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee on the Closing
Date, for the benefit of the Issuer Secured Parties to secure the Issuer Secured
Obligations, all of the Issuer's right, title and interest in and to all
accounts, money, chattel paper, securities, instruments, documents, deposit
accounts, certificates of deposit, letters of credit, advices of credit,
banker's acceptances, general intangibles, contract rights, investment property,
goods and other property consisting of, arising from or relating to (a) the
Initial Receivables, and all moneys due thereon after the Initial Cutoff Date;
(b) the Subsequent Receivables and all moneys due thereon or in respect thereof
after the related Subsequent Cutoff Date; (c) an assignment of the security
interests in the Financed Vehicles granted by Obligors pursuant to the Initial
Receivables and any Subsequent Receivables and any other interest of the Issuer
in the Financed Vehicles; (d) any proceeds with respect to the Initial
Receivables and the Subsequent Receivables repurchased pursuant to the terms of
the Sale and Servicing Agreement; (e) all rights under any Service Contracts on
the related Financed Vehicles; (f) any proceeds with respect to the Initial
Receivables and the Subsequent Receivables from claims on any physical damage,
theft, credit life or disability insurance policies covering Financed Vehicles
or Obligors and any proceeds from liquidation of any Initial Receivable or
Subsequent Receivable and Net Liquidation Proceeds with respect to the Initial
Receivables and any Subsequent Receivable; (g) all funds on
<PAGE>
deposit or other property from time to time in the Trust Accounts, and in all
investments and proceeds thereof and all rights of the Issuer therein (including
all income dividends, earnings, profits or other distributions of cash or other
property thereon); (h) the Issuer's rights and benefits, but none of its
obligations or burdens, under the Sale and Servicing Agreement and each
Subsequent Transfer Agreement, including the delivery requirements,
representations and warranties and the cure and repurchase obligations of
[__________] and [__________] under the Sale and Servicing Agreement and each
Subsequent Transfer Agreement; (i) all items contained in the Receivables Files,
computer tapes or disk drives, and any and all other documents that [__________]
keeps on file in accordance with its customary procedures relating to the
Receivables, the Obligors or the Financed Vehicles, and (j) all present and
future claims, demands, causes and chooses in action in respect of any or all of
the foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion, voluntary or involuntary, into cash or other liquid
property, all proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing (collectively, the "COLLATERAL").
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, and all amounts owing hereunder equally and ratably without prejudice,
priority or distinction except as set forth herein, and to secure compliance
with the provisions of this Indenture, all as provided in this Indenture.
The Indenture Trustee on behalf of the Holders of the Notes, and for
the benefit of the Insurer acknowledges such Grant, accepts the trusts under
this Indenture in accordance with the provisions of this Indenture and agrees to
perform its duties required in this Indenture in accordance with the terms
hereof.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1 DEFINITIONS. Except as otherwise specified herein, the
following terms have the respective meanings set forth below for all purposes of
this Indenture.
"ACT" has the meaning specified in Section 11.3(a).
"AUTHORIZED OFFICER" means, with respect to the Issuer and the
Servicer, any officer of the Owner Trustee or the Servicer, as applicable, who
is authorized to act for the Owner Trustee or the Servicer, as applicable, in
matters relating to the Issuer or the Servicer and who is identified on the list
of Authorized Officers delivered by the Servicer to the Indenture Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter) or, in the case of the Owner Trustee, a Responsible Officer of the
Owner Trustee.
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<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 2.10.
"CLASS A-1 INTEREST RATE" means [_____]%.
"CLASS A-2 INTEREST RATE" means [_____]%.
"CLASS A-3 INTEREST RATE" means [_____]%.
"CLASS A-1 NOTES" means the Class A-1 Notes, substantially in the
form of Exhibit B-1.
"CLASS A-2 NOTES" means the Class A-2 Notes, substantially in the
form of Exhibit B-2.
"CLASS A-3 NOTES" means the Class A-3 Notes, substantially in the
form of Exhibit B-3.
"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.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in the Granting Clause of
this Indenture.
"CORPORATE TRUST OFFICE" means the principal office of the Indenture
Trustee at which at any particular time its corporate trust business shall be
administered which office at date of the execution of this Agreement is located
at [______], [______], [______], [______], Attention: Corporate Trust Department
or at such other address as the Indenture Trustee may designate from time to
time by notice to the Noteholders, the Insurer, the Servicer and the Issuer, or
the principal corporate trust office of any successor Indenture Trustee (the
address of which the successor Indenture Trustee will notify the Noteholders and
the Issuer).
"DEFAULT" means any occurrence that is, or with notice or the lapse
of time or both would become, an Event of Default.
"DEFINITIVE NOTES" has the meaning specified in Section 2.10.
"EVENT OF DEFAULT" has the meaning specified in Section 5.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
-3-
<PAGE>
"EXECUTIVE OFFICER" means, with respect to any corporation or
limited liability company, the Chief Executive Officer, Chief Operating Officer,
Chief Financial Officer, President, Executive Vice President, any Vice
President, the Secretary or the Treasurer of such corporation or limited
liability company; with respect to any partnership, any general partner thereof,
and with respect to any limited liability company, any Manager.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon or a
security interest in or right of set-off against, deposit, or set over and
confirm pursuant to 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" means the Person in whose name a Note is
registered on the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"INDENTURE" means this Indenture as amended and supplemented from
time to time.
"INDENTURE TRUSTEE" means [____________] not in its individual
capacity but as trustee under this Indenture, or any successor Indenture Trustee
under this Indenture.
-4-
<PAGE>
"INDENTURE TRUSTEE SECURED OBLIGATIONS" means all amounts and
obligations which the Issuer may at any time owe to the Indenture Trustee in its
individual capacity and the Noteholders under this Indenture or the Notes.
"INDEPENDENT" means, when used with respect to any specified Person,
that the person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Seller and any Affiliate of any of the foregoing persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be
delivered to the Indenture Trustee under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, prepared
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.
"INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" has the meaning
assigned to such term in the Insurance Agreement.
"INSURER DEFAULT" has the meaning assigned to such term in the
Insurance Agreement.
"INSURER SECURED OBLIGATIONS" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Insurer under this
Indenture, the Insurance Agreement or any other Basic Document.
"INTEREST RATE" means with respect to the (i) Class A-1 Notes, the
Class A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate, and
(iii) Class A-3 Notes, the Class A-3 Interest Rate.
"ISSUER" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Indenture Trustee.
"ISSUER SECURED OBLIGATIONS" means the Insurer Secured Obligations
and the Indenture Trustee Secured Obligations.
"ISSUER SECURED PARTIES" means each of (i) the Indenture Trustee in
respect of the Indenture Trustee Secured Obligations and (ii) the Insurer in
respect of the Insurer Secured Obligations.
"NOTE" means any of the Class A-1 Notes, Class A-2 Notes or Class
A-3 Notes substantially in the form of Exhibit B-1, Exhibit B-2 and Exhibit B-3,
respectively.
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<PAGE>
"NOTE DEPOSITORY AGREEMENT" means the agreement among the Issuer,
the Indenture Trustee, the Servicer and The Depository Trust Company, as the
initial Clearing Agency, dated [________] [__], 200[__], substantially in the
form of Exhibit C.
"NOTE MAJORITY" means the Holders of Notes evidencing a majority of
the Outstanding Amount of the Notes.
"NOTE OWNER" means, with respect to a Book-Entry Note, the person
who is the owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency, or on the books of a Person maintaining an account with such
Clearing Agency (directly as a Clearing Agency Participant or as an indirect
participant), in each case in accordance with the rules of such Clearing Agency.
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings
specified in Section 2.4.
"NOTICE OF CLAIM" has the meaning specified in Section 5.18.
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Officer of the Owner Trustee, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
Section 314, 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, the Seller or the Servicer and who shall be
satisfactory to the Indenture Trustee and, if addressed to the Insurer,
satisfactory to the Insurer, and which shall comply with any applicable
requirements of Section 11.01, and shall be in form and substance satisfactory
to the Indenture Trustee, and if addressed to the Insurer, satisfactory to the
Insurer.
"OUTSTANDING" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i)Notes theretofore canceled by the Note Registrar or
delivered the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
amount has been theretofore deposited with the Indenture Trustee or Paying
Agent in trust for the Holders of such Notes (provided, however, that if
such Notes are to be redeemed, notice of such has been duly given pursuant
to this Indenture or provision, satisfactory to the Indenture Trustee);
and
(iii) Notes in exchange for or in lieu of other Notes which have
authenticated and delivered pursuant to this Indenture unless evidence
satisfactory to the Indenture Trustee is presented that any such Notes are
by a bona fide purchaser;
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PROVIDED, HOWEVER, that Notes which have been paid with proceeds of the Policy
shall continue to remain Outstanding for purposes of this Indenture until the
Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Indenture Trustee, and the Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Insurer; PROVIDED,
FURTHER, that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor on the Notes, the Seller, the Servicer, or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Indenture Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the
Indenture Trustee either actually knows to be so owned or has received written
notice thereof shall be so disregarded. Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Issuer, any other obligor upon the
Notes, the Seller or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all
Notes or class of Notes, as applicable, Outstanding at the date of
determination.
"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 payments to and distributions
from the Collection Account and the Note Distribution Account, including payment
of principal of or interest on the Notes on behalf of the Issuer.
"POLICY" means the financial guaranty insurance policy issued by the
Insurer with respect to the Notes, including any endorsements thereto, in the
form of Annex I to the Insurance Agreement.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"PREFERENCE CLAIM" has the meaning specified in Section 5.19.
"PROCEEDING" means any suit in equity, action at law or other
judicial or administrative proceeding.
"RECORD DATE" means, with respect to a Payment Date or Redemption
Date, the close of business on the Business Day preceding such Payment Date or
Redemption Date.
"REDEMPTION DATE" means in the case of a redemption of the Notes
pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section
10.1(b), the Payment Dates specified by the Servicer or the Issuer pursuant to
Section 10.1(a) or (b) as applicable.
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"REDEMPTION PRICE" means (a) in the case of a redemption of the
Notes pursuant to Section 10.1(a), an amount equal to the unpaid principal
amount of the then Outstanding Amount of each class of Notes being redeemed plus
accrued and unpaid interest thereon to but excluding the Redemption Date, or (b)
in the case of a payment made to Noteholders pursuant to Section 10.1(b), the
amount on deposit in the Note Distribution Account, but not in excess of the
amount specified in clause (a) above.
"RESPONSIBLE OFFICER" means, (i) with respect to the Indenture
Trustee, any officer within the Corporate Trust Office of the Indenture Trustee,
including any Vice President, Assistant Vice President, Assistant Treasurer,
Assistant Secretary, or any other officer of the Indenture Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also, with respect to a particular matter, any other officer to
whom such matter is referred because of such officer's knowledge of and
familiarity with the particular subject and (ii) with respect to the Owner
Trustee, any officer within the Corporate Trust Administration office of the
Owner Trustee, including any Vice President, Assistant Vice President, Assistant
Treasurer, Assistant Secretary or any other officer of the Owner Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing
Agreement dated as of [________] [__], 200[__], among the Issuer, the Seller,
the Servicer, the Transferor, the Depositor, the Indenture Trustee, the Backup
Servicer and the Custodian, as the same may be amended or supplemented from time
to time.
"SCHEDULE OF RECEIVABLES" means the listing of the Receivables set
forth in Exhibit A (which Exhibit may be in the form of microfiche); as
supplemented on each Subsequent Transfer Date to reflect the assignment to the
Issuer of Subsequent Receivables.
"SCHEDULED PAYMENTS" has the meaning specified in the Policy.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"STATE" means any one of the 50 states of the United States of
America or the District of Columbia.
"SUCCESSOR SERVICER" has the meaning specified in Section 3.7(e).
"TERMINATION DATE" means the latest to occur of (i) the expiration
of the Policy and the return of the Policy to the Insurer for cancellation, (ii)
the date on which the Insurer shall have received payment and performance of all
Insurer Issuer Secured obligations and (iii) the date on which the Indenture
Trustee shall have received payment and performance of all Indenture Trustee
Secured Obligations.
"TRUST FUND" means all money, instruments, rights and other property
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Indenture Trustee), including all proceeds thereof.
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"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939
as in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
Except as otherwise specified herein, the following terms have the
respective meanings set forth in the Sale and Servicing Agreement as in effect
on the Closing Date for all purposes of this Indenture, and the definitions of
such terms are equally applicable both to the singular and plural forms of such
terms:
SECTION OF SALE TERM
TERM AND SERVICING AGREEMENT
- ---- -----------------------
Affiliate............................. Section 1.1
Backup Servicer....................... Section 1.1
Backup Servicer Fee................... Section 1.1
Basic Documents....................... Section 1.1
Business Day.......................... Section 1.1
Class................................. Section 1.1
Closing Date.......................... Section 1.1
Collection Account.................... Section 1.1
Controlling Party..................... Section 1.1
Depositor............................. Section 1.1
Distribution Amount................... Section 1.1
Draw Date............................. Section 1.1
Payment Date.......................... Section 1.1
Eligible Investments.................. Section 1.1
Final Scheduled Payment Date.......... Section 1.1
Financed Vehicle...................... Section 1.1
Indenture Trustee Fee................. Section 1.1
Noteholders' Distributable Amount..... Section 1.1
Obligor............................... Section 1.1
Original Pool Balance................. Section 1.1
Payment Date.......................... Section 1.1
Person................................ Section 1.1
Policy Claim Amount................... Section 1.1
Pool Balance.......................... Section 1.1
Rating Agency......................... Section 1.1
Rating Agency Condition............... Section 1.1
Receivable............................ Section 1.1
Remaining Pre-Funding Amount.......... Section 1.1
Seller................................ Section 1.1
Servicer.............................. Section 1.1
Servicer Default...................... Section 1.1
Trust Accounts........................ Section 1.1
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Capitalized terms used herein and not otherwise defined herein or in
the Sale and Servicing Agreement have the meanings assigned to them in the Trust
Agreement.
Section 1.2 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings: "Commission" means
the Securities and Exchange Commission. "Indenture Securities" means the Notes.
"Indenture Securityholder" 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 1.3 RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the
plural include the singular.
ARTICLE II
THE NOTES
Section 2.1 FORM. The Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes, in each case, together with the Indenture Trustee's certificate
of authentication, shall be in substantially the form set forth in Exhibit B-1,
Exhibit B-2 and Exhibit B-3, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
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Each Note shall be dated the date of its authentication. The terms
of the Notes set forth in Exhibit B are part of the terms of this Indenture.
Section 2.2 EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Indenture Trustee shall upon receipt of the Policy and Issuer
Order authenticate and deliver Class A-1 Notes for original issue in an
aggregate principal amount of $[_______], Class A-2 Notes for original issue in
the aggregate principal amount of $[_______] and Class A-3 Notes for original
issue in the aggregate principal amount of $[_______]. Notes Outstanding at any
time may not exceed such amount except as provided in Section 2.5.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in $1,000 integral multiples thereof (except for one Note of each class which
may be issued in a denomination other than an integral multiple of $1,000).
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
Section 2.3 TEMPORARY NOTES. Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Indenture
Trustee shall authenticate and deliver, temporary Notes which are printed,
lithographed, typewritten, mimeographed or otherwise produced, of the tenor of
the Definitive Notes in lieu of which they are issued and with such variations
not inconsistent with the terms of this Indenture as the officers executing such
Notes may determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive
Notes to be prepared without unreasonable delay. After the preparation of
Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes
upon surrender of the temporary Notes at the office or agency of the Issuer to
be maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver in exchange
therefor a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
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Section 2.4 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The
Issuer shall cause to be kept a register (the "NOTE REGISTER") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Indenture Trustee shall be "Note Registrar" for the purpose of registering Notes
and transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Indenture Trustee is appointed by the
Issuer as Note Registrar, the Issuer will give the Indenture Trustee prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location, of the Note Register, and the Indenture Trustee
shall have the right to inspect the Note Register at all reasonable times and to
obtain copies thereof, and the Indenture Trustee shall have the right to rely
upon a certificate executed on behalf of the Note Registrar by an Executive
Officer thereof as to the names and addresses of the Holders of the Notes and
the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the
office or agency of the Issuer to be maintained as provided in Section 3.2, if
the requirements of Section 8-401(1) of the UCC are met the Issuer shall execute
and upon its request the 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, in any authorized
denominations, of the same class and a like aggregate principal amount.
Subject to the restrictions set forth in this Section 2.4, at the
option of the Holder, Notes may be exchanged for other Notes in any authorized
denominations, of the same Class and a like aggregate principal amount, upon
surrender of the Notes to be exchanged at such office or agency. Whenever any
Notes are so surrendered for exchange, if the requirements of Section 8-401(1)
of the UCC are met the Issuer shall execute and upon its request the 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 (i) 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 an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such Note 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 Note Registrar may require payment of a
sum sufficient to cover any
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tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Notes, other than exchanges pursuant to
Section 2.3 or 9.6 not involving any transfer.
The preceding provisions of this section notwithstanding, the Issuer
shall not be required to make and the Note Registrar need not register transfers
or exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
Section 2.5 MUTILATED, DESTROYED, LOST OR STOLEN NOTES. If (i) any
mutilated Note is surrendered to the Indenture Trustee, or the Indenture Trustee
receives evidence to its satisfaction of the destruction, loss or theft of any
Note, and (ii) there is delivered to the Indenture Trustee and the Insurer
(unless an Insurer Default shall have occurred and be continuing) such security
or indemnity as may be required by it to hold the Issuer, the Indenture Trustee
and the Insurer harmless, then, in the absence of notice to the Issuer, the Note
Registrar or the Indenture Trustee that such Note has been acquired by a bona
fide purchaser, and provided that the requirements of Section 8-405 of the UCC
are met, 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; PROVIDED,
HOWEVER, that if any such destroyed, lost or stolen Note, but not a mutilated
Note, shall have become or within seven days shall be due and payable, or shall
have been called for redemption, instead of issuing a replacement Note, the
Issuer may pay such destroyed, lost or stolen Note when so due or payable or
upon the Redemption Date without surrender thereof. If, after the delivery of
such replacement Note or payment of a destroyed, lost or stolen Note pursuant to
the proviso to the preceding sentence, a bona fide purchaser of the original
Note in lieu of which such replacement Note was issued presents for payment such
original Note, the Issuer, the Indenture Trustee and the Insurer shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Indenture Trustee in connection
therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
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Section 2.6 PERSONS DEEMED OWNER. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Indenture Trustee, any
agent of the Issuer, the Indenture Trustee or the Insurer may treat the Person
in whose name any Note is registered (as of the day of determination) as the
owner of such Note for the purpose of receiving payments of principal of and
interest, if any on such Note and for all other purposes whatsoever, whether or
not such Note be overdue, and none of the Issuer, the Indenture Trustee nor any
agent of the Issuer, the Insurer or the Indenture Trustee shall be affected by
notice to the contrary.
Section 2.7 PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED Interest.
(a) The Notes shall accrue interest as provided in the forms of the Class A-1
Note, the Class A-2 Note and the Class A-3 form of the Note set forth in
Exhibits B-1, B-2 and B-3, respectively, and such interest shall be payable on
each Payment 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 Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
Record Date, by check mailed first-class, postage prepaid, to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.12, with respect
to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Payment Date or on the Final Scheduled Payment Date
for such Note (and except for the Redemption Price for any Note called for
redemption pursuant to Section 10.1(a)) which shall be payable as provided
below. The funds represented by any such checks returned undelivered shall be
held in accordance with Section 3.3.
(b) The principal of each Note shall be payable in installments on
each Payment Date to the person registered as the holder thereof on the related
Record Date as provided in the forms of the Class A-1 Note, the Class A-2 Note
and the Class A-3 Note set forth in Exhibits B-1, B-2 and B-3, respectively.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable, if not previously paid, on the date on which an Event
of Default shall have occurred and be continuing, if the Indenture Trustee or
the Holders of the Notes representing not less than a majority of the
Outstanding Amount of the Notes have declared the Notes to be immediately due
and payable in the manner provided in Section 5.2. All principal payments on
each class of Notes shall be made pro rata to the Noteholders of such class
entitled thereto. The Indenture Trustee shall notify the Person in whose name a
Note is registered at the close of business on the Record Date preceding the
Payment Date on which the Issuer expects that the final installment of principal
of and interest on such Note will be paid. Such notice shall be mailed or
transmitted by facsimile prior to such final Payment Date and shall specify that
such final installment will be payable only upon presentation and surrender of
such Note and shall specify the place where such Note may be presented and
surrendered for payment of such installment. Notices in connection with
redemptions of Notes shall be mailed to Noteholders as provided in Section 10.2.
(c) If the Issuer defaults in a payment of interest on the Notes,
the Issuer shall pay defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable Interest Rate in any lawful
manner. The Issuer may pay such defaulted interest to the
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Persons who are Noteholders on a subsequent special record date, which date
shall be at least five Business Days prior to the payment date. The Issuer shall
fix or cause to be fixed any such special record date and payment date, and, at
least 15 days before any such special record date, the Issuer shall mail to each
Noteholder and the Indenture Trustee a notice that states the special record
date, the payment date and the amount of defaulted interest to be paid.
(d) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been surrendered
to the Indenture Trustee, the Indenture Trustee shall, if the Insurer has paid
any amount in respect of the Notes under the Policy or otherwise which has not
been reimbursed to it, deliver such surrendered Notes to the Insurer.
Section 2.8 CANCELLATION. Subject to Section 2.7(d), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Indenture Trustee, be delivered to
the Indenture Trustee and shall be promptly canceled by the Indenture Trustee.
Subject to Section 2.7(d), 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 canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section, except as expressly permitted by this Indenture.
Subject to Section 2.7(d), all canceled Notes may be held or disposed of by the
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 2.9 RELEASE OF COLLATERAL. The Indenture Trustee shall, on
or after the Termination Date, release any remaining portion of the Trust Fund
from the lien created by this Indenture and deposit in the Collection Account
any funds then on deposit in any other Trust Account. The Indenture Trustee
shall release property from the lien created by this Indenture pursuant to this
Section 2.9 only upon receipt of an Issuer Request accompanied by an Officer's
Certificate, an Opinion of Counsel meeting the applicable requirements of
Section 11.1 and (if required by the TIA) Independent Certificates in accordance
with TIA Sections 314(c) and 314(d)(1).
Notwithstanding this Section 2.9 or any other provision of this
Agreement, the Issuer may (A) collect, liquidate, sell or otherwise dispose of
Receivables as and to the extent permitted or required by the Basic Documents
and (B) make cash payments out of the Trust Accounts as and to the extent
permitted or required by the Basic Documents.
Section 2.10 BOOK-ENTRY NOTES. The Notes, upon original issuance,
will be issued in the form of typewritten Notes representing the Book-Entry
Notes, to be delivered to The Depository Trust Company, the initial Clearing
Agency, by, or on behalf of, the Issuer. Such Notes shall initially be
registered on the Note Register in the name of Cede & Co., the nominee of the
initial Clearing Agency, and no Note Owner will receive a Definitive Note
representing such Note Owner's interest in such Note, except as provided in
Section 2.12.
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Unless and until definitive, fully registered Notes (the "DEFINITIVE NOTES")
have been issued to Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the Notes
and the giving of instructions or directions hereunder) as the sole Holder
of the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository Agreement,
unless and until Definitive Notes are issued pursuant to Section 2.12, the
initial Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of and
interest on the Notes to such Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes evidencing
a specified percentage of the Outstanding Amount of the Notes, the
Clearing Agency shall be deemed to represent such percentage only to the
extent that it has received instructions to such effect from Note Owners
and/or Clearing Agency Participants owning or representing, respectively,
such required percentage of the beneficial interest in the Notes and has
delivered such instructions to the Indenture Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of reproduction
and postage expenses associated with the distribution of such reports,
from the Indenture Trustee at the Corporate Trust Office.
Section 2.11 NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, until
Definitive Notes shall have been issued to Note Owners pursuant to Section 2.12,
the Indenture Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Note Owners.
Section 2.12 DEFINITIVE NOTES. If (i) the Servicer advises the
Indenture Trustee in writing that the Clearing Agency is no longer willing or
able to properly discharge its responsibilities with respect to the Notes, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the 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, Note Owners representing beneficial interests aggregating
at least a majority of the Outstanding Amount of the Notes advise the Indenture
Trustee through the Clearing Agency
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in writing that the continuation of a book entry system through the Clearing
Agency is no longer in the best interests of the Note Owners, then the Clearing
Agency shall notify all Note Owners and the Indenture Trustee of the occurrence
of any such event and of the availability of Definitive Notes to Note Owners
requesting the same. Upon surrender to the Indenture Trustee of the typewritten
Note or Notes representing the Book-Entry Notes by the Clearing Agency,
accompanied by registration instructions, the Issuer shall execute and the
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, the Indenture Trustee
shall recognize the Holders of the Definitive Notes as Noteholders.
ARTICLE III
COVENANTS
Section 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the Notes and this Indenture. Without limiting the foregoing,
subject to Section 8.2(c), the Issuer will cause to be distributed all amounts
on deposit in the Note Distribution Account on each Payment Date deposited
therein, pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A- 1 Notes, to Class A-1 Noteholders, (ii) for the benefit of the Class
A-2 Notes, to Class A-2 Noteholders and (iii) for the benefit of the Class A-3
Notes, to Class A-3 Noteholders. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
Section 3.2 MAINTENANCE OF OFFICE OR AGENCY. The Issuer will
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange, and
where notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the 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 3.3 MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in
Sections 8.2(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
and the Note Distribution Account pursuant to Section 8.2(c) shall be made on
behalf of the Issuer by the 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.
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On or before each Payment Date and Redemption Date, the Issuer shall
deposit or cause to be deposited in the Note Distribution Account an aggregate
sum sufficient to pay the amounts then becoming due under the Notes, such sum to
be held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the 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 and the Insurer an
instrument in which such Paying Agent shall agree with the Indenture Trustee
(and if the Indenture Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as herein
provided;
(ii) give the Indenture Trustee notice of any default by the
Issuer of which it has actual knowledge (or any other obligor upon the
Notes) in the making of any payment required to be made with respect to
the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Indenture Trustee, forthwith pay to the
Indenture Trustee all sums so held in trust by such Paying Agent;
(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 a 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 the 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 (2)
years after such amount has become due and payable shall be discharged from such
trust and be paid to the Issuer on Issuer Request and with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing), and
the Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the
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Issuer), and all liability of the Indenture Trustee or such Paying Agent with
respect to such trust money shall thereupon cease; provided, however, that if
such money or any portion thereof had been previously deposited by the Insurer
or Indenture Trustee for the payment of principal or interest on the Notes, to
the extent any amounts are owing to the Insurer, such amounts shall be paid
promptly to the Insurer upon receipt of a written request by the Insurer to such
effect, and provided, further, that the Indenture Trustee or such Paying Agent,
before being required to make any such repayment, shall at the expense of the
Issuer cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in The City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Issuer. The Indenture Trustee shall also adopt and employ,
at the expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Indenture Trustee or of any
Paying Agent, at the last address of record for each such Holder).
Section 3.4 EXISTENCE. Except as otherwise permitted by the
provisions of Section 3.10, the Issuer will keep in full effect its existence,
rights and franchises as a business trust under the laws of the State of
Delaware (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Fund.
Section 3.5 PROTECTION OF TRUST FUND. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Fund, and
the Issuer shall take all actions necessary to obtain and maintain, in favor of
the Indenture Trustee, for the benefit of the Issuer Secured Parties, a first
lien on and a first priority, perfected security interest in the Trust Fund. The
Issuer will from time to time prepare (or shall cause to be prepared), execute
and deliver all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust Fund;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Indenture Trustee for the benefit of the
Issuer Secured Parties created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
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(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Fund and the rights of
the Indenture Trustee in such Trust Fund against the claims of all persons
and parties; and
(vi) pay all taxes or assessments levied or assessed upon
the Trust Fund when due.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any such financing statement, continuation statement
or other instrument delivered by or on behalf of the Issuer to the Indenture
Trustee for execution. The Indenture Trustee shall not have any liability for
the perfection or priority of the security interest granted hereby and shall
have no duty to prepare or file any continuation statements or other related
instruments.
Section 3.6 OPINIONS AS TO TRUST FUND. (a) On the Closing Date, the
Issuer shall furnish to the Indenture Trustee and the Insurer an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording and filing of this Indenture, any
indentures supplemental hereto, and any other requisite documents, and with
respect to the execution and filing of any financing statements and continuation
statements, as are necessary to perfect and make effective the first priority
lien and security interest in favor of the Indenture Trustee, for the benefit of
the Issuer Secured Parties, created by this Indenture and reciting the details
of such action, or stating that, in the opinion of such counsel, no such action
is necessary to make such lien and security interest effective.
(b) Within 120 days after the beginning of each calendar year,
beginning with the first calendar year beginning more than three months after
the Closing Date, the Issuer shall furnish to the Indenture Trustee and the
Insurer an Opinion of Counsel either stating that, in the opinion of such
counsel, such action has been taken with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and with respect to the execution and filing
of any financing statements and continuation statements as are necessary to
maintain the lien and security interest created by this Indenture and reciting
the details of such action or stating that in the opinion of such counsel no
such action is necessary to maintain such lien and security interest. Such
Opinion of Counsel shall also describe the recording, filing, re-recording and
refiling of this Indenture, any indentures supplemental hereto and any other
requisite documents and the execution and filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be required
to maintain the lien and security interest of this Indenture until January 30 in
the following calendar year.
Section 3.7 PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES.
(a) The Issuer will not take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in the Trust Fund or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Basic Documents or such other instrument or agreement.
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(b) The Issuer may contract with other Persons acceptable to the
Insurer (so long as no Insurer Default shall have occurred and be continuing) to
assist it in performing its duties under this Indenture, and any performance of
such duties by a Person identified to the Indenture Trustee and the Insurer in
an Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Servicer to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Fund, including but not
limited to preparing (or causing to be prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Indenture Trustee (given at the direction of
the Controlling Party) or the Controlling Party.
(d) If an officer of the Owner Trustee shall have actual knowledge
of the occurrence of a Servicer Default under the Sale and Servicing Agreement,
the Issuer shall promptly notify the Indenture Trustee, the Insurer and the
Rating Agencies thereof in accordance with Section 11.4, and shall specify in
such notice the action, if any, the Issuer is taking in respect of such default.
If a Servicer Default shall arise from the failure of the Servicer to perform
any of its duties or obligations under the Sale and Servicing Agreement with
respect to the Receivables, the Issuer shall take all reasonable steps available
to it to remedy such failure.
(e) If an Insurer Default shall have occurred and be continuing
and if the Issuer has given notice of termination to the Servicer of the
Servicer's rights and powers pursuant to Section 8.1 of the Sale and Servicing
Agreement, as promptly as possible thereafter, the Issuer shall appoint a
Successor Servicer in accordance with Section 8.2 of the Sale and Servicing
Agreement.
(f) Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Indenture Trustee. As soon as a Successor Servicer (other than the Indenture
Trustee) is appointed, the Issuer shall notify the Indenture Trustee of such
appointment, specifying in such notice the name and address of such Successor
Servicer.
(g) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Basic Documents (x) without the prior consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) or (y) if the effect thereof
would adversely affect the Holders of the Notes.
(h) Without derogating from the absolute nature of the assignment
granted to the Indenture Trustee under this Indenture or the rights of the
Indenture Trustee hereunder, the Issuer agrees that, unless such action is
specifically permitted hereunder or under the other Basic Documents, it will
not, without the prior written consent of the Indenture Trustee (to be given at
the direction of the Controlling Party) amend, modify, waive, supplement,
terminate or
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surrender, or agree to any amendment, modification, supplement, termination,
waiver or surrender of, the terms of any Collateral or the Basic Documents, or
waive timely performance or observance by the Servicer or the Seller under the
Sale and Servicing Agreement; 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. If any such amendment, modification, supplement or waiver
shall be so consented to by the Indenture Trustee or such Controlling Party, the
Issuer agrees, promptly following a request by the Indenture Trustee to do so,
to execute and deliver, in its own name and at its own expense, such agreements,
instruments, consents and other documents as the Indenture Trustee may deem
necessary or appropriate under the circumstances.
Section 3.8 NEGATIVE COVENANTS. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the Basic
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the Trust
Fund, unless directed to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any claim
against any present or former Noteholder by reason of the payment of the
taxes levied or assessed upon any part of the Trust Fund; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Indenture Trustee
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other
than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Fund or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens that arise by operation of law, in each case on a
Financed Vehicle and arising solely as a result of an action or omission
of the related Obligor), (C) permit the lien of this Indenture not to
constitute a valid first priority (other than with respect to any such
tax, mechanics' or other lien) security interest in the Trust Fund or (D)
amend, modify or fail to comply with the provisions of the Basic Documents
without the prior written consent of the Controlling Party.
(iv) take any action or fail to take any action that would cause
the Issuer to be treated as an association (or publicly traded
partnership) taxable as a corporation for U.S. Federal income tax
purposes.
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Section 3.9 ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will
deliver to the Indenture Trustee and the Insurer, within 120 days after the end
of each fiscal year of the Issuer (commencing with the fiscal year ended
December 31, 200[__]) and otherwise in compliance with the requirements of TIA
Section 314(a)(4), an Officer's Certificate stating, as to the Authorized
Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such Authorized
Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a default
in the compliance of any such condition or covenant, specifying each such
default known to such Authorized Officer and the nature and status
thereof.
Section 3.10 ISSUER MAY CONSOLIDATE, ETC. Only on Certain
Terms. (a) The Issuer shall not consolidate or merge with or into any other
Person, unless
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Person organized and existing
under the laws of the United States of America or any state and shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Indenture Trustee, in form satisfactory to the Indenture
Trustee and the Insurer (so long as no Insurer Default shall have occurred
and be continuing), the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every agreement
and covenant of this Indenture on the part of the Issuer to be performed
or observed, all as provided herein;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee and the
Insurer (so long as no Insurer Default shall have occurred or be
continuing)) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Insurer or any
Noteholder or any Certificateholder;
(v) all actions necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture Trustee
and the Insurer an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation or merger and such supplemental indenture
comply with this Article III and that all conditions precedent herein
provided for relating to such transaction have been complied with
(including any filing required by the Exchange Act); and
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(vi) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of such
consolidation or merger at least 20 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such consolidation or merger and the Issuer or
the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is greater than zero and (b) not less than
the net worth of the Issuer immediately prior to giving effect to such
consolidation or merger.
(b) The Issuer shall not convey or transfer all or substantially
all of its properties or assets, including those included in the Trust Fund, to
any Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which is
hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any state, (B) expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory to
the Indenture Trustee and the Insurer (so long as no Insurer Default shall
have occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or observance
of every agreement and covenant of this Indenture and each of the Basic
Documents on the part of the Issuer to be performed or observed, all as
provided herein, (C) expressly agree by means of such supplemental
indenture that all right, title and interest so conveyed or transferred
shall be subject and subordinate to the rights of Holders of the Notes,
(D) unless otherwise provided in such supplemental indenture, expressly
agree to indemnify, defend and hold harmless the Issuer against and from
any loss, liability or expense arising under or related to this Indenture
and the Notes and (E) expressly agree by means of such supplemental
indenture that such Person (or if a group of persons, then one specified
Person) shall prepare (or cause to be prepared) and make all filings with
the Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; the
Rating Agency Condition shall have been satisfied with respect to such
transaction;
(iii) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Indenture Trustee and the
Insurer (so long as no Insurer Default shall have occurred and be
continuing)) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Insurer or any
Noteholder or any Certificateholder;
(iv) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(v) the Issuer shall have delivered to the Indenture Trustee and
the Insurer an Officers' Certificate and an Opinion of Counsel each
stating that such conveyance or transfer and such supplemental indenture
comply with this Article III and that all
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conditions precedent herein provided for relating to such transaction have
been complied with (including any filing required by the Exchange Act);
and
(vi) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of such
conveyance or transfer at least 20 Business Days prior to the consummation
of such action and shall have received the prior written approval of the
Insurer of such consolidation or merger and the Issuer or the Person (if
other than the Issuer) formed by or surviving such consolidation or merger
has a net worth, immediately after such consolidation or merger, that is
(c) greater than zero and (b) not less than the net worth of the
Issuer immediately prior to giving effect to such consolidation or merger.
Section 3.11 SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties
of the Issuer pursuant to Section 3.10(b), 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 stating that the Trust is to be so
released.
Section 3.12 NO OTHER BUSINESS. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto. After the Pre-Funding Period, the Issuer
shall not fund the purchase any additional Receivables.
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) obligations owing from time to
time to the Insurer under the Insurance Agreement and (iii) any other
Indebtedness permitted by or arising under the Basic Documents or the Issuer's
compliance therewith. The proceeds of the Notes shall be used exclusively to
fund the Issuer's purchase of the Receivables and the other assets specified in
the Sale and Servicing Agreement, to fund the Pre- Funding Account and the
Capitalized Interest Account, the Reserve Account and the Yield Supplement
Account and to pay the Issuer's organizational, transactional and start-up
expenses.
Section 3.14 SERVICER'S OBLIGATIONS. The Issuer shall cause
the Servicer to comply with the Sale and Servicing Agreement.
Section 3.15 GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES.
Except as contemplated by the Sale and Servicing Agreement or this Indenture,
the Issuer shall not make any loan or advance or credit to, or guarantee
(directly or indirectly or by an instrument having the effect of assuring
another's payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in
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connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
Section 3.16 CAPITAL EXPENDITURES. The Issuer shall not
make any expenditure (by long-term or operating lease or otherwise) for
capital assets (either realty or personalty).
Section 3.17 COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Basic Document.
Section 3.18 RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Insurer as permitted by, and to the extent funds are
available for such purpose under the Sale and Servicing Agreement or Trust
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.19 NOTICE OF EVENTS OF DEFAULT. Upon a responsible officer
of the Owner Trustee having actual knowledge thereof, the Issuer agrees to give
the Indenture Trustee, the Insurer and the Rating Agencies prompt written notice
of each Event of Default hereunder and each default on the part of the Servicer
or the Seller of its obligations under the Sale and Servicing Agreement.
Section 3.20 FURTHER INSTRUMENTS AND ACTS. Upon request of the
Indenture Trustee or the Insurer, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
Section 3.21 AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST
AGREEMENT. The Issuer shall not agree to any amendment to Section 11.1 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Indenture Trustee, the Insurer or the
Holders of the Notes consent to amendments thereto as provided therein.
Section 3.22 INCOME TAX CHARACTERIZATION. For purposes of federal
income, state and local income and franchise and any other taxes, the Issuer
will treat the Notes as indebtedness.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.1 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee
under Section 4.2) and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Indenture Trustee payable to
all or any of them, and the Indenture Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when:
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.5
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.3) have been delivered to
the Indenture Trustee for cancellation and the Policy has
expired and been returned to the Insurer for cancellation; or
(2) all Notes not theretofore delivered to the Indenture
Trustee for cancellation (i) have become due and payable, (ii)
will become due and payable at their respective Final
Scheduled Payment Dates within one year, or (iii) are to be
called for redemption within one year under arrangements
satisfactory to the Indenture Trustee for the giving of notice
of redemption by the Indenture Trustee in the name, and at the
expense, of the Issuer, and the Issuer, in the case of (i),
(ii) or (iii) above, has irrevocably deposited or caused to be
irrevocably deposited with the Indenture Trustee cash or
direct obligations of or obligations guaranteed by the United
States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Indenture Trustee
for cancellation when due to the Final Scheduled Payment Date
or Redemption Date (if Notes shall have been called for
redemption pursuant to Section 10.1(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all Insurer
Secured Obligations and all Indenture Trustee Secured Obligations;
and
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(C) the Issuer has delivered to the Indenture Trustee and the
Insurer an Officer's Certificate, an Opinion of Counsel and, if
required by the TIA, the Indenture Trustee or the Insurer (so long
as an Insurer Default shall not have occurred and be continuing) an
Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.1(a) and each
stating that all conditions precedent herein provided for relating
to the satisfaction and discharge of this Indenture have been
complied with.
Section 4.2 APPLICATION OF TRUST MONEY. All moneys deposited with
the Indenture Trustee pursuant to Section 4.1 hereof shall be held in trust and
applied by it, in accordance with the provisions of the Notes and this
Indenture, to the payment, either directly or through any Paying Agent, as the
Indenture Trustee may determine, to the Holders of the particular Notes for the
payment or redemption 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 4.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Indenture Trustee under
the provisions of this Indenture with respect to such Notes shall, upon demand
of the Issuer, be paid to the Indenture Trustee to be held and applied according
to Section 3.3 and thereupon such Paying Agent shall be released from all
further liability with respect to such moneys.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.1 EVENTS OF DEFAULT. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a period
of five days after receipt of notice thereof from the Indenture Trustee
(solely for purposes of this clause, a payment on the Notes funded by the
Insurer shall be deemed to be a payment made by the Issuer); or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable on the related Final Scheduled Payment Date (solely for purposes
of this clause, a payment on the Notes funded by the Insurer shall be
deemed to be a payment made by the Issuer); or
(iii) so long as an Insurer Default shall not have occurred and
be continuing, an Insurance Agreement Indenture Cross Default; provided,
however, that the occurrence of
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an Insurance Agreement Indenture Cross Default may not form the basis of
an Event of Default unless the Insurer shall, upon prior written notice to
the Rating Agencies, have delivered (and not rescinded) to the Issuer and
the Indenture Trustee a written notice specifying that such Insurance
Agreement Indenture Cross Default constitutes an Event of Default under
the Indenture; or
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any representation
or warranty of the Issuer made in this Indenture or in any certificate or
other writing delivered pursuant hereto or in connection herewith proving
to have been incorrect in any material respect as of the time when the
same shall have been made, and such default shall continue or not be
cured, or the circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have been eliminated
or otherwise cured, for a period of 30 days (or for such longer period,
not in excess of 90 days, as may be reasonably necessary to remedy such
default; provided that such default is capable of remedy within 90 days or
less and the Servicer on behalf of the Owner Trustee delivers an Officer's
Certificate to the Indenture Trustee to the effect that the Issuer has
commenced, or will promptly commence and diligently pursue, all reasonable
efforts to remedy such default) after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee or to
the Issuer and the Indenture Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes a written notice specifying such default
or incorrect representation or warranty and requiring it to be remedied
and stating that such notice is a "Notice of Default" hereunder; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or any substantial
part of the Trust Fund 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 Seller, the Transferor or
the Issuer or for any substantial part of the Trust Fund, or ordering the
winding-up or liquidation of the Seller's, the Transferor's or the
Issuer's affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer of a voluntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or the consent by the Issuer to the entry of
an order for relief in an involuntary case under any such law, or the
consent by the Issuer to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Seller, the Transferor or the Issuer or for any
substantial part of the Trust Fund, or the making by the Seller, the
Transferor or the Issuer of any general assignment for the benefit of
creditors, or the failure by the Seller, the Transferor or 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.
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The Issuer shall deliver to the Indenture Trustee and the Insurer,
within five days after the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.
Section 5.2 RIGHTS UPON EVENT OF DEFAULT. (a) If an Event of Default
shall have occurred and be continuing, the Controlling Party may exercise any of
the remedies specified in Section 5.4(a). In the event of any acceleration of
any Notes by operation of this Section 5.2, the Indenture Trustee shall continue
to be entitled to make claims under the Policy pursuant to Section 5.18 hereof
for Scheduled Payments on the Notes. Payments under the Policy following
acceleration of any Notes shall be applied by the Indenture Trustee:
FIRST: to Noteholders for amounts due and unpaid on the Notes
for interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for interest; and
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal.
(b) In the event any Notes are accelerated due to an Event of
Default, the Insurer shall have the right (in addition to its obligation to pay
Scheduled Payments on the Notes in accordance with the Policy), but not the
obligation, to make payments under the Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing
and an Event of Default shall have occurred and be continuing, the Indenture
Trustee in its discretion may, or if so requested in writing by a Note Majority,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon.
(d) If an Insurer Default shall have occurred and be continuing,
then at any time after such declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee as hereinafter in this Article V provided, a
Note Majority, by written notice to the Issuer and the Indenture Trustee, may
rescind and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture Trustee
a sum sufficient to pay
(A) all payments of principal of and interest on all Notes and
all other amounts that would then be due hereunder or upon such
Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(B) all sums paid or advanced by the Indenture Trustee
hereunder and the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel;
and
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(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the
payment of any interest on any Note when the same becomes due and payable, and
such default continues for a period of five days, or (ii) default is made in the
payment of the principal of or any installment of the principal of any Note when
the same becomes due and payable, the Issuer will, upon demand of the 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 the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and
unconditionally appoints the Controlling Party as the true and lawful
attorney-in-fact of such Issuer Secured Party for so long as such Issuer Secured
Party is not the Controlling Party, with full power of substitution, to execute,
acknowledge and deliver any notice, document, certificate, paper, pleading or
instrument and to do in the name of the Controlling Party as well as in the
name, place and stead of such Issuer Secured Party such acts, things and deeds
for or on behalf of and in the name of such Issuer Secured Party under this
Indenture (including specifically under Section 5.4) and under the Basic
Documents which such Issuer Secured Party could or might do or which may be
necessary, desirable or convenient in such Controlling Party's sole discretion
to effect the purposes contemplated hereunder and under the Related Documents
and, without limitation, following the occurrence of an Event of Default,
exercise full right, power and authority to take, or defer from taking, any and
all acts with respect to the administration, maintenance or disposition of the
Trust Fund.
(c) If an Event of Default occurs and is continuing, the Indenture
Trustee may in its discretion but with the consent of the Controlling Party and
shall, at the direction of the Controlling Party (except as provided in Section
5.3(d) below), proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the Indenture Trustee or the
Controlling Party shall deem most effective to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy or legal or equitable right vested in the
Indenture Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including without limitation Sections 5.4(a), 5.12, 5.13 and 5.17)
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer fails to perform its obligations under Section 10.1
hereof when and as due, the Indenture Trustee may in its
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discretion (and without the consent of the Controlling Party) 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 specific performance 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; provided that the
Indenture Trustee shall only be entitled to take any such actions without the
consent of the Controlling Party to the extent such actions are taken only to
enforce the Issuer's obligations to redeem the principal amount of Notes and pay
interest thereon at the applicable Interest Rate and are taken only against the
portion of the Collateral, if any, consisting of the Pre-Funding Account, the
Capitalized Interest Account, any investments therein and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Fund, 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 gross negligence, bad faith or willful
misconduct) and of the Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a standby
trustee or person performing similar functions in any such proceedings;
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the 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 Indenture Trustee except as a result of negligence or bad faith.
(f) 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.
(g) 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
Indenture 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.
(h) In any proceedings brought by the Indenture Trustee (and also
any proceedings involving the interpretation of any provision of this
Indenture), the Indenture Trustee shall be held to represent all the Holders of
the Notes, and it shall not be necessary to make any Noteholder a party to any
such proceedings.
Section 5.4 REMEDIES. (a) If an Event of Default shall have
occurred and be continuing, the Controlling Party may do one or more of the
following (subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the Notes
or under this Indenture with respect thereto, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuer and
any other obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Fund;
(iii) exercise any remedies of a secured party under the UCC and
take any other appropriate action to protect and enforce the rights and
remedies of the Indenture Trustee and the Holders of the Notes; and
(iv) direct the Indenture Trustee to sell the Trust Fund 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, or, if the
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Insurer is the Controlling Party, the Insurer, may not sell or otherwise
liquidate the Trust Fund following an Insurance Agreement Indenture Cross
Default unless:
(I) such Insurance Agreement Indenture Cross Default arises
from a claim being made on the Policy or from the insolvency of the
Trust, or
(II) the proceeds of such sale or liquidation distributable to
the Noteholders are sufficient to discharge in full all amounts then
due and unpaid upon such Notes for principal and interest; or
if the Indenture Trustee is the Controlling Party, the Indenture Trustee may not
sell or otherwise liquidate the Trust Fund following an Event of Default unless
either (x) the Holders of 100% of the Outstanding Amount of the Notes consents
thereto, or (y) the proceeds of such sale or liquidation distributable to the
Noteholders are sufficient to discharge in full all amounts then due and unpaid
upon such Notes for principal and interest, or (z) the Indenture Trustee
determines that the Trust Fund 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 provides notice to the Rating Agencies and obtains the consent of
Holders of 66-2/3% of the Outstanding Amount of the Notes.
In determining such sufficiency or insufficiency with respect to
clause (y) and (z), the 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 Trust Fund for such purpose.
Section 5.5 OPTIONAL PRESERVATION OF THE TRUST FUND. If the
Indenture Trustee is the Controlling Party and if the Notes have been declared
to be due and payable under Section 5.2 following an Event of Default and such
declaration and its consequences have not been rescinded and annulled, the
Indenture Trustee may, but need not, elect to maintain possession of the Trust
Fund. It is the desire of the parties hereto and the Noteholders that there be
at all times sufficient funds for the payment of principal of and interest on
the Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Fund. In
determining whether to maintain possession of the Trust Fund, 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 Trust Fund
for such purpose.
Section 5.6 PRIORITIES. (a) Following (1) the acceleration of the
Notes pursuant to Section 5.2 or (2) if an Insurer Default shall have occurred
and be continuing, the occurrence of an Event of Default pursuant to Section
5.1(i), 5.1(ii), 5.1(iii), 5.1(v) or 5.1(vi), the Distribution Amount, including
any money or property collected pursuant to this Article V, shall be applied by
the Indenture Trustee in the following order of priority:
(i) FIRST: amounts due and owing and required to be distributed to
the Servicer, the Backup Servicer, the Custodian, the Owner Trustee and
the Indenture Trustee, respectively, pursuant to priorities (i) and (ii)
of Section 5.6(b) of the Sale and
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Servicing Agreement and not previously distributed, in the order of such
priorities and without preference or priority of any kind within such
priorities;
(ii) SECOND: to Noteholders for amounts due and unpaid on
the Notes for interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Notes for
interest;
(iii) THIRD: to Noteholders for amounts due and unpaid on
the Notes for principal, ratably, (a) to the Class A-1 Noteholders, (b)
to the Class A-2 Noteholders and (c) to the Class A-3 Noteholders,
according to the amounts due and payable on the Notes for principal;
(iv) FOURTH: amounts due and owing and required to be
distributed to the Insurer pursuant to priority (v) of Section 5.6(b)
of the Sale and Servicing Agreement and not previously distributed; and
(v) FIFTH: all remaining amounts to the Owner Trustee for
distribution to Certificateholders in accordance with Section 5.2(d) of
the Trust Agreement;
(vi) SIXTH: to or upon the order of the Transferor; provided that
any amounts collected from the Pre-Funding Account shall be paid, first,
for amounts due and unpaid on the Notes for principal, if any, for
distribution to Noteholders in accordance with Section 10.1(b) and,
second, in accordance with priorities ONE through SIXTH above.
(b) The Indenture Trustee may fix a special record date and
payment date for any payment to Noteholders pursuant to this Section. At least
15 days before such special record date the Issuer shall mail to each Noteholder
and the Indenture Trustee a notice that states the record date, the payment date
and the amount to be paid.
Section 5.7 LIMITATION OF SUITS. Neither the Insurer, nor any 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) the Insurer or such Holder has previously given written
notice to the Indenture Trustee of a continuing Event of Default; the
Insurer or the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Indenture Trustee to institute
such proceeding in respect of such Event of Default in its own name as
Indenture Trustee hereunder;
(ii) the Insurer or such Holder or Holders have offered and
provided to the Indenture Trustee indemnity reasonably satisfactory to it
against the costs, expenses and liabilities to be incurred in complying
with such request;
(iii) the Indenture Trustee for 60 days after its receipt of such
notice, request and offer and provision of indemnity has failed to
institute such proceedings;
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(iv) 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 Notes; and
(v) with respect to such Holder, an Insurer Default shall have
occurred and be continuing;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the 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 Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Indenture.
Section 5.8 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
Section 5.9 RESTORATION OF RIGHTS AND REMEDIES. If the Controlling
Party or any Noteholder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Indenture
Trustee or to such Noteholder, then and in every such case the Issuer, the
Indenture Trustee and the Noteholders shall, subject to any determination in
such Proceeding, be restored severally and respectively to their former
positions hereunder, and thereafter all rights and remedies of the Indenture
Trustee and the Noteholders shall continue as though no such proceeding had been
instituted.
Section 5.10 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy
herein conferred upon or reserved to the Controlling Party or to the Noteholders
is intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
Section 5.11 DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any
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such Default or Event of Default or an acquiescence therein. Every right and
remedy given by this Article V or by law to the Indenture Trustee or to the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee or by the Noteholders, as the case may be.
Section 5.12 CONTROL BY NOTEHOLDERS. Following the occurrence and
continuation of an Insurer Default, the Holders of a majority of the Outstanding
Amount of the Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the 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 express terms of Section 5.4, any direction
to the Indenture Trustee to sell or liquidate the Trust Fund shall be by
the Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have been
satisfied and the Indenture Trustee elects to retain the Trust Fund
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 Trust Fund shall be of no force and
effect; and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction;
PROVIDED, HOWEVER, that, subject to Section 6.1, the Indenture Trustee need not
take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
Section 5.13 WAIVER OF PAST DEFAULTS. If an Insurer Default shall
have occurred and be continuing prior to the declaration of the acceleration of
the maturity of the Notes as provided in Section 5.2, a Note Majority may waive
any past Default or Event of Default and its consequences except a Default (a)
in payment of principal of or interest on any of the Notes or (b) in respect of
a covenant or provision hereof which cannot be modified or amended without the
consent of the Holder of each Note. In the case of any such waiver, the Issuer,
the 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, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
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Section 5.14 UNDERTAKING FOR COSTS. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against the Indenture Trustee for any action taken, suffered or omitted by it as
Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to (a) any suit instituted by the
Indenture Trustee, (b) any suit instituted by any Noteholder, or group of
Noteholders, in each case holding in the aggregate more than 10% of the
Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder for
the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
Section 5.15 WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the 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 Trust Fund or
upon any of the assets of the Issuer.
Section 5.17 PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Indenture Trustee to do so and at the
Servicer's expense, the Issuer agrees to take all such lawful action as the
Indenture Trustee may request to compel or secure the performance and observance
by the Seller, the Transferor and the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement to the extent and in the
manner directed by the Indenture Trustee, including the transmission of notices
of default on the part of the Seller, the Transferor or the Servicer thereunder
and the institution of legal or administrative actions or proceedings to compel
or secure performance by the Seller or the Servicer of each of their obligations
under the Sale and Servicing Agreement.
(b) If the Indenture Trustee is a Controlling Party and if an
Event of Default has occurred and is continuing, the Indenture Trustee may, and,
at the direction (which direction
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shall be in writing) of the Holders of at least 66- 2/3% of the Outstanding
Amount of the Notes and upon receipt of indemnity reasonably satisfactory to the
Indenture Trustee shall, exercise all rights, remedies, powers, privileges and
claims of the Issuer against the Seller, the Transferor or the Servicer under or
in connection with the Sale and Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Seller, the Transferor or the Servicer of each of their obligations to the
Issuer thereunder and to give any consent, request, notice, direction, approval,
extension or waiver under the Sale and Servicing Agreement, and any right of the
Issuer to take such action shall be suspended.
Section 5.18 CLAIMS UNDER POLICY. (a) In the event that the
Indenture Trustee has delivered a Deficiency Notice with respect to any
Determination Date pursuant to Section 5.4 of the Sale and Servicing Agreement,
the Indenture Trustee shall on the related Draw Date determine the Policy Claim
Amount for the related Payment Date. If the Policy Claim Amount for such Payment
Date is greater than zero, the Indenture Trustee shall furnish to the Insurer no
later than 3:00 p.m. New York City time on the related Draw Date a completed
Notice of Claim in the amount of the Policy Claim Amount. Amounts paid by the
Insurer pursuant to a claim submitted under this Section 5.18(a) shall be
deposited by the Indenture Trustee into the Note Distribution Account for
payment to Noteholders on the related Payment Date.
(b) Any notice delivered by the Indenture Trustee to the Insurer
pursuant to subsection 5.18(a) shall specify the Policy Claim Amount claimed
under the Policy and shall constitute a "Notice of Claim" under the Policy. In
accordance with the provisions of the Policy, the Insurer is required to pay to
the Indenture Trustee the Policy Claim Amount properly claimed thereunder by
12:00 noon, New York City time, on the later of (i) the third Business Day
following the Business Day on which the Notice of Claim was received, and (ii)
the applicable Payment Date. Any payment made by the Insurer under the Policy
shall be applied solely to the payment of the Notes, and for no other purpose.
(c) The Indenture Trustee shall (i) receive as attorney-in-fact of
each Noteholder any Policy Claim Amount from the Insurer and (ii) deposit the
same in the Note Distribution Account for distribution to Noteholders as
provided in Section 3.1 or Section 5.2 of this Indenture. Any and all Policy
Claim Amounts disbursed by the Indenture Trustee from claims made under the
Policy shall not be considered payment by the Issuer with respect to such Notes,
and shall not discharge the obligations of the Issuer with respect thereto. The
Insurer shall, to the extent it makes any payment with respect to the Notes,
become subrogated to the rights of the recipients of such payments to the extent
of such payments. Subject to and conditioned upon any payment with respect to
the Notes by or on behalf of the Insurer, the Indenture Trustee shall assign to
the Insurer all rights to the payment of interest or principal with respect to
the Notes which are then due for payment to the extent of all payments made by
the Insurer, and the Insurer may exercise any option, vote, right, power or the
like with respect to the Notes to the extent that it has made payment pursuant
to the Policy. To evidence such subrogation, the Note Registrar shall note the
Insurer's rights as subrogee upon the register of Noteholders upon receipt from
the Insurer of proof of payment by the Insurer of any Noteholders' Interest
Distributable Amount or Noteholders' Principal Distributable Amount. The
foregoing subrogation shall in all cases be subject to the rights of the
Noteholders to receive all Scheduled Payment in respect of the Notes.
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(d) The Indenture Trustee shall keep a complete and accurate
record of all funds deposited by the Insurer into the Note Distribution Account
and the allocation of such funds to payment of interest on and principal paid in
respect of any Note. The Insurer shall have the right to inspect such records at
reasonable times upon one Business Day's prior notice to the Indenture Trustee.
(e) The Indenture Trustee shall be entitled to enforce on behalf
of the Noteholders the obligations of the Insurer under the Policy.
Notwithstanding any other provision of this Agreement or any Basic Documents,
the Noteholders are not entitled to institute proceedings directly against the
Insurer.
Section 5.19 PREFERENCE CLAIMS. (a) In the event that the Indenture
Trustee has received a certified copy of an order of the appropriate court that
any Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount paid on a Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Indenture Trustee shall
so notify the Insurer, shall comply with the provisions of the Policy to obtain
payment by the Insurer of such avoided payment, and shall, at the time it
provides notice to the Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Policy. The Indenture Trustee
shall furnish to the Insurer its records evidencing the payments of principal of
and interest on Notes, if any, which have been made by the Indenture Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the Policy, the Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Policy) and not to the Indenture Trustee or any Noteholder directly (unless
a Noteholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Insurer will
make such payment to the Indenture Trustee for distribution to such Noteholder
upon proof of such payment reasonably satisfactory to the Insurer).
(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which the Indenture Trustee has
actual knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar law
(a "Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Indenture Trustee hereby agree that so
long as an Insurer Default shall not have occurred and be continuing, the
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal at the expense of the Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 5.18(c), the Insurer shall
be subrogated to, and each Noteholder and the Indenture Trustee hereby delegate
and assign, to the fullest extent permitted by law, the rights of the Indenture
Trustee and each Noteholder in the conduct of any proceeding with respect to a
Preference Claim, including, without limitation, all rights of any party to an
adversary proceeding action with respect to any court order issued in connection
with any such Preference Claim.
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ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.1 DUTIES OF INDENTURE TRUSTEE. (a) If an Event of Default
actually known to a Responsible Officer of the Indenture Trustee has occurred
and is continuing, the Indenture Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default of which
a Responsible Officer of the Indenture Trustee has actual knowledge:
(i) The Indenture Trustee undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture against
the Indenture Trustee.
(ii) In the absence of bad faith on its part, the Indenture
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Indenture Trustee and conforming to the
requirements of this Indenture; however, the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture and, if applicable, the
other Basic Documents.
(c) The Indenture Trustee may not be relieved from liability for
its own grossly negligent action, its own grossly negligent failure to act or
its own willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(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 grossly 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 or 5.17.
(d) The Indenture Trustee shall not be liable for interest on any
money received by it except as the Indenture Trustee may agree in writing with
the Issuer.
(e) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture or the Sale and Servicing Agreement.
(f) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers, if it shall have reasonable
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grounds to believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section, Section 6.2 and provisions
of the TIA.
(h) The Indenture Trustee shall, upon reasonable prior notice to
the Indenture Trustee, permit any representative of the Insurer or the
Noteholders, during the Indenture Trustee's normal business hours, to examine
all books of account, records, reports and other papers of the Indenture Trustee
relating to the Notes, to make copies and extracts therefrom and to discuss the
Indenture Trustee's affairs and actions, as such affairs and actions relate to
the Indenture Trustee's duties with respect to the Notes, with the Indenture
Trustee's officers and employees responsible for carrying out the Indenture
Trustee's duties with respect to the Notes.
(i) The Indenture Trustee shall, and hereby agrees that it will,
perform all of the obligations and duties required of it under the Sale and
Servicing Agreement.
(j) The Indenture Trustee shall, and hereby agrees that it will,
hold the Policy in trust, and will hold any proceeds of any claim on the Policy
in trust solely for the use and benefit of the Noteholders.
(k) Without limiting the generality of this Section 6.1, the
Indenture Trustee shall have no duty unless specifically set forth in this
Indenture or the Basic Documents (i) to see to any recording, filing or
depositing of this Indenture or any agreement referred to herein or any
financing statement evidencing a security interest in the Financed Vehicles, or
to see to the maintenance of any such recording or filing or depositing or to
any recording, refiling or redepositing of any thereof, (ii) to see to any
insurance of the Financed Vehicles or Obligors or to effect or maintain any such
insurance, (iii) to see to the payment or discharge of any tax, assessment or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust, (iv) to confirm or
verify the contents of any reports or certificates delivered to the Indenture
Trustee pursuant to this Indenture or the Sale and Servicing Agreement believed
by the Indenture Trustee to be genuine and to have been signed or presented by
the proper party or parties, or (v) to inspect the Financed Vehicles at any time
or ascertain or inquire as to the performance of observance of any of the
Issuer's, the Seller's or the Servicer's representations, warranties or
covenants or the Servicer's duties and obligations as Servicer and as custodian
of the Receivable Files under the Sale and Servicing Agreement.
Section 6.2 RIGHTS OF INDENTURE TRUSTEE. (a) The Indenture Trustee
may rely on and shall be protected in acting or refraining from acting upon 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.
(b) Before the Indenture Trustee acts or refrains from acting, it
may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any
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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, PeopleFirst Finance, LLC, or any other 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, that the Indenture Trustee's conduct does
not constitute willful misconduct, gross 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 otherwise exercise any rights or powers vested in it by
this Indenture, at the request, order or direction of any of the Holders of
Notes or the Controlling Party pursuant to the provisions of this Indenture,
unless such Holders of Notes or the Controlling Party shall have offered and
provided to the Indenture Trustee security or indemnity reasonably satisfactory
to the Indenture Trustee 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 with reasonable care and
skill.
(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, and may conclusively rely on the
correctness of any statement made therein but the Indenture Trustee shall make
such investigation if requested in writing to do so by the Insurer (so long as
no, if the Insurer Default shall have occurred and be continuing) or (if an
Insurer Default shall have occurred and be continuing), the Controlling Party,
or by the Holders of Notes evidencing not less than 25% of the Outstanding
Amount thereof; provided, however, that if the payment within a reasonable time
to the 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 indemnity reasonably satisfactory
to the Indenture Trustee 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.
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Section 6.3 INDIVIDUAL RIGHTS OF INDENTURE TRUSTEE. The Indenture
Trustee in its individual or any other capacity may become the owner or pledgee
of Notes and may otherwise deal with the Issuer or its Affiliates with the same
rights it would have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Indenture Trustee must comply with Sections 6.11 and 6.12.
Section 6.4 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 Trust Fund or the Notes; the Indenture Trustee
shall not be accountable for the Issuer's use of the proceeds from the Notes,
and it shall not be responsible for any recitals or 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 6.5 NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is either actually known by, 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 (including
payments pursuant to the mandatory redemption provisions of such Note), the
Indenture Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.6 REPORTS BY INDENTURE TRUSTEE TO HOLDERS. Within the
prescribed period 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 in its possession relating to the payments made by
the Indenture Trustee on the Notes as may be reasonably required to enable such
Holder to prepare its Federal and state income tax returns.
Section 6.7 COMPENSATION AND INDEMNITY. (a) Pursuant to Section
5.6(b) of the Sale and Servicing Agreement, the Issuer shall, or shall cause the
Servicer to, pay to the Indenture Trustee from time to time compensation for its
services and reimbursement for its expenses in accordance with a separate
agreement between the Servicer and the Indenture Trustee. The Indenture
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. 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 of its obligations hereunder or the Servicer of its obligations under
Article X of the Sale and Servicing Agreement. The Issuer shall or shall cause
the Servicer to defend the claim, the Indenture Trustee may have separate
counsel and the Issuer shall or shall cause the Servicer to pay the fees and
expenses of such counsel. Neither the Issuer nor the Servicer need reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own willful misconduct,
negligence or bad faith.
(b) The payment obligations to the Indenture Trustee pursuant to
this Section shall survive the Termination Date and the discharge of this
Indenture subject to a satisfaction of the Rating Agency Condition. When the
Indenture Trustee incurs expenses after the occurrence
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of a Default specified in Section 5.1(v) or (vi) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable Federal or state bankruptcy,
insolvency or similar law. Notwithstanding anything else set forth in this
Indenture or the Basic Documents, the Indenture Trustee agrees that the
obligations of the Issuer (but not the Servicer) to the Indenture Trustee
hereunder and under the Basic Documents shall be recourse to the Trust Fund only
and specifically shall not be recourse to the assets of the Seller, the
Transferor, the Depositor, the Issuer or any Noteholder or any
Certificateholder. In addition, the Indenture Trustee agrees that its recourse
to the Seller, the Transferor, the Depositor, the Issuer, the Trust Fund and the
Seller shall be limited to the right to receive the distributions referred to in
Section 5.6(b) of the Sale and Servicing Agreement
Section 6.8 REPLACEMENT OF INDENTURE TRUSTEE. (a) The Indenture
Trustee may resign at any time by so notifying the Issuer and the Insurer. The
Controlling Party 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;
(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;
(iii) an involuntary case under the federal bankruptcy laws, as
now or hereafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law is commenced with respect to the
Indenture Trustee and such case is not dismissed within 60 days;
(iv) 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
(v) the Indenture Trustee otherwise becomes incapable of acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee, acceptable to the
Insurer in its sole discretion (so long as an Insurer Default shall not
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have occurred and be continuing). If the Issuer fails to appoint such a
successor Indenture Trustee, the Controlling Party may appoint a successor
Indenture Trustee.
A successor Indenture Trustee shall deliver a written acceptance of
its appointment to the retiring Indenture Trustee, to the Issuer and to the
Insurer (so long as no Insurer Default shall have occurred and be continuing).
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 subject to
satisfaction of the Rating Agency Condition. 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.
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 Controlling Party 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 Section 6.8 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 Issuer's and the Servicer's obligations under Section 6.7
shall continue for the benefit of the retiring Indenture Trustee.
(b) Every temporary or permanent successor Indenture Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor
and to the Indenture Trustee, each Issuer Secured Party and the Issuer an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Indenture Collateral to the
successor Collateral Agent, whereupon such successor, without any further act,
deed or conveyance, shall become fully vested with all the estates, properties,
rights, powers, duties and obligations of its predecessor. Such predecessor
shall, nevertheless, on the written request of either Issuer Secured Party or
the Issuer, execute and deliver an instrument transferring to such successor all
the estates, properties, rights and powers of such predecessor hereunder. In the
event that any instrument in writing from the Issuer or an Issuer Secured Party
is reasonably required by a successor Indenture Trustee to more fully and
certainly vest in such successor the estates, properties, rights, powers, duties
and obligations vested or intended to be vested hereunder in the Indenture
Trustee, any and all such written instruments shall, at the request of the
temporary or permanent successor Indenture Trustee, be forthwith executed,
acknowledged and delivered by the Issuer. The designation of any successor
Indenture Trustee and the instrument or instruments removing any Indenture
Trustee and appointing a successor hereunder,
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together with all other instruments provided for herein, shall be maintained
with the records relating to the Collateral and, to the extent required by
applicable law, filed or recorded by the successor Indenture Trustee in each
place where such filing or recording is necessary to effect the transfer of the
Collateral to the successor Indenture Trustee or to protect or continue the
perfection of the security interests granted hereunder.
Section 6.9 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 and shall
provide written notice thereof to the Issuer, the Insurer, and each Rating
Agency provided, however that such corporation or banking association shall be
otherwise qualified and eligible under Section 6.11 hereto.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Indenture Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Notes so
authenticated; and in case at that time any of the Notes shall not have been
authenticated, any successor to the Indenture Trustee may authenticate such
Notes either in the name of any predecessor hereunder or in the name of the
successor to the Indenture Trustee; 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 provisions of this Indenture,
at any time, for the purpose of meeting any legal requirement of any
jurisdiction in which any part of the Trust may at the time be located, the
Indenture Trustee with the consent of the Insurer (so long as an Insurer Default
shall not have occurred and be continuing) shall have the power and may execute
and deliver all instruments to appoint one or more Persons to act as a
co-trustee or co-trustees, or a separate trustee or separate trustees, of all or
any part of the Trust, and to vest in such Person or Persons, in such capacity
and for the benefit of the Noteholders, such title to the Trust, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Indenture Trustee may consider
necessary or desirable. No co-trustee or separate trustee hereunder shall be
required to meet the terms of eligibility as a successor trustee under Section
6.11 and no notice to Noteholders of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Indenture Trustee shall be conferred or imposed upon and
exercised or performed by the Indenture Trustee and such separate trustee
or co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Indenture
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Indenture Trustee
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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 Fund or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder, including acts or
omissions of predecessor or successor trustees; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time constitute
the Indenture Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If any separate trustee
or co-trustee shall die, dissolve, become insolvent, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall invest in and be exercised by the Indenture Trustee, to the extent
permitted by law, without the appointment of a new or successor trustee.
Section 6.11 ELIGIBILITY; DISQUALIFICATION. The Indenture Trustee
shall at all times satisfy the requirements of TIA Section 310(a). The Indenture
Trustee shall have a combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition or its parent and
it or its parent shall have a long term debt rating of BBB- or better by the
Rating Agencies. The Indenture Trustee shall provide copies of such reports to
the Insurer upon request. The Indenture Trustee shall comply with TIA Section
310(b), including the optional provision permitted by the second sentence of TIA
Section 310(b)(9); 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 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.
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Section 6.13 APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints
[_____________], in its capacity as Indenture Trustee, as the collateral agent
with respect to the Collateral, and [_____________] hereby accepts such
appointment and agrees to act as collateral agent with respect to the Collateral
for the Issuer Secured Parties, to maintain custody and possession of such
Collateral (except as otherwise provided hereunder) and to perform the other
duties with respect to the Collateral in accordance with the provisions of this
Indenture. Each Issuer Secured Party hereby authorizes the Indenture Trustee to
take such action on its behalf, and to exercise such rights, remedies, powers
and privileges hereunder, as the Controlling Party may direct and as are
specifically authorized to be exercised by the Indenture Trustee by the terms
hereof, together with such actions, rights, remedies, powers and privileges as
are reasonably incidental thereto. The Indenture Trustee shall act upon and in
compliance with the written instructions of the Controlling Party delivered
pursuant to this Indenture promptly following receipt of such written
instructions; provided that the Indenture Trustee shall not act in accordance
with any instructions (i) which are not authorized by, or in violation of the
provisions of, this Indenture, (ii) which are in violation of any applicable
law, rule or regulation or (iii) for which the Indenture Trustee has not
received reasonable indemnity. Receipt of such instructions shall not be a
condition to the exercise by the Indenture Trustee of its express duties
hereunder, except where this Indenture provides that the Indenture Trustee is
permitted to act only following and in accordance with such instructions.
Section 6.14 PERFORMANCE OF DUTIES. The Indenture Trustee shall have
no duties or responsibilities except those expressly set forth in this Indenture
and the other Basic Documents to which the Indenture Trustee is a party or as
directed by the Controlling Party in accordance with this Indenture. The
Indenture Trustee shall not be required to take any discretionary actions
hereunder except at the written direction and with the indemnification of the
Controlling Party. The Indenture Trustee shall, and hereby agrees that it will,
perform all of the duties and obligations required of it under the Sale and
Servicing Agreement.
Section 6.15 LIMITATION ON LIABILITY. Neither the Indenture Trustee
nor any of its directors, officers or employees shall be liable for any action
taken or omitted to be taken by it or them hereunder, or in connection herewith,
except that the Indenture Trustee shall be liable for its negligence, bad faith
or willful misconduct; nor shall the Indenture Trustee be responsible for the
validity, effectiveness, value, sufficiency or enforceability against the Issuer
of this Indenture or any of the Collateral (or any part thereof).
Notwithstanding any term or provision of this Indenture, the Indenture Trustee
shall incur no liability to the Issuer or the Issuer Secured Parties for any
action taken or omitted by the Indenture Trustee in connection with the
Collateral, except for the negligence, bad faith or willful misconduct on the
part of the Indenture Trustee, and, further, shall incur no liability to the
Issuer Secured Parties except for negligence, bad faith or willful misconduct in
carrying out its duties to the Issuer Secured Parties. Subject to Section 6.16,
the Indenture Trustee shall be protected and shall incur no liability to any
such party in relying upon the accuracy, acting in reliance upon the contents,
and assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document reasonably believed by the Indenture Trustee to be
genuine and to have been duly executed by the appropriate signatory, and (absent
actual knowledge to the contrary) the Indenture Trustee shall not be required to
make any independent investigation with respect thereto. The Indenture Trustee
shall at all times be free independently to establish to its reasonable
satisfaction, but shall
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have no duty to independently verify, the existence or nonexistence of facts
that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Basic Documents. The Indenture Trustee may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the written advice of
such counsel. The Indenture Trustee shall not be under any obligation to
exercise any of the remedial rights or powers vested in it by this Indenture or
to follow any direction from the Controlling Party unless it shall have received
reasonable security or indemnity satisfactory to the Indenture Trustee against
the costs, expenses and liabilities which might be incurred by it.
Section 6.16 RELIANCE UPON DOCUMENTS. In the absence of negligence,
bad faith or willful misconduct on its part, the Indenture Trustee shall be
entitled to rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable reliance
upon any statement or opinion contained in any such document or instrument.
SECTION 6.17 [RESERVED]
SECTION 6.18 [RESERVED]
Section 6.19 REPRESENTATIONS AND WARRANTIES OF THE INDENTURE
TRUSTEE. The Indenture Trustee represents and warrants to the Issuer and to each
Issuer Secured Party as follows:
(a) DUE ORGANIZATION. The Indenture Trustee is a national banking
association, duly organized, validly existing and in good standing under the
laws of the United States and is duly authorized and licensed under applicable
law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Indenture Trustee has all requisite
right, power and authority to execute and deliver this Indenture and to perform
all of its duties as Indenture Trustee hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the Indenture
Trustee of this Indenture and the other Basic Documents to which it is a party,
and the performance by the Indenture Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary organizational
proceedings and no further approvals or filings, including any governmental
approvals, are required for the valid execution and delivery by the Indenture
Trustee, or the performance by the Indenture Trustee, of this Indenture and such
other Basic Documents to which it is a party.
(d) VALID AND BINDING INDENTURE. The Indenture Trustee has duly
executed and delivered this Indenture and each other Basic Document to which it
is a party, and each of this Indenture and each such other Basic Document
constitutes the legal, valid and binding obligation of the Indenture Trustee,
enforceable against the Indenture Trustee in accordance with its terms, except
as (i) such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the enforcement of
creditors' rights
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generally and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
Section 6.20 WAIVER OF SETOFFS. The Indenture Trustee hereby
expressly waives any and all rights of setoff that the Indenture Trustee may
otherwise at any time have under applicable law with respect to any Trust
Account and agrees that amounts in the Trust Accounts shall at all times be held
and applied solely in accordance with the provisions hereof.
Section 6.21 CONTROL BY THE CONTROLLING PARTY. The Indenture Trustee
shall comply with notices and instructions given by the Issuer only if
accompanied by the written consent of the Controlling Party, except that if any
Event of Default shall have occurred and be continuing, the Indenture Trustee
shall act upon and comply with notices and instructions given by the Controlling
Party alone in the place and stead of the Issuer.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.1 ISSUER TO FURNISH TO INDENTURE TRUSTEE NAMES AND
ADDRESSES OF NOTEHOLDERS. The Issuer will furnish or cause to be furnished to
the Indenture Trustee (a) not more than five (5) days after the earlier of (i)
each Record Date and (ii) three months after the last Record Date, a list, in
such form as the Indenture Trustee may reasonably require, of the names and
addresses of the Holders as of such Record Date, (b) at such other times as the
Indenture Trustee may request in writing, within thirty (30) days after receipt
by the Issuer of any such request, a list of similar form and content as of a
date not more than ten (10) days prior to the time such list is furnished;
provided, however, that so long as the Indenture Trustee is the Note Registrar,
no such list shall be required to be furnished. The Indenture Trustee or, if the
Indenture Trustee is not the Note Registrar, the Issuer shall furnish to the
Insurer in writing on an annual basis on each March 31 and at such other times
as the Insurer may request, a copy of the list.
Section 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO
NOTEHOLDERS. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders contained in
the most recent list furnished to the Indenture Trustee as provided in Section
7.1 and the names and addresses of Holders received by the Indenture Trustee in
its capacity as Note Registrar. The Indenture Trustee may destroy any list
furnished to it as provided in such Section 7.1 upon receipt of a new list so
furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar shall
have the protection of TIA Section 312(c).
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Section 7.3 REPORTS BY ISSUER. The Issuer shall:
(i) file with the Indenture Trustee, within 15 days after the
Issuer is required to file the same with the Commission, copies of the
annual reports and of the information, documents and other reports (or
copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may be
required to file with the Commission pursuant to Section 13 or 15(d) of
the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with respect
to compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Indenture Trustee (and the Indenture Trustee
shall transmit by mail to all Noteholders described in TIA Section 313(c))
such summaries of any information, documents and reports required to be
filed by the Issuer pursuant to clauses (i) and (ii) of this Section
7.3(a) as may be required by rules and regulations prescribed from time to
time by the Commission.
Section 7.4 REPORTS BY INDENTURE TRUSTEE. If required by TIA Section
313(a), within 60 days after each June 30, beginning with June 30, 200[__], 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.
Section 7.5 FISCAL YEAR.
Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.1 COLLECTION OF MONEY. Except as otherwise expressly
provided herein, the Indenture Trustee may demand payment or delivery of, and
shall receive directly and without intervention or assistance of any fiscal
agent or other intermediary, all money and other property payable to or
receivable by the Indenture Trustee pursuant to this Indenture. The Indenture
Trustee shall apply all such money received by it as provided in this Indenture.
Except as otherwise expressly provided in this Indenture, if any default occurs
in the making of any
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payment or performance under any agreement or instrument that is part of the
Trust Fund, the Indenture Trustee may take such action as may be appropriate to
enforce such payment or performance, including the institution and prosecution
of appropriate proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in Article V.
Section 8.2 TRUST ACCOUNTS. (a) On or prior to the Closing Date, the
Issuer shall establish or shall cause the Servicer to establish and maintain, in
the name of the Indenture Trustee, for the benefit of the Noteholders, the
Insurer and Certificateholders, as applicable, the Trust Accounts as provided in
Section 5.1 of the Sale and Servicing Agreement.
(b) Subject to Section 5.6 of the Sale and Servicing Agreement, on
each Payment Date and Redemption 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 amounts and in the following order of
priority (except as otherwise provided in Section 5.6):
(i) accrued and unpaid interest on the Notes; provided that if
there are not sufficient funds in the Note Distribution Account to pay the
entire amount of accrued and unpaid interest then due on each class of the
Notes, the amount in the Note Distribution Account shall be applied to the
payment of such interest on the each class of Notes pro rata on the basis
of the amount of accrued and unpaid interest due on each class of Notes;
(ii) any amounts deposited in the Note Distribution Account with
respect to the Remaining Pre-Funding Amount shall be distributed in
accordance with Section 10.1 hereof;
(iii) principal to the Holders of the Class A-1 Notes until the
Outstanding Amount of the Class A-1 Notes is reduced to zero;
(iv) principal to the Holders of the Class A-2 Notes until
the Outstanding Amount of the Class A-2 Notes is reduced to zero; and
(v) principal to the Holders of the Class A-3 Notes until the
Outstanding Amount of the Class A-3 Notes is reduced to zero.
Section 8.3 GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested and reinvested in
Eligible Investments by the Indenture Trustee upon Issuer Order, subject to the
provisions of Section 5.1(b) of the Sale and Servicing Agreement. All income or
other gain from investments of moneys deposited in a Trust Account shall be
deposited (or caused to be deposited) by the Indenture Trustee in such Trust
Account, and any loss resulting from such investments shall be charged to such
account. The Issuer 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
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Indenture Trustee to make any such investment or sale, the Issuer shall deliver
to the Indenture Trustee an Opinion of Counsel, acceptable to the Indenture
Trustee, to such effect.
(b) [RESERVED]
(c) Subject to Section 6.1(c), the Indenture Trustee shall not in
any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Eligible Investment included therein
except for losses attributable to the Indenture Trustee's failure to make
payments on such Eligible Investment issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms.
(d) If (i) the Issuer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 2:00 p.m. Eastern 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 5.2, or,
if such Notes shall have been declared due and payable following an Event of
Default, amounts collected or receivable from the Trust Fund are being applied
in accordance with Section 5.5 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 investments of the type set forth in
clause (c) of the definition of Eligible Investments maturing no later than the
Business Day immediately preceding the next scheduled Payment Date.
Section 8.4 RELEASE OF TRUST FUND. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.7, the Indenture Trustee may, and when
required by the provisions of this Indenture and the Sale and Servicing
Agreement shall, execute instruments to release property from the lien of this
Indenture, or convey the Indenture Trustee's interest in the same, in a manner
and under circumstances that are not inconsistent with the provisions of this
Indenture. No party relying upon an instrument executed by the Indenture Trustee
as provided in this Article VIII shall be bound to ascertain the Indenture
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding and all sums due the Indenture Trustee pursuant to Section 6.7
have been paid, release any remaining portion of the Trust Fund from the lien of
this Indenture and release for deposit into the Certificate Distribution Account
or to any other Person entitled thereto any funds then on deposit in the Trust
Accounts. The Indenture Trustee shall release property from the lien of this
Indenture pursuant to this Section 8.4(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by TIA) Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
Section 8.5 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 8.4(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
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complete the same, and concluding that all conditions precedent to the taking of
such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Fund. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Indenture Trustee in connection with any such
action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.1 SUPPLEMENTAL INDENTURES. (a) Without the consent of the
Holders of any Notes but with the prior written consent of the Insurer (unless
an Insurer Default shall have occurred and be continuing) and with prior notice
to the Rating Agencies by the Issuer, as evidenced to the Indenture Trustee, the
Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any
time and from time to time, may enter into one or more indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act as in
force at the date of the execution thereof), in form satisfactory to the
Indenture Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien of
this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein and
in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the 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 to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that such action
shall not adversely affect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes and
to add to or change any of the provisions of this Indenture as shall be
necessary to facilitate the administration of the trusts hereunder by more
than one trustee, pursuant to the requirements of Article VI; or
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(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the qualification
of this Indenture under the TIA or under any similar federal statute
hereafter enacted and to add to this Indenture such other provisions as
may be expressly required by the TIA.
The 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
but with the consent of the Insurer, if there is no Insurer Default, and with
prior notice to the Rating Agencies by the Issuer, as evidenced to 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; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel, adversely affect
in any material respect the interests of any Noteholder.
Section 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. (a)
The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also
may, with prior written notice to the Rating Agencies, with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) and if
the Insurer is no longer the Controlling Party, with the consent of the Holders
of not less than a majority of the Outstanding Amount of the Notes, enter into
an indenture or indentures supplemental hereto for any purpose; 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 or the Redemption Price with respect thereto, change
the provision of this Indenture relating to the application of collections
on, or the proceeds of the sale of, the Trust Fund to payment of principal
of or interest on the Notes, or change any place of payment where, or the
coin or currency in which, any Note or the interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any such
amount due on the Notes on or after the respective due dates thereof (or,
in the case of redemption, on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is required
for any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences provided for in this
Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
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(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Indenture Trustee to direct the Issuer to sell or
liquidate the Trust Fund pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including the
calculation of any of the individual components of such calculation) or to
affect the rights of the Holders of Notes to the benefit of any provisions
for the mandatory redemption of the Notes contained herein; or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Fund or, except as otherwise permitted or contemplated herein or in
any of the Basic Documents, terminate the lien of this Indenture on any
property at any time subject hereto or deprive the Holder of any Note of
the security provided by the lien of this Indenture.
(b) The Indenture Trustee may determine whether or not any Notes
would be affected by any supplemental indenture and any such determination shall
be conclusive upon the Holders of all Notes, whether theretofore or thereafter
authenticated and delivered hereunder. The Indenture Trustee shall not be liable
for any such determination made in good faith.
(c) 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.
(d) Promptly after the execution by the Issuer and the Indenture
Trustee of any supplemental indenture pursuant to this Section, the Indenture
Trustee shall mail to the Insurer and 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 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Indenture Trustee shall be entitled to receive, and
subject to Sections 6.1 and 6.2, shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Indenture Trustee may, but shall
not be obligated to, enter into any such supplemental indenture that affects the
Indenture Trustee's own rights, duties, liabilities or immunities under this
Indenture or otherwise.
Section 9.4 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed
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to be modified and amended in accordance therewith with respect to the Notes
affected thereby, and the respective rights, limitations of rights, obligations,
duties, liabilities and immunities under this Indenture of the Indenture
Trustee, the Issuer, the Insurer and the Holders of the Notes shall thereafter
be determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
Section 9.5 CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
Section 9.6 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Indenture Trustee shall,
bear a notation in form approved by the Indenture Trustee as to any matter
provided for in such supplemental indenture. If the Issuer or the Indenture
Trustee shall so determine, new Notes so modified as to conform, in the opinion
of the Indenture Trustee and the Issuer, to any such supplemental indenture may
be prepared and executed by the Issuer and authenticated and delivered by the
Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
Section 10.1 REDEMPTION. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Seller pursuant to Section
9.1(a) of the Sale and Servicing Agreement, on any Payment Date on which the
Servicer exercises its option to purchase the Trust Estate pursuant to said
Section 9.1(a), for a purchase price equal to the Redemption Price; provided,
however, that the Issuer has available funds sufficient to pay the Redemption
Price. The Servicer or the Issuer shall furnish the Insurer and the Rating
Agencies notice of such redemption. If the Notes are to be redeemed pursuant to
this Section 10.1(a), the Servicer or the Issuer shall furnish notice of such
election to the Indenture Trustee not later than 35 days prior to the Redemption
Date and the Issuer shall deposit with the Indenture Trustee in the Note
Distribution Account the Redemption Price of the Notes to be redeemed whereupon
all such Notes shall be due and payable on the Redemption Date upon the
furnishing of a notice complying with Section 10.2 to each Holder of Notes.
(b) If on the Payment Date on which the Pre-Funding Period ends
(or on the Payment Date on or immediately following the last day of the Pre-
Funding Period, if the Pre-Funding Period does not end on a Payment Date), any
Pre-Funded Amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date, the Notes will be redeemed in whole or in
part, in an aggregate principal amount equal to the Prepayment Amount which will
be distributed pro rata to Holders of each Class of Notes based on the
Outstanding Amount of each such Class; provided that if the Remaining Pre-
Funding Amount is $100,000 or less such
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amount shall be applied sequentially to release the Outstanding Amount of the
Class of Notes having the lowest numerical designation then outstanding until
paid in full, and then to the Class of Notes having the next lowest numerical
designation then outstanding.
(c) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.1(c), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Indenture Trustee not later than 45 days prior to the Redemption Date whereupon
all such amounts shall be payable on the Redemption Date.
Section 10.2 FORM OF REDEMPTION NOTICE. (a) Notice of redemption
under Section 10.1 shall be given by the Indenture Trustee by facsimile or by
first-class mail, postage prepaid, transmitted or mailed prior to the applicable
Redemption Date to the Insurer and each Holder of Notes, as of the close of
business on the Record Date preceding the applicable Redemption Date, at such
Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such
Redemption Date is not applicable and that payments shall be made only
upon presentation and surrender of such Notes and the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as provided
in Section 3.2); and
(iv) that (unless the Issuer shall default in the payment of the
Redemption Price) interest on the Notes shall cease to accrue on the
Redemption Date. Notice of redemption of the Notes shall be given by the
Indenture Trustee in the name and at the expense of the Issuer. Failure to
give notice of redemption, or any defect therein, to any Holder of any
Note shall not impair or affect the validity of the redemption of any
other Note.
(b) Prior notice of redemption under Section 10.1(b) is not
required to be given to Noteholders.
Section 10.3 NOTES PAYABLE ON REDEMPTION DATE. The Notes to be
redeemed shall, following notice of redemption as required by Section 10.2 (in
the case of redemption pursuant to Section 10.1), on the Redemption Date become
due and payable at the Redemption Price and (unless the Issuer shall default in
the payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
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ARTICLE XI
MISCELLANEOUS
Section 11.1 COMPLIANCE CERTIFICATES AND OPINIONS, ETC. (a) Upon any
application or request by the Issuer to the Indenture Trustee to take any action
under any provision of this Indenture, the Issuer shall furnish to the Indenture
Trustee and to the Insurer (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, and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with and (iii) (if required by the TIA) an Independent Certificate
from a firm of certified public accountants meeting the applicable requirements
of this Section, except that, in the case of any such application or request as
to which the furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion
has read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is necessary
to enable such signatory to express an informed opinion as to whether or
not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property or
securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
elsewhere in this Indenture, furnish to the Indenture Trustee and the Insurer an
Officer's Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such deposit) to the
Issuer of the Collateral or other property or securities to be so deposited.
(i) Whenever the Issuer is required to furnish to the Indenture
Trustee and the Insurer an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause (a)
above, the Issuer shall also deliver to the Indenture Trustee and the
Insurer an Independent Certificate as to the same matters, if the fair
value to the Issuer of the securities to be so deposited and of all other
such securities made the basis of any such withdrawal or release since the
commencement of the then-current
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fiscal year of the Issuer, as set forth in the certificates delivered
pursuant to clause (a) above and this clause (b)(i), is 10% or more of the
Outstanding Amount of the Notes, but such a certificate need not be
furnished with respect to any securities so deposited, if the fair value
thereof to the Issuer as set forth in the related Officer's Certificate is
less than $25,000 or less than 1% percent of the Outstanding Amount of the
Notes.
(ii) Other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or securities
are to be released from the lien of this Indenture, the Issuer shall also
furnish to the Indenture Trustee and the Insurer an Officer's Certificate
certifying or stating the opinion of each person signing such certificate
as to the fair value (within 90 days of such release) of the property or
securities proposed to be released and stating that in the opinion of such
person the proposed release will not impair the security under this
Indenture in contravention of the provisions hereof.
(iii) Whenever the Issuer is required to furnish to the Indenture
Trustee and the Insurer an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause (a)
above, the Issuer shall also furnish to the Indenture Trustee and the
Insurer an Independent Certificate as to the same matters if the fair
value of the property or securities and of all other property other than
Purchased Receivables and Liquidated Receivables, or securities released
from the lien of this Indenture since the commencement of the then current
calendar year, as set forth in the certificates required by clause (a)
above and this clause (b)(iii), equals 10% or more of the Outstanding
Amount of the Notes, but such certificate need not be furnished in the
case of any release of property or securities if the fair value thereof as
set forth in the related Officer's Certificate is less than $25,000 or
less than 1% percent of the then Outstanding Amount of the Notes.
(iv) Notwithstanding Section 2.9 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise dispose
of Receivables as and to the extent permitted or required by the Basic
Documents and (B) make cash payments out of the Trust Accounts as and to
the extent permitted or required by the Basic Documents.
Section 11.2 FORM OF DOCUMENTS DELIVERED TO INDENTURE Trustee. In
any case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or
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opinion of, or representations by, an officer or officers of the Servicer, the
Seller or the Issuer, stating that the information with respect to such factual
matters is in the possession of the Servicer, the Seller or the Issuer, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Indenture Trustee, it is provided that the Issuer
shall deliver any document as a condition of the granting of such application,
or as evidence of the Issuer's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such application or
at the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Indenture Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
Section 11.3 ACTS OF NOTEHOLDERS. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall become effective when such
instrument or instruments are delivered to the Indenture Trustee, and, where it
is hereby expressly required, to the Issuer. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein sometimes referred
to as the "Act" of the Noteholders signing such instrument or instruments. Proof
of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
6.1) conclusive in favor of the 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 customary manner of the Indenture
Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
Section 11.4 NOTICES, ETC., TO INDENTURE TRUSTEE, ISSUER, INSURER
AND RATING AGENCIES. Any request, demand, authorization, direction, notice,
consent, waiver or Act of
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Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the Issuer shall
be sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed certified mail, return receipt requested and shall
be deemed to have been duly given upon receipt to the Indenture Trustee at its
Corporate Trust Office, or
(b) The Issuer by the Indenture Trustee or by any Noteholder shall
be sufficient for every purpose hereunder if personally delivered, delivered by
overnight courier or mailed certified mail, return receipt requested and shall
be deemed to have been duly given upon receipt to the Issuer addressed to:
[_________] Owner Trust 200[__]-[__], in care of [________], [________],
[________], [________], Attention: [________] or at any other address previously
furnished in writing to the Indenture Trustee by Issuer. The Issuer shall
promptly transmit any notice received by it from the Noteholders to the
Indenture Trustee.
(c) The Insurer by the Issuer or the Indenture Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by registered mail
or personally delivered or telexed or telecopied to the recipient as follows:
To the Insurer: [___________]
[___________]
[___________], [___________]
Attention: [___________]
Telex No.: (___) [___________]
Confirmation: (___) [___________]
Telecopy No.: (___) [___________] or
(___) [___________]
(In each case in which notice or other communication to the Insurer
refers to an Event of Default, a claim on the Policy or with respect to which
failure on the part of the Insurer to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of the General Counsel and the Head--Financial
Guaranty Group "URGENT MATERIAL ENCLOSED.")
Notices required to be given to the Rating Agencies by the Issuer,
the Indenture Trustee, or the Owner Trustee shall be in writing, personally
delivered, delivered by overnight courier or mailed certified mail, return
receipt requested to (i) [_____________], at the following address:
[__________], [__________], [__________], [__________], [__________], Attention:
[__________] and (ii) [__________], at the following address: [___________],
[___________], [___________], [___________], Attention: [___________]; or as to
each of the foregoing, at such other address as shall be designated by written
notice to the other parties.
Section 11.5 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later
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than the latest date, and not earlier than the earliest date, prescribed for the
giving of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner here
in provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Indenture
Trustee but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
Section 11.6 ALTERNATE PAYMENT AND NOTICE PROVISIONS.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the 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, provided that such methods are
reasonable and consented to by the Indenture Trustee (which consent shall not be
unreasonably withheld). 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 11.7 CONFLICT WITH TRUST INDENTURE ACT. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on
any person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.8 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
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Section 11.9 SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Indenture Trustee in
this Indenture shall bind its successors.
Section 11.10 SEPARABILITY. In case any provision in this Indenture
or in the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 11.11 BENEFITS OF INDENTURE. The Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an Ownership interest in any part of the
Trust Fund, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Insurer may disclaim any of its rights and powers under this
Indenture (in which case the Indenture Trustee may exercise such right or power
hereunder), but not its duties and obligations under the Policy, upon delivery
of a written notice to the Indenture Trustee.
Section 11.12 LEGAL HOLIDAYS. In any case where the date on which
any payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date an which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14 COUNTERPARTS. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
Section 11.15 RECORDING OF INDENTURE. If this Indenture is subject
to recording in any appropriate public recording offices, such recording is to
be effected by the Issuer and at its expense accompanied by an Opinion of
Counsel (which may be counsel to the 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 any other
person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
Section 11.16 TRUST OBLIGATION. (a) No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the
Seller, the Transferor, the Depositor,
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the Servicer, the Owner Trustee or the Indenture Trustee on the Notes or under
this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Seller, the Transferor, the Depositor,
the Servicer, the Owner Trustee or the Indenture Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Seller, the Transferor, the Depositor, the Servicer, the Owner Trustee, or the
Indenture Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Transferor, the Depositor, the Servicer,
the Owner Trustee, or the Indenture Trustee or of any successor or assign of the
Seller, the Transferor, the Depositor, the Servicer, the Owner Trustee or the
Indenture Trustee in its individual capacity, except as any such Person may have
expressly agreed (it being understood that the Indenture Trustee and the Owner
Trustee have no such obligations in their individual capacity) and except that
any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Article VI, VII and
VIII of the Trust Agreement.
(b) It is expressly understood and agreed to by the parties hereto
that (a) this Indenture is executed and delivered by Wilmington Trust Company,
not individually or personally but solely as Owner Trustee of the [_______]
Owner Trust 200[__]-[__], in the exercise of the powers and authority conferred
and vested in it, (b) each of the representations, undertakings and agreements
herein made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by [__________] but is made and
intended for the purpose for binding only the Issuer, (c) nothing herein
contained shall be construed as creating any liability on [__________],
individually or personally, to perform any covenant either expressed or implied
contained herein, all such liability, if any, being expressly waived by the
parties hereto and by any Person claiming by, through or under the parties
hereto and (d) under no circumstances shall [__________] be personally liable
for the payment of any indebtedness or expenses of the Issuer or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Issuer under this Indenture or any other related
documents.
Section 11.17 NO PETITION. The Indenture Trustee, by entering into
this Indenture, and each Noteholder, by accepting a Note, hereby covenant and
agree that they will not at any time institute against the Transferor, the
Depositor, or the Issuer, or join in any institution against the Transferor, 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 Basic Documents.
Section 11.18 INSPECTION. The Issuer agrees that, on reasonable
prior notice, it will permit any representative of the Indenture Trustee or of
the Insurer, during the Issuer's normal business hours, to examine all the books
of account, records, reports, and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by Independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and independent certified public
accountants, all
-66-
<PAGE>
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.
[THIS SPACE LEFT INTENTIONALLY BLANK]
-67-
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
[_________________]
OWNER TRUST 200[__]-[__]
By: [_________________], not
in its individual capacity but
solely as Owner/Trustee
By:______________________________________
Name:
Title:
[_________________]
[_________________], not in its
individual capacity but solely as
Indenture Trustee
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT B-1
[Form of Note]
REGISTERED $[_________]
No. __________
SEE REVERSE FOR CERTAIN DEFINITIONS
[Unless this Note is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC).]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[____________] OWNER TRUST 200[__]-[__]
Class A-1 [____]% ASSET BACKED NOTES
[______________] OWNER TRUST 200[__]-[__], a Delaware business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "ISSUER"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of [_________] payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $[_________] and the denominator of which is $[_________]
by (ii) the aggregate amount, if any, payable from the Note Distribution Account
in respect of principal on the Class A-1 Notes pursuant to Section 3.1 of the
Indenture; provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on the Class A-1 Payment Date in [_____], 200[__]
(the "FINAL SCHEDULED PAYMENT DATE"). The Issuer will pay interest on this Note
at the rate per annum shown above on each Payment Date until the principal of
this Note is paid or made available for payment. With respect to any Payment
Date, interest on the Outstanding Amount of this Note will be an amount equal to
one-twelfth of the rate shown above, multiplied by the Outstanding Amount on the
preceding Payment Date (after giving effect to all payments of principal made on
the preceding Payment Date). Interest on this Note will accrue for each Payment
Date for the related Interest Period. Interest will be computed on the basis of
a 360-day year consisting of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first
B-1-1
<PAGE>
to interest due and payable on this Note as provided above and then to the
unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "POLICY") issued by Financial Security Assurance Inc. (the
"INSURER"), pursuant to which the Insurer has unconditionally guaranteed
payments to the Noteholders to the extent set forth in the Indenture.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the 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.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.
[_________________]
OWNER TRUST 200[__]-[__]
By: [_____________], not
in its individual capacity but
solely as Owner Trustee
By:_______________________________________
Name:
Title:
Date:
B-1-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
[_____________]
[_____________], not in its individual
capacity but solely as Indenture
Trustee
By:_______________________________________
Authorized Signatory
B-1-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 [______]% Asset Backed Notes (herein called the
"CLASS A-1 NOTES"), all issued under an Indenture dated as of [_________] [__],
200[__] (such indenture, as supplemented or amended, is herein called the
"INDENTURE"), between the Issuer and [____________], as trustee (the "INDENTURE
TRUSTEE", which term includes any successor Indenture Trustee under the
Indenture, to which Indenture) and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
(together, the "NOTES") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment
Date in an amount described on the face hereof. "PAYMENT DATE" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing in [______], 200[__].
As provided in the Indenture and subject to the restrictions on
transfer and certain limitations set forth therein, the transfer of this Note
may be registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or his attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the 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 or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Transferor, the Depositor, or the Issuer or join in
any institution against the Transferor, 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, the
Indenture or the Basic Documents.
B-1-4
<PAGE>
By acceptance of this Note each Noteholder covenants and agrees to
treat such Note as indebtedness for purposes of federal income, State and local
income and franchise and any other taxes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and the Insurer and any agent of the
Issuer, the Indenture Trustee or the Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Indenture
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits the amendment thereof and the modification of
the rights and obligations of the Issuer and the rights of the Holders of the
Notes under the Indenture at any time by the Issuer with the consent of the
Insurer or, if an Insurer Default has occurred and is continuing, with the
consent of the Holders of Notes representing a majority of the Outstanding
Amount of all Notes at time Outstanding. The Indenture also contains provisions
permitting the Insurer (and in certain circumstances described in the Indenture,
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
Controlling Party or the Holder of this Note (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
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 term "ISSUER" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with
the laws of the State of New York, including Section 5-1401 of the General
Obligations Law, but otherwise without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
B-1-5
<PAGE>
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither Wilmington Trust
Company, any owner of a beneficial interest in the Issuer, nor any of their
respective partners, beneficiaries, agents, officers, directors, employees or
successors or assigns shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on, or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
B-1-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________________________________________________________
(NAME AND ADDRESS OF ASSIGNEE)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________________(1)
Signature Guaranteed:
__________________
(1) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
<PAGE>
B-1-7
EXHIBIT B-2
[Form of Class A-2 Note]
REGISTERED $[________]
No. __________
SEE REVERSE FOR CERTAIN DEFINITIONS
[Unless this Note is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC).]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[_____________] OWNER TRUST 200[__]-[__]
CLASS A-2 [____]% ASSET BACKED NOTES
[_____________] OWNER TRUST 200[__]-[__], a Delaware business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "ISSUER"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of [_____________] payable on each
Payment Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[________] and the denominator of which is
$[________] by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-2 Notes pursuant to
Section 3.1 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Class A-2 Payment
Date in [__________] 200[__] (the "FINAL SCHEDULED PAYMENT DATE"). The Issuer
will pay interest on this Note at the rate per annum shown above on each Payment
Date until the principal of this Note is paid or made available for payment.
With respect to any Payment Date, interest on the Outstanding Amount of this
Note will be an amount equal to one-twelfth of the rate shown above, multiplied
by the Outstanding Amount on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date). Interest on this
Note will accrue for each Payment Date for the related Interest Period. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to
B-2-1
<PAGE>
interest due and payable on this Note as provided above and then to the unpaid
principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "POLICY") issued by Financial Security Assurance Inc. (the
"INSURER"), pursuant to which the Insurer has unconditionally guaranteed
payments to the Noteholders to the extent set forth in the Indenture.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the 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.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.
[_________________]
OWNER TRUST 200[__]-[__]
By: [_______________], not
in its individual capacity but
solely as Owner Trustee
By:_______________________________________
Name:
Title:
Date:
B-2-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
[_______________]
[_______________], not in its
individual capacity but solely as
Indenture Trustee
By:_______________________________________
Authorized Signatory
<PAGE>
B-2-3
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 [_____]% Asset Backed Notes (herein called the
"CLASS A-2 NOTES"), all issued under an Indenture dated as of [_________] [__],
200[__] (such indenture, as supplemented or amended, is herein called the
"INDENTURE"), between the Issuer and [___________], as trustee (the "INDENTURE
TRUSTEE", which term includes any successor Indenture Trustee under the
Indenture), to which Indenture and all indentures supplemental thereto reference
is hereby made for a statement of the respective rights and obligations
thereunder of the Issuer, the Indenture Trustee and the Holders of the Notes.
The Notes are subject to all terms of the Indenture. All terms used in this Note
that are defined in the Indenture, as supplemented or amended, shall have the
meanings assigned to them in or pursuant to the Indenture, as so supplemented or
amended.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
(together, the "NOTES") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment
Date in an amount described on the face hereof. "PAYMENT DATE" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing in [________], 200[__].
As provided in the Indenture and subject to the restrictions on
transfer and certain limitations set forth therein, the transfer of this Note
may be registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or his attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the 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 or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Transferor, the Depositor, or the Issuer or join in
any institution against the Transferor, 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, the
Indenture or the Basic Documents.
B-2-4
<PAGE>
By acceptance of this Note each Noteholder covenants and agrees to
treat such Note as indebtedness for purposes of federal income, State and local
income and franchise and any other taxes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and the Insurer and any agent of the
Issuer, the Indenture Trustee or the Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Indenture
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits the amendment thereof and the modification of
the rights and obligations of the Issuer and the rights of the Holders of the
Notes under the Indenture at any time by the Issuer with the consent of the
Insurer or, if an Insurer Default has occurred and is continuing, with the
consent of the Holders of Notes representing a majority of the Outstanding
Amount of all Notes at time Outstanding. The Indenture also contains provisions
permitting the Insurer (and in certain circumstances described in the Indenture,
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
Controlling Party or the Holder of this Note (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
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 term "ISSUER" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with
the laws of the State of New York, including Section 5-1401 of the General
Obligations Law, but otherwise without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
B-2-5
<PAGE>
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither [___________], any
owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture, it being expressly understood that said covenants,
obligations and indemnifications have been made by the Owner Trustee for the
sole purposes of binding the interests of the Owner Trustee in the assets of the
Issuer. The Holder of this Note by the acceptance hereof agrees that except as
expressly provided in the Indenture or the Basic Documents, in the case of an
Event of Default under the Indenture, the Holder shall have no claim against any
of the foregoing for any deficiency, loss or claim therefrom; provided, however,
that nothing contained herein shall be taken to prevent recourse to, and
enforcement against, the assets of the Issuer for any and all liabilities,
obligations and undertakings contained in the Indenture or in this Note.
B-2-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________________________________
(NAME AND ADDRESS OF ASSIGNEE)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________________(1)
Signature Guaranteed:
__________________
(1) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever
<PAGE>
EXHIBIT B-3
[Form of Class A-3 Note]
REGISTERED $[__________]
No. __________
SEE REVERSE FOR CERTAIN DEFINITIONS
[Unless this Note is presented by an authorized representative of
The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or
its agent for registration of transfer, exchange or payment, and any Note issued
is registered in the name of Cede & Co. or in such other name as is requested by
an authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC).]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[______________] OWNER TRUST 200[__]-[__]
CLASS A-3 [_____]% ASSET BACKED NOTES
[______________] OWNER TRUST 200[__]-[__], a Delaware business trust
organized and existing under the laws of the State of Delaware (herein referred
to as the "ISSUER"), for value received, hereby promises to pay to CEDE & CO.,
or registered assigns, the principal sum of [______________] payable on each
Payment Date in an amount equal to the result obtained by multiplying (i) a
fraction the numerator of which is $[__________] and the denominator of which is
$[__________] by (ii) the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-3 Notes pursuant to
Section 3.1 of the Indenture; provided, however, that the entire unpaid
principal amount of this Note shall be due and payable on the Class A-3 Payment
Date in [________], 200[__] (the "FINAL SCHEDULED PAYMENT DATE"). The Issuer
will pay interest on this Note at the rate per annum shown above on each Payment
Date until the principal of this Note is paid or made available for payment.
With respect to any Payment Date, interest on the Outstanding Amount of this
Note will be an amount equal to one-twelfth of the rate shown above, multiplied
by the Outstanding Amount on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date). Interest on this
Note will accrue for each Payment Date for the related Interest Period. Interest
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to
B-3-1
<PAGE>
interest due and payable on this Note as provided above and then to the unpaid
principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "POLICY") issued by Financial Security Assurance Inc. (the
"INSURER"), pursuant to which the Insurer has unconditionally guaranteed
payments to the Noteholders to the extent set forth in the Indenture.
Reference is made to the further provisions of this Note set forth
on the reverse hereof, which shall have the same effect as though fully set
forth on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the 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.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer as of the date set
forth below.
[_______________]
OWNER TRUST 200[__]-[__]
By: [___________], not in its
individual capacity but solely as
Owner Trustee
By:_______________________________________
Name:
Title:
Date:
B-3-2
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
[______________]
[___________], not in its individual
capacity but solely as Indenture
Trustee
By:_______________________________________
Authorized Signatory
B-3-3
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 [______]% Asset Backed Notes (herein called the
"CLASS A-3 NOTES"), all issued under an Indenture dated as of [_______], 200[__]
(such indenture, as supplemented or amended, is herein called the "INDENTURE"),
between the Issuer and [___________], as trustee (the "INDENTURE TRUSTEE", which
term includes any successor Indenture Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Indenture Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
(together, the "NOTES") are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Payment
Date in an amount described on the face hereof. "PAYMENT DATE" means the
fifteenth day of each month, or, if any such date is not a Business Day, the
next succeeding Business Day, commencing in [_________], 200[__].
As provided in the Indenture and subject to the restrictions on
transfer and certain limitations set forth therein, the transfer of this Note
may be registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder hereof or his attorney duly authorized in writing, with
such signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the 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 or Note Owner, by acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note covenants and agrees that
by accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Transferor, the Depositor, or the Issuer or join in
any institution against the Transferor, 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, the
Indenture or the Basic Documents.
B-3-4
<PAGE>
By acceptance of this Note each Noteholder covenants and agrees to
treat such Note as indebtedness for purposes of federal income, State and local
income and franchise and any other taxes.
Prior to the due presentment for registration of transfer of this
Note, the Issuer, the Indenture Trustee and the Insurer and any agent of the
Issuer, the Indenture Trustee or the Insurer may treat the Person in whose name
this Note (as of the day of determination or as of such other date as may be
specified in the Indenture) is registered as the owner hereof for all purposes,
whether or not this Note be overdue, and neither the Issuer, the Indenture
Trustee nor any such agent shall be affected by notice to the contrary.
The Indenture permits the amendment thereof and the modification of
the rights and obligations of the Issuer and the rights of the Holders of the
Notes under the Indenture at any time by the Issuer with the consent of the
Insurer or, if an Insurer Default has occurred and is continuing, with the
consent of the Holders of Notes representing a majority of the Outstanding
Amount of all Notes at time Outstanding. The Indenture also contains provisions
permitting the insurer (and in certain circumstances described in the Indenture,
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
Controlling Party or the Holder of this Note (or any one of more Predecessor
Notes) shall be conclusive and binding upon such Holder and upon all future
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent or waiver is made upon this Note. The Indenture also permits the
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 term "ISSUER" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of the Indenture
Trustee and the Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with
the laws of the State of New York, including Section 5-1401 of the General
Obligations Law, but otherwise without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
B-3-5
<PAGE>
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither Wilmington Trust
Company, any owner of a beneficial interest in the Issuer, nor any of their
respective partners, beneficiaries, agents, officers, directors, employees or
successors or assigns shall be personally liable for, nor shall recourse be had
to any of them for, the payment of principal of or interest on, or performance
of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
B-3-6
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ___________________________________
(NAME AND ADDRESS OF ASSIGNEE)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________________(1)
Signature Guaranteed:
(1) NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
___________________
(1) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever
===============================================================================
Exhibit 4.4
FORM OF SALE AND SERVICING AGREEMENT
among
[_____________________] 200[_]-[_],
Issuer,
[NAME OF TRANSFEROR],
Transferor,
[NAME OF SELLER AND SERVICER],
Seller and Servicer,
PAINEWEBBER ASSET ACCEPTANCE CORPORATION,
Depositor
and
[NAME OF INDENTURE TRUSTEE, BACKUP SERVICER AND CUSTODIAN],
as Indenture Trustee, Backup Servicer and Custodian
Dated as of [________], 200[_]
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.1 Definitions....................................................1
Section 1.2 Other Definitional Provisions.................................21
ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1 Conveyance of Initial Receivables.............................22
Section 2.2 Conveyance of Subsequent Receivables..........................22
Section 2.3 Conveyance from Transferor to Depositor.......................25
Section 2.4 Conveyance from Depositor to Trust............................26
Section 2.5 Closing.......................................................26
ARTICLE III
THE RECEIVABLES
Section 3.1 Representations and Warranties................................26
Section 3.2 Repurchase upon Breach........................................31
Section 3.3 Custody of Receivables Files..................................32
Section 3.4 Duties of Custodian...........................................32
Section 3.5 Retention and Termination of Servicer.........................32
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1 Appointment and Duties of Servicer............................33
Section 4.2 Collection and Allocation of Receivable Payments..............34
Section 4.3 Realization upon Receivables..................................35
Section 4.4 [RESERVED]....................................................36
Section 4.5 Maintenance of Security Interests in Financed Vehicles........36
Section 4.6 Covenants of Servicer.........................................36
Section 4.7 Purchase of Receivables upon Breach...........................37
Section 4.8 Servicing Fee.................................................37
Section 4.9 Servicer's Certificate........................................37
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<PAGE>
Section 4.10 Annual Statement as to Compliance; Notice of Default..........38
Section 4.11 Financial Statements..........................................38
Section 4.12 Access to Certain Documentation and Information Regarding
Receivables..................................................39
Section 4.13 Servicer Expenses.............................................39
Section 4.14 Appointment of Subservicer....................................39
Section 4.15 Obligations under Basic Documents.............................40
Section 4.16 Reports to the Commission.....................................40
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
Section 5.1 Establishment of Trust Accounts...............................40
Section 5.2 Collections...................................................43
Section 5.3 Application of Collections....................................44
Section 5.4 Deficiency Notice.............................................44
Section 5.5 Additional Deposits...........................................44
Section 5.6 Distributions.................................................45
Section 5.7 Pre-Funding Account...........................................46
Section 5.8 Statements to Certificateholders and Noteholders..............47
Section 5.9 Net Deposits..................................................48
Section 5.10 Optional Deposits by the Insurer..............................48
ARTICLE V-A
THE POLICY
Section 5A.1 Claims Under Policy...........................................48
Section 5A.2 Preference Claims; Direction of Proceedings...................49
Section 5A.3 Surrender of Policy...........................................50
ARTICLE VI
THE SELLER
Section 6.1 Representations of the Seller.................................50
Section 6.2 Existence.....................................................52
Section 6.3 Liability of Seller; Indemnities..............................53
Section 6.4 Merger or Consolidation of, or Assumption of the
Obligations of, Seller.......................................54
Section 6.5 Limitation on Liability of Seller and Others..................54
Section 6.6 Seller May Own Certificates or Notes..........................55
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<PAGE>
ARTICLE VII
THE SERVICER
Section 7.1 Representations of Servicer...................................55
Section 7.2 Indemnities of Servicer.......................................57
Section 7.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer.....................................58
Section 7.4 Limitation on Liability of Servicer and Others................58
Section 7.5 Servicer Not To Resign........................................59
ARTICLE VII-A
THE TRANSFEROR
Section 7A.1 Representations of the Transferor.............................59
Section 7A.2 Existence.....................................................61
Section 7A.3 Liability of Transferor; Indemnities..........................62
Section 7A.4 Limitation on Liability of Transferor and Others..............62
Section 7A.5 Transferor May Own Certificates or Notes......................63
ARTICLE VII-B
THE DEPOSITOR
Section 7B.1 Representations of the Depositor..............................63
Section 7B.2 Existence.....................................................65
Section 7B.3 Liability of Depositor; Indemnities...........................65
Section 7B.4 Limitation on Liability of Depositor and Others...............66
Section 7B.5 Depositor May Own Certificates or Notes.......................66
ARTICLE VIII
DEFAULT
Section 8.1 Servicer Default..............................................66
Section 8.2 Appointment of Successor......................................68
Section 8.3 Notification to Noteholders, Certificateholders and
Backup Servicer..............................................69
Section 8.4 Waiver of Past Defaults.......................................69
ARTICLE VIII-A
THE BACKUP SERVICER
Section 8A.1 Appointment of Backup Servicer................................70
Section 8A.2 Duties of Backup Servicer.....................................70
Section 8A.3 Backup Servicing Standard.....................................70
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<PAGE>
Section 8A.4 Limitation on Resignation of the Backup Servicer..............71
Section 8A.5 Rights in Respect of the Backup Servicer......................71
Section 8A.6 Termination Fee...............................................71
Section 8A.7 Resignation or Termination of Backup Servicing Fee............72
Section 8A.8 Backup Servicing Fee..........................................72
Section 8A.9 Indemnity.....................................................72
Section 8A.10 Limitation of Liability.......................................72
ARTICLE IX
TERMINATION
Section 9.1 Optional Purchase of All Receivables..........................73
ARTICLE X
ADMINISTRATIVE DUTIES OF THE SERVICER
Section 10.1 __________....................................................74
Section 10.2 Records.......................................................76
Section 10.3 Additional Information to be Furnished to the Issuer..........76
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 Amendment.....................................................76
Section 11.2 Protection of Title to the Trust..............................77
Section 11.3 Notices.......................................................80
Section 11.4 Assignment....................................................80
Section 11.5 Limitations on Rights of Others...............................80
Section 11.6 Severability..................................................81
Section 11.7 Separate Counterparts.........................................81
Section 11.8 Headings......................................................81
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<PAGE>
Section 11.9 Governing Law.................................................81
Section 11.10 Assignment to Indenture Trustee...............................81
Section 11.11 Nonpetition Covenants.........................................81
Section 11.12 Limitation of Liability of Owner Trustee and Indenture
Trustee......................................................82
Section 11.13 Independence of the Servicer..................................82
Section 11.14 No Joint Venture..............................................83
Section 11.15 Third-Party Beneficiaries.....................................83
Section 11.16 Disclaimer by Insurer.........................................83
Section 11.17 Insurer as Controlling Party..................................83
Section 11.18 Limited Recourse..............................................83
Exhibit A -- Form of Subsequent Transfer Agreement
Exhibit B -- Form of Monthly Certificateholder Statement
Exhibit C -- Form of Monthly Noteholder Statement
Exhibit D -- Form of Servicer's Certificate
Exhibit E -- Form of Note Policy
Exhibit F -- Form of Stamp
Schedule A -- Schedule of Receivables
Schedule B -- Location of Receivables
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<PAGE>
SALE AND SERVICING AGREEMENT dated as of [________], 200[_], among
[_____________________] 200[_]-[_], a [__________] business trust (the
"ISSUER"), [______________], a [_______________] company, as transferor (the
"TRANSFEROR"), [__________________], a [______________] company, as seller and
servicer (the "SELLER" and the "SERVICER"), PaineWebber Asset Acceptance
Corporation, a Delaware corporation, as depositor (the "DEPOSITOR"), and
[__________________], a national banking association, as Indenture Trustee,
Backup Servicer and Custodian.
WHEREAS the Transferor desires to purchase a portfolio of
receivables arising in connection with motor vehicle loans originated by the
Seller;
WHEREAS the Seller is willing to sell such receivables to the
Transferor;
WHEREAS the Transferor desires to purchase additional receivables
during the Pre-Funding Period (as defined herein) arising in connection with
motor vehicle loans originated by the Seller;
WHEREAS the Seller is willing to sell such additional receivables
to the Transferor;
WHEREAS the Depositor desires to obtain a transfer of such
receivables from the Transferor and the Transferor is willing to assign its
interest in such receivables to the Depositor;
WHEREAS the Issuer desires to obtain a transfer of the Depositor's
interest in such receivables and the Depositor desires to transfer its interest
in such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
WHEREAS the Backup Servicer is willing to act as backup servicer
pursuant to the terms hereof;
WHEREAS the Custodian is willing to act as custodian pursuant to the
terms hereof and the terms of the Custodial Agreement (as defined herein); and
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
<PAGE>
"ADDITION NOTICE" means, with respect to any transfer of Subsequent
Receivables to the Transferor pursuant to Section 2.2 of this Agreement, notice
of the Seller's election to transfer Subsequent Receivables to the Transferor,
such notice to designate the related Subsequent Transfer Date and the
approximate principal amount of Subsequent Receivables to be transferred on such
Subsequent Transfer Date.
"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. A Person shall not be deemed to be an
Affiliate of any person solely because such other Person has the contractual
right or obligation to manage such Person unless such other Person controls such
Person through equity ownership or otherwise.
"AGGREGATE PRINCIPAL BALANCE" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable (other than a Purchased Receivable) that became a Liquidated
Receivable during the related Collection Period and (ii) any Receivable (other
than a Liquidated Receivable) that was purchased or repurchased by any Person
pursuant to this Agreement during the related Collection Period) as of the date
of determination.
"AGREEMENT" means this Sale and Servicing Agreement, as the same may
be amended and supplemented from time to time.
"AMOUNT FINANCED" means, with respect to a Receivable, the amount
advanced under such Receivable toward the purchase price or refinancing of the
Financed Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service, car club and warranty contracts, and
other items customarily financed as part of automobile loans. "Annual Percentage
Rate" or "APR" of a Receivable means the annual percentage rate of finance
charges or service charges, as stated in the related Contract.
"AVAILABLE FUNDS" means, with respect to any Determination Date, the
sum of (i) the Collected Funds for the related Collection Period, (ii) all
Purchase Amounts deposited in the Collection Account during the related
Collection Period, (iii) the Monthly Capitalized Interest Amount with respect to
the related Payment Date, (iv) the Yield Supplement Amount, with respect to the
related Payment Date, and (v) following the acceleration of the Notes pursuant
to Section 5.2 of the Indenture, the amount of money or property collected
pursuant to Section 5.4 of the Indenture since the preceding Determination Date
by the Indenture Trustee for distribution pursuant to Section 5.6 of the
Indenture.
"AVERAGE PRINCIPAL BALANCE" means, with respect to any Collection
Period, the sum of the Principal Balance of the Receivables as of the close of
business on the last day of the immediately preceding Collection Period and the
Principal Balance of the Receivables as of the close of business on the last day
of such Collection Period, divided by two.
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<PAGE>
"BACKUP SERVICER" means [__________________], as the Backup
Servicer, and each successor Backup Servicer pursuant to Section 8A.1 of the
Agreement.
"BACKUP SERVICER DUTIES" has the meaning assigned to such term in
Section 8A.2.
"BACKUP SERVICING FEE" means the monthly fee payable to the Backup
Servicer, in an amount equal to the greater of (A) the product of one-twelfth of
[__]% per annum multiplied by the Outstanding Amount on the preceding Payment
Date after giving effect to distributions on such date or (B) $[___]. "Backup
Servicing Standard" has the meaning assigned to that term in Section 8A.3.
"BASE SERVICING FEE" means, with respect to any Collection Period,
the fee payable to the Servicer for services rendered during such Collection
Period, which shall be equal to one-twelfth of the Servicing Fee Rate multiplied
by the Pool Balance as of the first day of such Collection Period.
"BASIC DOCUMENTS" means the Certificate of Trust, the Trust
Agreement, the Sale and Servicing Agreement, each Subsequent Transfer Agreement,
the Indenture, the Insurance Agreement, the Reserve Account Agreement, the
Custodial Agreement, the Depository Agreement, the Policy, the Premium Letter,
the FSA Indemnification Agreement, the Depositor Indemnification Agreement, the
Notes, the Certificates and the Pledge Agreement and other documents and
certificates delivered in connection therewith.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or
other day on which commercial banks located in [____________], [_____________]
or New York, New York are authorized or obligated by law, executive order or
governmental decree to be closed or the principal place of business of any
successor Servicer, successor Indenture Trustee or successor Owner Trustee.
"CAPITALIZED INTEREST ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1 hereof.
"CAPITALIZED INTEREST ACCOUNT INITIAL DEPOSIT" means $[_________],
deposited into the Capitalized Interest Account on the Closing Date.
"CERTIFICATE" means a Trust Certificate (as defined in the Trust
Agreement).
"CERTIFICATE BALANCE" means, with respect to the Class A
Certificates, initially, $[___________], and thereafter equals the initial
Certificate Balance reduced by all amounts allocable to principal previously
distributed to Certificateholders.
"CERTIFICATE DISTRIBUTION ACCOUNT" has the meaning assigned to such
term in Section 5.1(a) of the Trust Agreement.
"CERTIFICATE POOL FACTOR" as of the close of business on a Payment
Date means a seven digit decimal figure equal to the Certificate Balance as of
such Payment Date after giving effect to principal distributions on such date
divided by the initial Certificate Balance.
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<PAGE>
"CERTIFICATE MAJORITY" means over 50% of Holders of the
Certificates.
"CERTIFICATEHOLDER" has the meaning assigned to such term in the
Trust Agreement.
"CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT" means with respect to any
Payment Date, the sum of the Certificateholders' Monthly Principal Distributable
Amount and the Class R Certificateholders' Distributable Amount.
"Certificateholders' Monthly Principal Distributable Amount" means, with respect
to any Payment Date, the Certificateholders' Percentage of the Principal
Distributable Amount.
"CERTIFICATEHOLDERS' PERCENTAGE" means (i) for each Payment Date
prior to the Payment Date on which the Class A-3 Notes are paid in full, [_]%,
(ii) on the Payment Date on which the Class A-3 Notes are paid in full, the
percentage equivalent of a fraction, the numerator of which is the excess, if
any, of (x) the Principal Distributable Amount for such Payment Date over (y)
the outstanding principal amount of the Class A-3 Notes immediately prior to
such Payment Date, and the denominator of which is the Principal Distributable
Amount for such Payment Date, and (iii) for each Payment Date thereafter to and
including the Payment Date on which the Certificate Balance is reduced to zero,
100%.
"CERTIFICATEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, with
respect to any Payment Date, the excess of the Certificateholders' Principal
Distributable Amount for the preceding Payment Date over the amount in respect
of principal that was actually deposited in the Certificate Distribution Account
on such preceding Payment Date.
"CERTIFICATEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Payment Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Payment Date and the Certificateholders'
Principal Carryover Shortfall for such Payment Date; provided, however, that the
Certificateholders' Principal Distributable Amount (i) shall not exceed the
Certificate Balance and (ii) shall equal the Certificate Balance on the Final
Scheduled Payment Date for the Certificates.
"CLASS" means any of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A Certificates or the Class R Certificates, as the
context requires.
"CLASS A CERTIFICATE" has the meaning assigned to such term in the
Trust Agreement.
"CLASS A-1 NOTE" has the meaning assigned to such term in the
Indenture.
"CLASS A-2 NOTE" has the meaning assigned to such term in the
Indenture.
"CLASS A-3 NOTE" has the meaning assigned to such term in the
Indenture.
"CLASS R CERTIFICATE" has the meaning assigned to such term in the
Trust Agreement.
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<PAGE>
"CLASS R CERTIFICATEHOLDERS' DISTRIBUTABLE AMOUNT" means the amount
available for distribution to the Class R Certificateholders pursuant to Section
5.6(b)(viii) hereof.
"CLEARING AGENCY" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"CLOSING DATE" means [__________], 200[_].
"COLLATERAL" has the meaning assigned to such term in the Indenture.
"COLLECTED FUNDS" means, with respect to any Determination Date, the
amount of funds in the Collection Account representing collections on the
Receivables during the related Collection Period, including all Net Liquidation
Proceeds collected during the related Collection Period.
"COLLECTION ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1(a) hereof.
"COLLECTION PERIOD" means the calendar month preceding the month in
which each Payment Date occurs (or in the case of the Initial Payment Date, from
the Initial Cutoff Date to and including [__________], 200[_]).
"COMPUTER TAPE" means the computer tape or other electronic media
furnished by the Seller to the Transferor and its assigns describing certain
characteristics of the Initial Receivables as of the Initial Cutoff Date and of
Subsequent Receivables as of the related Subsequent Cutoff Date. "Contract"
means a motor vehicle loan evidenced by a note and security agreement.
"CONTROLLING PARTY" means, if no Insurer Default has occurred and is
continuing, the Insurer, otherwise if Notes remain Outstanding, the Indenture
Trustee for the benefit of the Noteholders, or, after all unpaid principal and
interest on the Notes and all amounts owing to the Insurer have been paid in
full, the Owner Trustee for the benefit of the Certificateholders. "Corporate
Trust Office" means (i) with respect to the Owner Trustee, the principal
corporate trust office of the Owner Trustee, which at the time of execution of
this Agreement [Address], Attention: [_____________] and (ii) with respect to
the Indenture Trustee and the Indenture Collateral Agent, the principal
corporate trust office of the Indenture Trustee, which at the time of execution
of this Agreement is located at [Address], Attention: [___________].
"CRAM DOWN LOSS" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on such Receivable or otherwise modifying or
restructuring the Scheduled Payments to be made on such Receivable, an amount
equal to (i) the excess of the principal balance of such Receivable immediately
prior to such order over the principal balance of such Receivable as so reduced
and/or (ii) if such court shall have issued an order reducing the effective rate
of interest on such Receivable, the net present value (using as the discount
rate the higher of the APR on such Receivable or the rate of interest, if any,
specified by the court in such order) of the scheduled payments as so modified
or restructured. A "Cram Down Loss" shall be deemed to have occurred on the date
of issuance of such order.
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<PAGE>
"CUSTODIAL AGREEMENT" means the agreement dated as of [________],
200[_] among the Seller, the Servicer, the Issuer, the Owner Trustee, the
Indenture Trustee and the Custodian, as amended, modified and supplemented from
time to time.
"CUSTODIAN" means [__________________], its successors in interest
and any successor Custodian under the Custodial Agreement.
"DEFAULT RATE" means, for any Determination Date, the product
(expressed as a percentage) of (a) twelve and (b) a fraction, (i) the numerator
of which is the sum of (x) the aggregate Principal Balance of all Receivables
that became Defaulted Receivables during the related Collection Period and (y)
the aggregate Principal Balance of all Receivables that became Purchased
Receivables during the Collection Period and that were 31 or more days
delinquent at the time of repurchase, and (ii) the denominator of which is the
Average Principal Balance for the related Collection Period.
"DEFAULTED RECEIVABLE" means a Receivable with respect to which: (i)
all or a portion of any Scheduled Payment is 90 or more days delinquent, (ii)
the Servicer has repossessed the related Financed Vehicle (and any applicable
redemption period has expired) or (iii) such Receivable is in default and the
Servicer has determined in good faith that payments thereunder are not likely to
be resumed.
"DEFICIENCY CLAIM AMOUNT" shall have the meaning set forth in
Section 5.4 of this Agreement.
"DEFICIENCY CLAIM DATE" means, with respect to any Payment Date, the
fourth Business Day immediately preceding such Payment Date.
"DEFICIENCY NOTICE" shall have the meaning set forth in Section 5.4
of this Agreement.
"DELINQUENCY RATIO" means, with respect to any Collection Period,
the quotient, expressed as a percentage, of (i) the Aggregate Principal Balance
of all Receivables with respect to which one or more payments are 31 or more
days past due at the last day of such Collection Period and (ii) the Pool
Balance as of the close of business on the last day of such Collection Period.
"DELIVERY" or "DELIVER" when used with respect to Trust Account
Property means the following and such additional or alternative procedures as
may hereafter become appropriate to effect the complete transfer of ownership of
any such Trust Account Property to the Indenture Trustee or the Indenture
Collateral Agent, as applicable, free and clear of any adverse claims,
consistent with changes in applicable law or regulations or the interpretation
thereof:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
instruments and are susceptible of physical delivery ("PHYSICAL PROPERTY"): (i)
transfer of possession thereof to the Indenture Trustee, endorsed to, or
registered in the name of, the Indenture Trustee, or its nominee or endorsed in
blank;
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(b) with respect to a certificated security: (i) delivery thereof in
bearer form to the Indenture Trustee; or (ii) delivery thereof in registered
form to the Indenture Trustee; and (A the certificate is endorsed to the
Indenture Trustee or in blank by effective endorsement; or (B) the certificate
is registered in the name of the Indenture Trustee, upon original issue or
registration of transfer by the issuer thereof;
(c) with respect to an uncertificated security: (i) the delivery of
the uncertificated security to the Indenture Trustee; or (ii) the issuer thereof
has agreed that it will comply with instructions originated by the Indenture
Trustee without further consent by the registered owner;
(d) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations: (i) a Federal Reserve Bank by
book entry credits the book-entry security to the securities account (as defined
in 31 CFR Part 357) of a participant (as defined in 31 CFR Part 357) which is
also a securities intermediary; and (ii) the participant indicates by book entry
that the book-entry security has been credited to the Indenture Trustee's
securities account;
(e) with respect to a security entitlement: (i) the Indenture
Trustee, becomes the entitlement holder; or (ii) the securities intermediary has
agreed that it will comply with entitlement orders originated by the Indenture
Trustee without further consent by the entitlement holder;
(f) for the purpose of clauses (b) and (c) hereof "delivery" means:
(i) with respect to a certificated security: (A) the Indenture Trustee acquires
possession thereof; (B) another person (other than a securities intermediary)
either acquires possession thereof on behalf of the Indenture Trustee or, having
previously acquired possession thereof, acknowledges that it holds for the
Indenture Trustee; or (C) a securities intermediary acting on behalf of the
Indenture Trustee acquires possession of thereof, only if the certificate is in
registered form and has been specially endorsed to the Indenture Trustee by an
effective endorsement;
(ii) with respect to an uncertificated security: (A) the issuer
registers the Indenture Trustee as the registered owner, upon original
issue or registration of transfer; or (B) another person (other than a
securities intermediary) either becomes the registered owner thereof on
behalf of the Indenture Trustee or, having previously become the
registered owner, acknowledges that it holds for the Indenture Trustee;
(g) for purposes of this definition, except as otherwise indicated,
the following terms shall have the meaning assigned to each such term in the
UCC: (i) "CERTIFICATED SECURITY," (ii) "EFFECTIVE ENDORSEMENT," (iii)
"ENTITLEMENT HOLDER," (iv) "INSTRUMENT," (iv) "SECURITIES ACCOUNT," (vi)
"SECURITY ENTITLEMENT," (vii) "SECURITIES INTERMEDIARY," (viii) "UNCERTIFICATED
SECURITY;" and
(h) in each case of Delivery contemplated herein, the Indenture
Trustee shall make appropriate notations on its records, and shall cause the
same to be made on the records of
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its nominees, indicating that securities are held in trust pursuant to and as
provided in this Agreement.
"DEPOSITOR" means PaineWebber Asset Acceptance Corporation, and its
successors in interest.
"DEPOSITOR INDEMNIFICATION AGREEMENT" has the meaning assigned to
such term in the Underwriting Agreement.
"DEPOSITOR PROPERTY" has the meaning assigned to such term in
Section 2.3 hereof.
"DEPOSITORY AGREEMENT" means a Note Depository Agreement.
"DETERMINATION DATE" means, with respect to any Payment Date, the
fifth Business Day prior to the related Payment Date.
"DISTRIBUTION AMOUNT" means, with respect to a Payment Date, the sum
of (i) the Available Funds for the immediately preceding Determination Date,
plus (ii) any amounts received with respect to the Deficiency Claim Amount from
the Reserve Account, an Insurer Optional Deposit or otherwise, other than from
draws under the Policy, received by the Indenture Trustee from the Insurer with
respect to such Payment Date.
"DRAW DATE" has the meaning assigned to such term in the Insurance
Agreement.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account
with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution have a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade.
"ELIGIBLE INSTITUTION" means (a) the corporate trust department of
the Indenture Trustee or any other entity specified in this Agreement or (b) a
depository institution organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia (or any domestic
branch of a foreign bank), which (i) has either (A) a long-term unsecured debt
rating of AAA or better by [____________] and Aaa or better by [____________] or
(B) a certificate of deposit rating of [___] by [____________] and [___] or
better by [____________] or any other short-term or certificate of deposit
rating acceptable to the Rating Agencies and the Insurer and (ii) whose deposits
are insured by the FDIC. If so qualified under clause (b) above, the Owner
Trustee or the Indenture Trustee may be considered an Eligible Institution.
"ELIGIBLE INVESTMENTS" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) certain obligations of, or obligations guaranteed as to
principal and interest by, the U.S. government or any agency or instrumentality
of the U.S. government, when such
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obligations are backed by the full faith and credit of the U.S., provided
however, such obligation (i) must be limited to those instruments that have a
predetermined fixed-dollar amount of principal due at maturity that cannot vary
or change, (ii) if the obligation is rated, it should not have an `r'
highlighter affixed to its rating, (iii) if the investments may be liquidated
before their maturity or are being relied on to meet a certain yield, subject to
the applicable Rating Agency restrictions are necessary, and (iv) has an
interest rate tied to a single interest rate index plus a single fixed spread,
if any, and which changes proportionately with such index;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution authorities
(including depository receipts issued by any such institution or trust company
as custodian with respect to any obligation referred to in clause (a) above or
portion of such obligation for the benefit of the holders of such depository
receipts); PROVIDED, HOWEVER, that at the time of the investment or contractual
commitment to invest therein (which shall be deemed to be made again each time
funds are reinvested following each Payment Date), the commercial paper or other
short-term senior unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such depository
institution or trust company) of such depository institution or trust company
shall have a credit rating from [____________] of [___] and from [____________]
of [___];
(c) commercial paper having, at the time of the investment or
contractual commitment to invest therein, a rating from [____________] of
[___] and from [____________] of [___];
(d) investments in money market funds (including funds for which the
Indenture Trustee or the Owner Trustee or any of their respective Affiliates is
investment manager or advisor) having a rating from [____________] of AAA-m or
AAAm-G and from [____________] of Aaa and having been approved by the Insurer;
(e) bankers' acceptances issued by any depository institution
*r trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America or
any agency or instrumentality thereof the obligations of which are backed by the
full faith and credit of the United States of America, in either case entered
into with a depository institution or trust company (acting as principal) rated
[___] by [____] and [___] by [____________]; and
(g) any other investment which would satisfy the Rating Agency
Condition and is consistent with the ratings of the Notes and which, so long as
no Insurer Default shall have occurred and be continuing, has been approved by
the Insurer.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Indenture Trustee or any of its Affiliates.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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"FDIC" means the Federal Deposit Insurance Corporation.
"FINAL SCHEDULED PAYMENT DATE" means with respect to (i) the Class
A-1 Notes, [________], 200[_], (ii) the Class A-2 Notes, [___________], 200[_]
and (iii) the Class A-3 Notes, [__________], 200[_].
"FINANCED VEHICLE" means a new or used automobile, light-duty truck
or van, securing an Obligor's indebtedness under the respective Receivable.
"FSA INDEMNIFICATION AGREEMENT" has the meaning assigned to the term
"Indemnification Agreement" in the Insurance Agreement.
"INDENTURE" means the Indenture dated as of [________], 200[_],
among the Issuer and the Indenture Trustee, as the same may be amended and
supplemented from time to time.
"INDENTURE COLLATERAL AGENT" means the Person appointed pursuant to
the terms of the Reserve Account Agreement and acting as Collateral Agent under
the Reserve Account Agreement, its successors in interest and any successor
Collateral Agent under the Reserve Account Agreement.
"INDENTURE TRUSTEE" means the Person acting as Indenture Trustee
under the Indenture and the other Basic Documents, its successors in interest
and any successor trustee under the Indenture.
"INDENTURE TRUSTEE FEE" means the monthly fee payable to the
Indenture Trustee in an amount equal to the product of (i) 1/12 and (ii) [__]
percent per annum and (iii) the Outstanding Amount on the preceding Payment Date
after giving effect to distributions on such date.
"INITIAL CUTOFF DATE" means as to any Initial Receivable, the
beginning of business on [________], 200[_].
"INITIAL RECEIVABLES" means any Receivable conveyed to the
Transferor, its successors in interest and assigns on the Closing Date.
"INITIAL YIELD SUPPLEMENT AMOUNT" shall mean $[_________].
"INSOLVENCY EVENT" means, with respect to a specified Person, (a)
the filing of a petition against such Person or the entry of a decree or order
for relief by a court or supervisory authority having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or appointing a receiver,
conservator, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or
ordering the winding-up or liquidation or such Person's affairs, and such
petition, decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) the commencement by such Person of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by
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such Person to the entry of an order for relief in an involuntary case under any
such law, or the consent by such Person to the appointment of or taking
possession by, a receiver, conservator, liquidator, assignee, custodian,
trustee, sequestrator, or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or such Person admitting its
inability to pay its debts when due or the taking of action by such Person in
furtherance of any of the foregoing. "Insurance Agreement" means the Insurance
and Indemnity Agreement, dated as of [________], 200[_], among the Insurer, the
Issuer, the Transferor, the Seller and the Servicer.
"INSURANCE AGREEMENT EVENT OF DEFAULT" means an "Event of Default",
as defined in the Insurance Agreement.
"INSURER" means [________________], a monoline insurance company
incorporated under the laws of the State of New York, its successors and
assigns.
"INSURER DEFAULT" means the occurrence and continuance of any of the
following events:
(a) the Insurer shall have failed to make a payment required
under the Policy in accordance with its terms; or
(b) the Insurer shall have (i) filed a petition or commenced any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code or any other similar federal or state any law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) made
a general assignment for the benefit of its creditors, or (iii) had an order for
relief entered against it under the United States Bankruptcy Code or any other
similar federal or state law relating to insolvency, bankruptcy, rehabilitation,
liquidation or reorganization which is final and nonappealable; or
(c) a court of competent jurisdiction, the New York Department of
Insurance or other competent regulatory authority shall have entered a final and
nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Insurer or for all or any material portion of its
property or (ii) authorizing the taking of possession by a custodian, trustee,
agent or receiver of the Insurer (or the taking of possession of all or any
material portion of the property of the Insurer).
"INSURER OPTIONAL DEPOSIT" means, with respect to any Payment Date,
an amount delivered by the Insurer pursuant to Section 5.10 hereof, at its sole
option, to the Indenture Trustee for deposit into the Collection Account.
"INTEREST CARRYOVER SHORTFALL" means, with respect to any Payment
Date, the excess of the Noteholders' Interest Distributable Amount for the
preceding Payment Date over the amount in respect of interest that was actually
deposited in the Note Distribution Account on such preceding Payment Date, plus
interest on the amount of interest due but not paid to Noteholders on the
preceding Payment Date, to the extent permitted by law, at the Interest Rate
borne by each Class of Notes from such preceding Payment Date to but excluding
the current Payment Date.
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"INTEREST PERIOD" means, with respect to any Payment Date, the
period from and including the Closing Date (in the case of the first Payment
Date) or from and including the most recent Payment Date on which interest has
been paid to but excluding such Payment Date.
"INTEREST RATE" means (i) with respect to the Class A-1 Notes,
[______]% per annum, (ii) the Class A-2 Notes, [______]% per annum and (iii) the
Class A-3 Notes, [______]% per annum. The Interest Rate for each Class A Note
shall be computed on the basis of a 360 day year consisting of twelve 30 day
months.
"INVESTMENT EARNINGS" means, with respect to any Payment Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts and the Certificate Distribution Account.
"ISSUER" means [_____________________] 200[_]-[_].
"LIEN" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law as a result of any
act or omission by the related Obligor.
"LIEN CERTIFICATE" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the Obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"LIQUIDATED RECEIVABLE" means, with respect to any Determination
Date, a Receivable as to which, as of the last day of the related Collection
Period, (i) 60 days have elapsed since the Servicer repossessed the Financed
Vehicle, (ii) the Servicer has determined in good faith that all amounts it
expects to recover have been received, (iii) all or a portion part of a
Scheduled Payment is 120 days or more delinquent or (iv) the Financed Vehicle
has been sold and the proceeds received.
"MANDATORY REDEMPTION DATE" means the Payment Date on or immediately
following the last day of the Pre-Funding Period.
"MONTHLY CAPITALIZED INTEREST AMOUNT" means in the case of Payment
Dates occurring on or prior to the Mandatory Redemption Date, an amount equal to
the product of (A) the product of (x) 1=/12 and (y) the Weighted Average Rate
and (B) the difference between (x) the aggregate Outstanding Amount of the Notes
immediately prior to the applicable Payment Date and (y) the Pool Balance as of
the last day of the second preceding Collection Period, or in the case of the
[________], 200[_] Payment Date, as of the Closing Date.
"MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date, without duplication, the sum of (i) the principal portion
(calculated on the basis of the Simple Interest Method) of all Collected Funds
received during the immediately preceding Collection Period (other than Net
Liquidation Proceeds) including the principal portion of all prepayments, (ii)
the Principal Balance of all Receivables that became Liquidated Receivables
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during the related Collection Period (other than Purchased Receivables), (iii)
the principal portion of the Purchase Amounts received with respect to all
Receivables that became Purchased Receivables during the related Collection
Period, (iv) at the option of the Insurer (so long as no Insurer Default shall
have occurred and be continuing), from funds received from the Insurer pursuant
to Section 5.10 hereof, the Principal Balance of all the Receivables that were
required to be purchased pursuant to Sections 3.2 and 4.7, during such
Collection Period but were not purchased, (v) the aggregate amount of Cram Down
Losses that shall have occurred during the related Collection Period; and (vi)
following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Indenture Trustee
for distribution pursuant to Section 5.6 of the Indenture.
"[____________]" means [_______________], or its successors.
"NET LIQUIDATION LOSSES" means, with respect to any Collection
Period, (a) the sum of the Principal Balances (plus accrued interest through the
end of such Collection Period) of all Receivables that became Liquidated
Receivables since the Cutoff Date, minus (b) any Net Liquidation Proceeds
received during such Collection Period.
"NET LIQUIDATION PROCEEDS" means as to any Liquidated Receivable,
all amounts (including insurance proceeds) realized with respect to such
Receivable (other than amounts withdrawn from the Reserve Account, amounts paid
pursuant to Section 5.10 of this Agreement and drawings under the Policy) net of
(i) reasonable expenses incurred by the Servicer in connection with the
collection of such Receivable and the repossession and disposition of the
Financed Vehicle and (ii) amounts that are required to be refunded to the
Obligor on such Receivable; provided, however, that the Net Liquidation Proceeds
with respect to any Receivable shall in no event be less than zero.
"NET LOSS RATE" means, for any Determination Date, the quotient
(expressed as a percentage) of (a) the product of (i) twelve and (ii) Net
Liquidation Losses, divided by (b) the Average Principal Balance for the related
Collection Period.
"[________]" means [__________________], and its successors in
interest.
"NOTE" means any of the Notes issued pursuant to the terms of the
Indenture.
"NOTEHOLDER" has the meaning assigned to such term in the Indenture.
"NOTE DEPOSITORY AGREEMENT" means the agreement, if any, among the
Issuer, the Indenture Trustee and The Depository Trust Company, as initial
Clearing Agency.
"NOTE DISTRIBUTION ACCOUNT" means the account designated as such,
established and maintained pursuant to Section 5.1(a) hereof. "Note Majority"
means the Holders of a majority in outstanding principal amount of the Notes.
"NOTEHOLDERS' DISTRIBUTABLE AMOUNT" means, with respect to any
Payment Date, the sum of the Noteholders' Principal Distributable Amount and the
Noteholders' Interest Distributable Amount.
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"NOTEHOLDERS' INTEREST CARRYOVER SHORTFALL" means, with respect to
any Payment Date, the excess of the Noteholders' Interest Distributable Amount
for the preceding Payment Date, over the amount in respect of interest that was
actually deposited in the Note Distribution Account on such preceding Payment
Date, plus interest on the amount of interest due but not paid to Noteholders on
the preceding Payment Date, to the extent permitted by law, at the respective
Interest Rate borne by each such Class of Notes from such preceding Payment Date
to but excluding the current Payment Date.
"NOTEHOLDERS' INTEREST DISTRIBUTABLE AMOUNT" means, with respect to
any Payment Date, the sum of the Noteholders' Monthly Interest Distributable
Amount for such Payment Date and the Noteholders' Interest Carryover Shortfall
for such Payment Date.
"NOTEHOLDERS' MONTHLY INTEREST DISTRIBUTABLE AMOUNT" means, with
respect to any Payment Date, the sum of the amount for each Class of Notes equal
to product of (i) the Interest Rate for such Class of Notes (ii) 1/12 and (iii)
the Outstanding Amount of the Notes of each such Class immediately preceding
such Payment Date.
"NOTEHOLDERS' MONTHLY PRINCIPAL DISTRIBUTABLE AMOUNT" means, with
respect to any Payment Date, the Noteholders' Percentage of the Principal
Distributable Amount.
"NOTEHOLDERS' PERCENTAGE" means with respect to any Determination
Date (i) relating to a Payment Date prior to the Payment Date on which the
principal amount of the Class A-3 Notes is reduced to zero, 98%; (ii) relating
to the Payment Date on which the principal amount of the Class A-3 Notes is
reduced to zero, the percentage equivalent of a fraction, the numerator of which
is the principal amount of the Class A-3 Notes immediately prior to such Payment
Date, and the denominator of which is the Principal Distributable Amount; and
(iii) relating to any other Payment Date, 0%.
"NOTEHOLDERS' PRINCIPAL CARRYOVER SHORTFALL" means, as of the close
of any Payment Date, the excess of the Noteholders' Monthly Principal
Distributable Amount and any outstanding Noteholders' Principal Carryover
Shortfall for the preceding Payment Date over the amount in respect of principal
that was actually deposited in the Note Distribution Account on such preceding
Payment Date.
"NOTEHOLDERS' PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to
any Payment Date, (other than the Final Scheduled Payment Date for any Class of
Notes), the sum of the Noteholders' Monthly Principal Distributable Amount for
such Payment Date and the Noteholders' Principal Carryover Shortfall for such
Payment Date. The Noteholders' Principal Distributable Amount on the Final
Scheduled Payment Date for any Class of Notes will equal the sum of (i) the
Noteholders' Monthly Principal Distributable Amount for such Payment Date, (ii)
the Noteholders' Principal Carryover Shortfall for such Payment Date, and (iii)
the excess of the Outstanding Amount of such Class of Notes, if any, over the
amounts described in clauses (i) and (ii).
"NOTE POOL FACTOR" for each Class of Notes as of the close of
business on a Payment Date means a seven-digit decimal figure equal to the
outstanding principal amount of
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such Class of Notes as of such Payment Date after giving effect to principal
distributions on such date divided by the original Outstanding Amount of such
Class of Notes.
"NOTICE OF CLAIM" has the meaning assigned to such term in Section
5A.1(b) hereof.
"OBLIGOR" on a Receivable means the purchaser or co-purchasers of
the Financed Vehicle and any other Person who owes payments under the
Receivable.
"OFFICER'S CERTIFICATE" means a certificate signed by the (a)
chairman of the board, the president, any executive vice president or any vice
president and (b) any treasurer, assistant treasurer, secretary or assistant
secretary of the Seller or the Servicer, as appropriate.
"OPINION OF COUNSEL" means one or more written opinions of counsel
who may be an employee of or counsel to the Seller or the Servicer, which
counsel shall be acceptable to the Indenture Trustee, the Owner Trustee, the
Insurer or the Rating Agencies, as applicable.
"ORIGINAL POOL BALANCE" means the sum, as of any date, of the Pool
Balance as of the Initial Cutoff Date, plus the aggregate Principal Balance of
the Subsequent Receivables, if any, sold to the Trust, as of their respective
Subsequent Cutoff Dates.
"OUTSTANDING" has the meaning assigned to such term in the
Indenture.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all
Notes or Class of Notes, as applicable, outstanding at the date of
determination.
"OWNER TRUST ESTATE" has the meaning assigned to such term in the
Trust Agreement.
"OWNER TRUSTEE" means [_________________], not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"OWNER TRUSTEE FEE" means $[______] per annum, payable annually in
advance.
"PAYMENT DATE" means the fifteenth day of each calendar month and if
such day is not a Business Day, the next succeeding Business Day, commencing in
[_________], 200[_],.
"[__________]" means [__________________], and its successors in
interest.
"PERSON" means any individual, corporation, limited liability
company, estate, partnership, joint venture, association, joint stock company,
trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"PHYSICAL PROPERTY" has the meaning assigned to such term in the
definition of "Delivery" above.
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"POLICY" means the financial guaranty insurance policy issued by the
Insurer in accordance with the terms of the Insurance Agreement.
"POLICY CLAIM AMOUNT" has the meaning assigned to such term in
Section 5A.1(a) hereof.
"POOL BALANCE" means, as of any date of determination, the sum of
the Principal Balances of the Receivables (excluding Purchased Receivables and
Liquidated Receivables).
"PRE-FUNDED AMOUNT" means, with respect to any Payment Date, the
amount on deposit in the Pre-Funding Account (exclusive of Pre-Funding
Earnings), which initially shall be $[___________].
"PRE-FUNDING ACCOUNT" has the meaning specified in Section
5.1(a)(iii).
"Pre-Funding Earnings" means any investment earnings (net of losses)
on amounts on deposit in the Pre-Funding Account.
"PRE-FUNDING PERIOD" shall mean the period from and including the
Closing Date and ending on the earliest of: (a) the last day of the Collection
Period on which the Pre-Funded Amount (after giving effect to any transfers
therefrom in connection with the transfer of Subsequent Receivables to the Trust
on or before such date) is less than $[________], (b) the date on which an Event
of Default occurs and (c) the close of business on [_________], 200[_].
"PREFERENCE CLAIM" has the meaning assigned to such term in Section
5A.2(b) hereof.
"PREMIUM LETTER" has the meaning assigned to such term in the
Insurance Agreement.
"PLEDGE AGREEMENT" has the meaning assigned to such term in the
Insurance Agreement.
"PRINCIPAL BALANCE" means, with respect to any Receivable, as of any
date, the Amount Financed minus (i) that portion of all amounts received on or
prior to such date and allocable to principal in accordance with the terms of
the Receivable and the Simple Interest Method, and (ii) any Cram Down Loss in
respect of such Receivable.
"PRINCIPAL CARRYOVER SHORTFALL" means, as of the close of business
on any Payment Date, the excess of the Principal Distributable Amount plus any
outstanding Principal Carryover Shortfall from the preceding Payment Date over
the amount of principal deposited in the Note Distribution Account and the
Certificate Distribution Account, with respect to such current Payment Date.
"PRINCIPAL DISTRIBUTABLE AMOUNT" means, with respect to any Payment
Date, the sum of the Monthly Principal Distributable Amount for such Payment
Date and the Principal Carryover Shortfall for the prior Payment Date.
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"PURCHASE AMOUNT" means with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Principal Balance of such
Receivable (including one month's interest thereon, in the month of payment, at
the APR less, so long as [__________] is the Servicer, the Servicing Fee), after
giving effect to the receipt of any moneys collected (from whatever source) on
such Receivable, if any.
"PURCHASED RECEIVABLE" means a Receivable purchased as of the close
of business on the last day of a Collection Period by the Servicer pursuant to
Section 4.7 of this Agreement or repurchased by the Seller or the Transferor, as
applicable, pursuant to Section 3.2 of the Agreement.
"RATING AGENCY" means each of [____________] and [____________], and
together, the "Ratings Agencies". If no such organization or successor maintains
a rating on the Notes, "Rating Agency" shall be a nationally recognized
statistical rating organization or other comparable Person designated by the
Seller and acceptable to the Insurer (so long as an Insurer Default shall not
have occurred and be continuing), notice of which designation shall be given to
the Indenture Trustee, Owner Trustee and the Servicer.
"RATING AGENCY CONDITION" means, with respect to any action, that
each Rating Agency shall have been given 10 days' (or such shorter period as
shall be acceptable to each Rating Agency) prior notice thereof and that the
Rating Agencies shall have notified the Seller, the Servicer, the Owner Trustee,
Insurer, the Depositor, the Issuer and the Indenture Trustee in writing that
such action will not result in a reduction, qualification or withdrawal of the
then current rating of any Class of Notes.
"REALIZED LOSSES" means, with respect to any Receivable that becomes
a Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
"Receivable" means any Contract listed on Schedule A, as such Schedule shall be
amended to reflect the transfer of Subsequent Receivables to the Trust (which
Schedule may be in the form of microfiche).
"RECEIVABLE FILES" means the documents specified in Section 3.3.
"RECORD DATE" means, with respect to each Payment Date, the close of
business on the Business Day preceding such Payment Date, unless otherwise
specified in this Agreement.
"REGISTRAR OF TITLES" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"REMAINING PRE-FUNDING AMOUNT" means, if the Pre-Funded Amount has
not been reduced to zero on the Mandatory Redemption Date, after giving effect
to any reductions in the Pre-Funded Amount on such date pursuant to Section
5.6(a)(ii), the amount remaining in the Pre-Funding Account at such time,
exclusive of the Pre-Funding Earnings, if any, for the related Collection
Period.
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"RESERVE ACCOUNT" means the account designated as such, established
and maintained pursuant to the Reserve Account Agreement.
"RESERVE ACCOUNT AGREEMENT" means the Master Reserve Account
Agreement dated as of [________], 200[_] among the TRANSFEROR, the Insurer and
the Indenture Collateral Agent.
"RESERVE ACCOUNT BALANCE" means, for any Payment Date, the amount on
deposit in the Reserve Account. Unless specifically stated to the contrary, the
Reserve Account Balance shall be calculated after giving effect to all deposits
and withdrawals therefrom on the prior Payment Date (or, in the case of the
first Payment Date, the Closing Date) and all interest and other income (net of
losses and investment expenses) on such amounts during the related Collection
Period.
"RESERVE ACCOUNT INITIAL DEPOSIT" means $[____________].
"SCHEDULED PAYMENT" on a Receivable means that portion of the
payment required to be made by the Obligor during the respective Collection
Period sufficient to amortize the Principle Balance thereof under the Simple
Interest Method over the term of the Receivable and to provide interest at the
APR.
"SELLER" means [__________________], a [______________] company, as
Seller under this Agreement and its successors in interest to the extent
permitted hereunder.
"SERVICE CONTRACT" means, with respect to a Financed Vehicle, the
agreement, if any, financed under the related Receivable that provides for the
repair of such Financed Vehicle, including any extended warranties.
"SERVICER" means [__________________], as the servicer of the
Receivables, and each successor Servicer pursuant to Section 7.3 or 8.2 of the
Agreement.
"SERVICER DEFAULT" means an event specified in Section 8.1 of this
Agreement.
"SERVICER'S CERTIFICATE" means an Officer's Certificate of the
Servicer delivered pursuant to Section 4.9 of this Agreement, substantially in
the form of Exhibit D hereto.
"SERVICING FEE" has the meaning specified in Section 4.8 of this
Agreement.
"SERVICING FEE RATE" means [__]% per annum.
"SERVICING STANDARD" shall have the meaning assigned to such term in
Section 4.1 hereof.
"SIMPLE INTEREST METHOD" means the method of allocating a fixed
level payment to principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the fixed rate
of interest multiplied by the unpaid principal balance multiplied by the period
of time elapsed since the preceding payment of interest was made (in some states
assuming 30 day months), divided by the actual number of days in a year
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(360 days in states which assume 30 day months) and the remainder of such
payment is allocable to principal.
"SIMPLE INTEREST RECEIVABLE" means any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
"[____________]" means [____________] Ratings Group, a division
of The [_________________], or its successors.
"SUBSEQUENT CUTOFF DATE" means, with respect to a Subsequent
Receivable, the opening of business on the first day of the month in which such
Subsequent Receivable is conveyed to the Trust pursuant to this Agreement.
"SUBSEQUENT RECEIVABLES" means the Receivables transferred to the
Transferor and its assigns pursuant to Sections 2.2, 2.3 and 2.4 of this
Agreement and each Subsequent Transfer Agreement, which Subsequent Receivables
shall be listed on Schedule A to the related Subsequent Transfer Agreement.
"SUBSEQUENT RESERVE ACCOUNT DEPOSIT" shall mean, with respect to any
Subsequent Transfer Date, cash or Permitted Investments having a value equal to
[___]% of the aggregate Principal Balances as of the related Subsequent Cutoff
Date of the Subsequent Receivables conveyed to the Trust on such Subsequent
Transfer Date.
"SUBSEQUENT TRANSFER AGREEMENT" means an agreement among the Issuer,
the Transferor, the Seller, the Servicer, the Depositor, the Indenture Trustee,
the Backup Servicer and the Custodian, pursuant to which the Transferor will
acquire Subsequent Receivables from the Seller and transfer such Subsequent
Receivables to the Depositor, which will transfer such Subsequent Receivables to
the Issuer.
"SUBSEQUENT TRANSFER DATE" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than once a month, during
the Pre- Funding Period on which Subsequent Receivables are to be transferred
from the Seller to the Transferor, the Transferor to the Depositor and the
Depositor to the Issuer, pursuant to this Agreement, and a Subsequent Transfer
Agreement is executed and delivered.
"TRANSFEROR" means [______________], and its successors in interest.
"TRANSFEROR PROPERTY" has the meaning assigned to such term in
Section 2.1 hereof.
"TRUST" means the Issuer.
"TRUST ACCOUNT PROPERTY" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
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"TRUST ACCOUNTS" has the meaning assigned thereto in Section 5.1 of
the Agreement.
"TRUST AGREEMENT" means the Trust Agreement dated as of [________],
200[_], between the Depositor and the Owner Trustee, as the same may be amended
and supplemented from time to time.
"TRUST OFFICER" means, (i) in the case of the Indenture Trustee, the
chairman or vice-chairman of the board of directors, the chairman or
vice-chairman of the executive committee of the board of directors, the
president, any vice president, the secretary, any assistant secretary, the
treasurer, any assistant treasurer, the cashier, any assistant cashier, any
trust officer or assistant trust officer, the controller and any assistant
controller or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the corporate trust office of the Owner Trustee with
direct responsibility for the administration of this Agreement or any of the
Basic Documents on behalf of the Owner Trustee.
"TRUST PROPERTY" has the meaning assigned to such term in the Trust
Agreement.
"UCC" means the Uniform Commercial Code as in effect in the State of
New York on the date of the Agreement.
"UNDERWRITING AGREEMENT" means the agreement dated as of
[___________], 200[_], among the Depositor, [__________], [_____________], the
Transferor, and [_______________], as the same may be amended and supplemented
from time to time.
"WEIGHTED AVERAGE RATE" means, with respect to any date of
determination, a per annum rate equal to (A) the sum of (i) the product of (x)
the Outstanding Amount of the Class A-1 Notes on such date and (y) the Class A-1
Interest Rate, plus (ii) the product of (x) the Outstanding Amount of the Class
A-2 Notes on such date and (y) the Class A-2 Interest Rate, plus (iii) the
product of (x) the Outstanding Amount of the Class A-3 Notes on such date and
(y) the Class A-3 Interest Rate divided by (B) the Outstanding Amount of the
Notes on such date; provided that if the date of determination is a Payment
Date, then the Outstanding Amount of any class of Notes shall be determined
after giving effect to all payments made on such date.
"YIELD SUPPLEMENT ACCOUNT" means the account designated, established
and maintained pursuant to Section 5.1 hereof.
"YIELD SUPPLEMENT ACCOUNT INITIAL DEPOSIT" means $[___________].
"YIELD SUPPLEMENT ACCOUNT REQUIRED AMOUNT" means, on the Closing
Date, $[___________] and, as of the close of business on any Payment Date, an
amount equal to the sum of all projected Yield Supplement Amounts for all future
Payment Dates, assuming that future Scheduled Payments on the Receivables are
made on their scheduled due dates.
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"YIELD SUPPLEMENT AMOUNT" with respect to any Payment Date will be
determined by aggregating for all of the Receivables, one twelfth (1/12) of the
difference (if positive) between (x) the product of (i) the Principal Balance of
such Receivable multiplied by (ii) the Weighted Average Rate plus [____]% (which
percentage represents the Servicing Fee Rate plus [___]%) and (y) the product of
(i) the Principal Balance of such Receivable multiplied by (ii) the APR on such
Receivable.
Section 1.2 OTHER DEFINITIONAL PROVISIONS
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Indenture, or, if not defined therein,
in the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any instrument governed hereby and in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein.
(c) As used in this Agreement, in any instrument governed hereby and
in any certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in this Agreement or in any such
instrument, certificate or other document, and accounting terms partly defined
in this Agreement or in any such instrument, certificate or other document to
the extent not defined, shall have the respective meanings given to them under
generally accepted accounting principles as in effect on the date of this
Agreement or any such instrument, certificate or other document, as applicable.
To the extent that the definitions of accounting terms in this Agreement or in
any such instrument, certificate or other document are inconsistent with the
meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such instrument, certificate
or other document shall control.
(d) The words "HEREOF," "HEREIN," "HEREUNDER" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section, Schedule and Exhibit
references contained in this Agreement are references to Sections, Schedules and
Exhibits in or to this Agreement unless otherwise specified; and the term
"INCLUDING" shall mean "INCLUDING WITHOUT LIMITATION."
(e) The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) 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.
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ARTICLE II
CONVEYANCE OF RECEIVABLES
Section 2.1 CONVEYANCE OF INITIAL RECEIVABLES. In consideration of
the Transferor's delivery to or upon the order of the Seller on the Closing Date
of the net proceeds from the sale of the Notes and the Certificates and the
other amounts to be distributed from time to time to the Seller in accordance
with the terms of this Agreement, the Seller does hereby sell, transfer, assign,
set over and otherwise convey to Transferor, without recourse (subject to the
obligations set forth herein), all right, title and interest of the Seller in
and to:
(a) the Initial Receivables, and all moneys received thereon after
the Initial Cutoff Date and all Net Liquidation Proceeds with respect to such
Receivables;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial Receivables and any other interest of the
Seller in such Financed Vehicles;
(c) any proceeds with respect to the Initial Receivables from claims
on any theft, physical damage, credit life or disability insurance policies
covering Financed Vehicles or Obligors and any proceeds from the liquidation of
the Initial Receivables;
(d) all rights under any Service Contracts on the related
Financed Vehicles;
(e) the related Receivables Files; and
(f) the proceeds of any and all of the foregoing (the items
specified in clauses (a) through (e) are referred to herein as the "TRANSFEROR
PROPERTY").
In connection with such sale, the Seller agrees to record and file,
at its own expense, financing statements (and continuation statements with
respect to such financing statements when applicable) with respect to the
Receivables for the sale of accounts and chattel paper meeting the requirements
of applicable state law in such manner and in such jurisdictions as are
necessary to perfect the sale and assignment of the Receivables to the Issuer.
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Transferor Property from the Seller to the Transferor and the beneficial
interest in and title to the Receivables and the other Transferor Property shall
not be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. In the event that,
notwithstanding the intent of the Seller, the transfer and assignment
contemplated hereby is held not to be a sale, this Agreement shall constitute a
security agreement and the Seller does hereby grant a security interest in the
property referred to in this Section 2.1 for the benefit of the Transferor.
Section 2.2 CONVEYANCE OF SUBSEQUENT RECEIVABLES. (a) Subject to the
conditions set forth in paragraph (b) below, in consideration of the
Transferor's delivery on each related Subsequent Transfer Date to or upon the
order of the Seller of the amount described in Section 5.7(a) to be delivered to
the Seller, the Seller does hereby sell, transfer, assign, set over
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and otherwise convey to the Transferor without recourse (subject to the
obligations set forth herein), all right, title and interest of the Seller in
and to:
(i) the Subsequent Receivables listed on Schedule A to the related
Subsequent Transfer Agreement and all monies received thereon after the
related Subsequent Transfer Date and all Net Liquidation Proceeds with
respect to such Receivables;
(ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to such Subsequent Receivables and any other interest of
the Seller in such Financed Vehicles;
(iii) any proceeds with respect to such Subsequent Receivables
from claims on any theft, physical damage, credit life or disability
insurance policies covering the related Financed Vehicles or Obligors and
any proceeds from the liquidation of such Subsequent Receivables;
(iv) all rights under any Service Contracts on the related
Financed Vehicles:
(v) the related Receivables Files;
(vi) the proceeds of any and all of the foregoing.
(b) The Seller shall transfer to the Transferor the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Indenture Trustee, the
Owner Trustee, the Insurer and the Rating Agencies with an Addition Notice
not later than [____] Business Days prior to such Subsequent Transfer Date
and shall have provided any information reasonably requested by any of the
foregoing with respect to the Subsequent Receivables;
(ii) the Seller shall have executed and delivered to the
Transferor, which shall have delivered to the Depositor, which shall have
delivered to the Issuer a duly executed Subsequent Transfer Agreement
which shall include supplements to Schedule A, listing the Subsequent
Receivables;
(iii) the Seller shall, to the extent required by Section 5.2,
have deposited in the Collection Account all collections in respect of the
Subsequent Receivables since the related Subsequent Cutoff Date;
(iv) as of each Subsequent Transfer Date, (A) the Seller shall
not be insolvent and shall not become insolvent as a result of the
transfer of Subsequent Receivables on such Subsequent Transfer Date, (B)
the Seller shall not intend to incur or believe that it shall incur debts
that would be beyond its ability to pay as such debts mature, (C) such
transfer shall not have been made with actual intent to hinder, delay or
defraud any Person and (D) the assets of the Seller shall not constitute
unreasonably small capital to carry out its business as conducted;
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(v) the Pre-Funding Period shall not have terminated;
(vi) after giving effect to any transfer of Subsequent
Receivables on a Subsequent Transfer Date, the Receivables transferred to
the Trust pursuant to this Agreement shall meet the following criteria
(based on the characteristics of the Initial Receivables on the Initial
Cutoff Date and the Subsequent Receivables on the related Subsequent
Cutoff Dates): not more than [__]% of the Pool Balance based on aggregate
Principal Balance shall have Obligors whose mailing addresses are in any
one state other than [__________] unless an Opinion of Counsel acceptable
to the Rating Agencies and the Insurer with respect to the security
interest in the related Financed Vehicles is furnished by the Seller on or
prior to such Subsequent Transfer Date;
(vii) each Subsequent Receivable shall have an APR of [____]% or
higher and a remaining term to stated maturity of not more than 60 months;
(viii) each of the representations and warranties made by the
Seller pursuant to Section 3.1 with respect to the Subsequent Receivables
to be transferred on such Subsequent Transfer Date and pursuant to Section
6.1 on such Subsequent Transfer Date shall be true and correct as of the
related Subsequent Transfer Date, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to such Subsequent
Transfer Date;
(ix) the Seller shall, at its own expense, on or prior to the
Subsequent Transfer Date indicate in its computer files that the
Subsequent Receivables identified in the Subsequent Transfer Agreement
have been sold by the Seller to the Transferor, assigned by the Transferor
to the Depositor and assigned by the Depositor to the Issuer pursuant to
this Agreement and pledged to the Indenture Trustee pursuant to the
Indenture;
(x) the Seller shall have taken any action required to maintain
the first perfected ownership interest of the Trust in the Owner Trust
Estate and the first perfected security interest of the Indenture Trustee
in the Collateral;
(xi) no selection procedures adverse to the interests of
the Noteholders, the Certificateholders or the Insurer shall have been
utilized in selecting the Subsequent Receivables;
(xii) the addition of any such Subsequent Receivables shall
not result in a material adverse tax consequence to the Trust, the
Noteholders or the Certificateholders;
(xiii) the Seller shall have delivered (A) to the Rating
Agencies, the Indenture Trustee and the Insurer an Opinion of Counsel with
respect to the transfer of such Subsequent Receivables substantially in
the form of the Opinion of Counsel delivered to the Rating Agencies, the
Indenture Trustee and the Insurer on the Closing Date and (B) to the
Indenture Trustee the Opinion of Counsel required by Section 11.2(b);
(xiv) each Rating Agency shall have confirmed that the rating on
the Notes shall not be withdrawn or reduced as a result of the transfer of
such Subsequent Receivables to the Trust;
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(xv) the Insurer (so long as no Insurer Default shall have
occurred and be continuing), in its absolute and sole discretion, shall
have approved the transfer of such Subsequent Receivables to the Trust;
(xvi) the applicable Subsequent Reserve Account Deposit
shall have been made;
(xvii) the Seller shall have delivered to the Insurer and the
Indenture Trustee an Officers' Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (b); and
(xviii) no Event of Default has occurred and is continuing.
The Seller covenants that in the event any of the foregoing
conditions precedent are not satisfied with respect to any Subsequent Receivable
on the date required as specified above, the Seller will immediately repurchase
each such Subsequent Receivable from the Transferor, at a price equal to the
Purchase Amount thereof, in the manner specified in Section 4.7.
Upon each conveyance pursuant to the terms of this Sections 2.2, 2.3
and 2.4 hereof and a Subsequent Transfer Agreement, such Subsequent Receivables
shall be deemed to be Transferor Property.
The Seller agrees to transfer to the Transferor pursuant to Section
2.2(a), Subsequent Receivables with an Aggregate Principal Balance as of the
related Subsequent Cutoff Dates of approximately $[_________], subject only to
the availability thereof.
Section 2.3 CONVEYANCE FROM TRANSFEROR TO DEPOSITOR. For valuable
consideration, the transfer of which is hereby acknowledged, the Transferor does
hereby transfer, assign, set over and otherwise convey to the Depositor, all
right title and interest of the Transferor (but none of its obligations) in the
Transferor Property, this Agreement, each Subsequent Transfer Agreement, each
Subsequent Receivable and the Custodial Agreement, including all of the duties
and obligations of each party hereto and thereto (collectively, the "DEPOSITOR
PROPERTY").
It is the intention of the Transferor that the transfer and
assignment contemplated by this Section 2.3 shall constitute a sale of the
Receivables and other Depositor Property from the Transferor to the Depositor
and the beneficial interest in and title to the Receivables and the other
Depositor Property shall not be part of the Transferor's estate in the event of
the filing of a bankruptcy petition by or against the Transferor under any
bankruptcy law. In the event that, notwithstanding the intent of the Transferor,
the transfer and assignment contemplated hereby is held not to be a sale, this
Agreement shall constitute a security agreement and the Transferor does hereby
grant a security interest in the property referred to in this Section 2.3 for
the benefit of the Depositor.
The Transferor covenants that in the event that after any Subsequent
Transfer Date it receives notice or becomes aware that any of the conditions
precedent set forth in Section 2.2(b) are not satisfied with respect to any
Subsequent Receivable on the date required as specified above, the Transferor
will immediately repurchase such Subsequent Receivable from
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the Depositor, at a price equal to the Purchase Amount thereof, in the manner
specified in Section 4.7.
Section 2.4 CONVEYANCE FROM DEPOSITOR TO TRUST. For valuable
consideration, the transfer of which is hereby acknowledged, the Depositor does
hereby transfer, assign, set over and otherwise convey to the Trust, all right
title and interest of the Depositor (but none of its obligations) in the
Depositor Property, this Agreement, each Subsequent Transfer Agreement, each
Subsequent Receivable and the Custodial Agreement, including all of the duties
and obligations of each party hereto and thereto collectively, the "TRUST
PROPERTY").
It is the intention of the Depositor that the transfer and
assignment contemplated by this Section 2.4 shall constitute a sale of the
Receivables and other Trust Property from the Depositor to the Trust and the
beneficial interest in and title to the Receivables and the other Trust Property
shall not be part of the Depositor's estate in the event of the filing of a
bankruptcy petition by or against the Depositor under any bankruptcy law. In the
event that, notwithstanding the intent of the Depositor, the transfer and
assignment contemplated hereby is held not to be a sale, this Agreement shall
constitute a security agreement and the Depositor does hereby grant a security
interest in the property referred to in this Section 2.4 for the benefit of the
Noteholders, Certificateholders and the Insurer.
The Seller covenants that in the event that after any Subsequent
Transfer Date it receives notice or becomes aware that any of the conditions
precedent set forth in Section 2.2(b) were not satisfied with respect to any
Subsequent Receivable on the date required as specified above, the Seller will
immediately repurchase such Subsequent Receivable, at a price equal to the
Purchase Amount thereof, in the manner specified in Section 4.7.
Section 2.5 CLOSING. The conveyance of the Receivables shall take
place at the offices of [_____________], [Address] on the Closing Date,
simultaneously with the closing of the transactions related to the Notes and the
Certificates. Upon the acceptance by the Depositor of the net proceeds from the
sale of the Notes, the ownership of each Receivable and the contents of the
related Receivable File will be vested in the Issuer, subject to the lien of the
Indenture.
ARTICLE III
THE RECEIVABLES
Section 3.1 REPRESENTATIONS AND WARRANTIES. The Seller makes the
following representations and warranties to the Transferor, on which the
Transferor, is deemed to have relied in acquiring the Receivables and (ii)
Transferor makes the following representations and warranties upon which each of
the Depositor and the Issuer is deemed to have relied in acquiring the
Receivables and upon which the Insurer shall be deemed to rely in issuing the
Policy. Such representations and warranties speak as of the execution and
delivery of this Agreement and as of the Closing Date in the case of Initial
Receivables, as of the related Subsequent Transfer Date in the case of
Subsequent Receivables, but shall survive the sale, transfer and assignment of
the Receivables to the Transferor, the Depositor and the Trust and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
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(a) TITLE. It is the intention of (i) the Seller that the transfer
and assignment herein contemplated constitute a sale of the Receivables from the
Seller to the Transferor and that the beneficial interest in and title to such
Receivables not be part of the debtor's estate in the event of the filing of a
petition for receivership by or against the Seller under any bankruptcy law,
(ii) the Transferor that the transfer and assignment herein contemplated
constitute an assignment of the Receivables from the Transferor to the Depositor
and that the beneficial interest in and title to such Receivables not be part of
the debtor's estate in the event of the filing of a petition for receivership by
or against the Transferor under any bankruptcy law and (iii) the Depositor that
the transfer and assignment herein contemplated constitute an assignment of the
Receivables from the Depositor to the Trust and that the beneficial interest in
and title to such Receivables not be part of the debtor's estate in the event of
the filing of a petition for receivership by or against the Depositor under any
bankruptcy law. Immediately prior to the transfer and assignment herein
contemplated, (i) the Seller had good and marketable title to each Receivable,
free and clear of all Liens and, immediately upon the transfer thereof, (ii) the
Transferor shall have good and marketable title to each such Receivable, free
and clear of all Liens, and (iii) the Depositor shall have good and marketable
title to each such Receivable, free and clear of all Liens; and the transfer of
the Receivables to the Transferor, the Depositor and the Issuer has been
perfected under the UCC. No Dealer or any other Person has any right to receive
proceeds of any Receivables.
(b) ALL FILINGS MADE. All filings (including, without limitation,
UCC filings) necessary in any jurisdiction to give the Transferor, Depositor,
the Issuer and Indenture Trustee, a first priority perfected ownership interest
in the Receivables, and to give the Transferor, Depositor and Indenture Trustee
a first priority perfected security interest therein, shall have been made.
(c) CHARACTERISTICS OF RECEIVABLES. Each Receivable (i) shall have
been originated in the United States of America by the Seller in the ordinary
course of the Seller's business in accordance with its underwriting guidelines
and shall have been fully and properly executed by the parties thereto, (ii)
shall have created or shall create a valid, subsisting and enforceable first
priority security interest in favor of the Seller in the Financed Vehicle, which
security interest has been assigned by the Seller to the Transferor which
security interest has been assigned from the Transferor to the Depositor and
from the Depositor to the Issuer, which has assigned such security interest to
the Indenture Trustee, (iii) shall contain customary and enforceable provisions
such that the rights and remedies of the holder thereof shall be adequate for
realization against the collateral of the benefits of the security, (iv) shall
be Simple Interest Receivables and shall provide for level monthly payments
(provided that the payment in the first or last month in the life of the
Receivable may be minimally different from the level payment) that fully
amortize the Amount Financed over the original term and yield interest at the
rate per annum specified on Schedule A hereto, and has not been amended or
collections with respect to which have been waived and (v) shall be denominated
in U.S. dollars.
(d) Not more than [__]% of Obligors with respect to the Receivables
shall have a minimum FICO score of less than 680.
(e) At least three (3) Scheduled Payments shall have been received
with respect to each Receivable.
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(f) As of the Initial Cutoff Date, at least [__]% of Obligors make
their Scheduled Payments by means of ACH withdrawal by or on behalf of the
Servicer.
(g) SCHEDULE OF RECEIVABLES. The information set forth in Schedule A
to this Agreement is true and correct in all material respects as of the close
of business on the Initial Cutoff Date or, with respect to any Subsequent
Receivables, as of the close of business on the related Subsequent Cutoff Date,
and no selection procedures believed by the Seller to be adverse to the
Noteholders, the Certificateholders or the Insurer were utilized in selecting
the Receivables. The Computer Tape regarding the Receivables is true and correct
in all material respects as of the Initial Cutoff Date and will be true and
correct as of each Subsequent Cutoff Date.
(h) COMPLIANCE WITH LAW. Each Receivable complied at the time it was
originated or made and at the execution of this Agreement complies (or the
applicable Subsequent Transfer Agreement will comply) in all material respects
with all requirements of applicable Federal, state and local laws and
regulations thereunder, including, without limitation, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Rees-Levering Act, the
Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, state adaptations of the National Consumer Act, the Uniform
Consumer Credit Code and other consumer credit laws and equal credit opportunity
and disclosure laws.
(i) BINDING OBLIGATION. Each Receivable represents the legal, valid
and binding payment obligation in writing of the Obligor thereunder, enforceable
by the holder thereof in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect related
to or affecting creditors' rights generally and subject to general principles of
equity (whether applied in a proceeding at law or in equity); and all parties to
each Receivable had full legal capacity to execute and deliver such Receivable
and all other documents related thereto and to grant the security interest
purported to be granted thereby.
(j) NO GOVERNMENT OBLIGOR. None of the Receivables are due
from the United States of America or any State or from any agency,
department, instrumentality or political subdivision of the United States of
America or any state.
(k) SECURITY INTEREST IN FINANCED VEHICLE. Immediately prior to the
assignment and transfer thereof to the Trust, each Receivable is secured by a
validly perfected first priority security interest in the Financed Vehicle in
favor of [__________] as secured party or all necessary and appropriate actions
have been commenced that will result in the valid perfection of a first priority
security interest in the Financed Vehicle in favor of [__________] as secured
party within 120 days of the origination of each such Receivable. Immediately
after the assignment and transfer thereof to the Trust, although the Lien
Certificate will not indicate the Trust or the Owner Trustee as secured party,
each Receivable will be secured by an enforceable and perfected security
interest in the Financed Vehicle in favor of the Trust as secured party, which
security interest is prior to all other Liens in such Financed Vehicle.
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(l) RECEIVABLES IN FORCE. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from the
Lien granted by the related Receivable in whole or in part unless another
vehicle has been substituted as collateral securing the Receivable without any
other modification to such Receivable.
(m) NO WAIVER OR AMENDMENT. No provision of a Receivable has been
waived or amended except as permitted pursuant to Section 4.2 hereof. Such
Receivable has not been modified as a result of application of the Soldiers' and
Sailors' Civil Relief Act of 1940, as amended.
(n) NO DEFENSES. No right of rescission, setoff, counterclaim
or defense has been asserted or threatened with respect to any Receivable.
(o) NO LIENS. There are no Liens or claims, including Liens for
work, labor, storage, materials or unpaid state or federal taxes relating to any
Financed Vehicle securing the related Receivable, that are or may be prior to or
equal to the Lien granted by such Receivable.
(p) NO DEFAULT. No Initial Receivable has a payment that is more
than 30 days delinquent as of the Initial Cutoff Date or, with respect to any
Subsequent Receivables, of not more than 30 days delinquent as of the related
Subsequent Cutoff Date and, except as permitted in this paragraph, no default,
breach, violation or event (in any such case) permitting acceleration under the
terms of any Receivable has occurred; and no continuing condition that with
notice or the lapse of time would constitute a default, breach, violation or
event (in any such case) permitting acceleration under the terms of any
Receivable shall have arisen as of the Initial Cutoff Date with respect to the
Initial Receivables or the Subsequent Cutoff Date with respect to the Subsequent
Receivables; and the Seller has not waived and shall not waive any of the
foregoing.
(q) NO BANKRUPTCIES. No Obligor on any Receivable was the
subject of a bankruptcy proceeding commenced following the execution of the
related Contract.
(r) NO REPOSSESSIONS. As of the Initial Cutoff Date, no Financed
Vehicle securing any Receivable is in repossession status and, as of the related
Subsequent Cutoff Date, no Financed Vehicle securing any Subsequent Receivable
will be in repossession status.
(s) ADVERSE SELECTION. No selection procedures adverse to the
Noteholders, the Certificateholders or the Insurer were utilized in selecting
the Receivables from those owned by the Seller which met the selection criteria
contained in this Agreement.
(t) CHATTEL PAPER. Each Receivable constitutes "CHATTEL PAPER"
as defined in the UCC.
(u) INSURANCE. The Obligor with respect to each Receivable agreed in
the related Contract to obtain insurance covering the Financed Vehicle insuring
against loss and damage due to fire, theft, transportation, collision and other
risks generally covered by comprehensive and collision insurance coverage (i) in
an amount at least equal to the lesser of (x) its maximum insurable value or (y)
the Principal Balance due from the Obligor under such Receivable and (ii) naming
[__________] as loss payee.
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(v) LAWFUL ASSIGNMENT. No Receivable was originated as of the
Initial Cutoff Date or, with respect to any Subsequent Receivables, as of the
related Subsequent Cutoff Date, or, is subject to the laws of, any jurisdiction
under which the sale, transfer and assignment of such Receivable under this
Agreement is unlawful, void or voidable. The Seller has not entered into any
agreement with any Obligor or other Person that prohibits, restricts or
conditions the assignment of any portion of the Receivables.
(w) ONE ORIGINAL. There is only one original executed copy of
each Receivable.
(x) LOCATION OF RECEIVABLE FILES. The Receivable Files shall be kept
at one or more of the locations listed in Schedule B and each item required to
be in a Receivable File is in such Receivable File.
(y) COMPUTER RECORDS. As of the Closing Date, the accounting and
computer records relating to the Initial Receivables of the Seller have been
marked to show the absolute ownership by the Owner Trustee on behalf of the
Trust of the Initial Receivables, and, as of any Subsequent Transfer Date the
accounting and computer records relating to the Subsequent Receivables will be
marked to show the absolute ownership by the Owner Trustee on behalf of the
Trust of the Subsequent Receivables.
(z) TAXES. There are no state or local taxing jurisdictions which
have asserted that nonresident holders of certificates in, or notes issued by,
an entity which holds assets similar to the assets to be held by the Trust are
subject to the jurisdiction's income or other taxes solely by reason of the
location in the jurisdiction of the Owner Trustee, the Seller, the Servicer or
the Obligors or the assets securing the Receivables held by the Trust, or the
issuer of a financial guaranty insurance policy.
(aa) MATURITY OF RECEIVABLES. Each Receivable has a final maturity
date not later than nine (9) months before [__________], 200[_] each Receivable
has an original term to stated maturity of not more than 60 months; the weighted
average original term of the Initial Receivables is approximately 55.74 months;
the weighted average remaining term of the Initial Receivables is approximately
48.72 months as of the Initial Cutoff Date.
(bb) FINANCING. Approximately [____]% of the aggregate Principal
Balance of the Initial Receivables, constituting approximately [____] of the
Initial Receivables as of the Cutoff Date, represent new vehicles; approximately
[____]% of the aggregate Principal Balance of the Initial Receivables,
constituting approximately [____] Receivables as of the Initial Cutoff Date,
represent used vehicles; approximately [____]% of the aggregate Principal
Balance of the Initial Receivables, constituting approximately [___] of the
Initial Receivables as of the Initial Cutoff Date, represent refinances of
existing loans; and approximately [____]% of the aggregate Principal Balance of
the Initial Receivables, constituting approximately [____] of the Initial
Receivables as of the Initial Cutoff Date, represent lease buyouts; all of the
aggregate Principal Balance of the Initial Receivables as of the Initial Cutoff
Date represent Simple Interest Receivables. The aggregate Principal Balance of
the Initial Receivables, as of the Initial Cutoff Date, is $[___________].
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(cc) APR. The weighted average Annual Percentage Rate of the
Receivables as of the Cutoff Date is approximately [____]%. Each Initial
Receivable has an APR equal to or greater than 6.99%.
(dd) NUMBER. As of the Initial Cutoff Date, there are [____]
Receivables.
(ee) BALANCE. Each Initial Receivable has a remaining principal
balance of not less than $[_________] and not more than $[__________]; as of
the Initial Cutoff Date, the average Principal Balance of the Receivables is
$[__________].
(ff) SECURITY. Each Receivable is secured by a new or used
automobile or light-duty truck.
(gg) ADVANCE PAYMENTS. Each Receivable had not been paid more
than three months in advance as of the close of business on the Cutoff Date.
(hh) NO FORCE PLACED INSURANCE. As of the close of business on the
Initial Cutoff Date with respect to Initial Receivables and each Subsequent
Cutoff Date with respect to Subsequent Receivables, each Receivable was secured
by a Financed Vehicle that was not insured by a force placed insurance policy or
any vendor's single interest and non-filing insurance policy.
(ii) YIELD SUPPLEMENT AMOUNTS. An amount equal to the sum of all
projected Yield Supplement Amounts for all future Payment Dates with respect to
each Receivable, assuming that future payments on such Receivable are made on
their scheduled due dates, has been deposited to the Yield Supplement Account on
or prior to the Closing Date.
Section 3.2 REPURCHASE UPON BREACH. (a) The Seller, the Servicer,
the Insurer or the Indenture Trustee, as the case may be, shall inform the other
parties to this Agreement and the Insurer promptly, in writing, upon the
discovery of any breach of the Seller's representations and warranties made
pursuant to Section 3.1 hereof. As of the last day of the second (or, if the
Seller so elects, the first) month following the discovery by the Seller or
receipt by the Seller of notice from any of the Servicer, the Insurer or the
Indenture Trustee of such breach, unless such breach is cured by such date, the
Seller shall repurchase from the Trust any Receivable in which the interests of
the Noteholders, the Certificateholders or the Insurer are materially and
adversely affected by any such breach as of such date. The "SECOND MONTH" shall
mean the month following the month in which discovery occurs or notice is given,
and the "FIRST MONTH" shall mean the month in which discovery occurs or notice
is given. In consideration of and simultaneously with the repurchase of a such
Receivable, the Seller shall remit to the Indenture Trustee for deposit to the
Collection Account the Purchase Amount in the manner specified in Section 5.5
and the Issuer shall execute such assignments and other documents reasonably
requested by such person in order to effect such repurchase. The sole remedy of
the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders or the Insurer with respect to a breach of representations
and warranties made pursuant to Section 3.1 hereof shall be the repurchase of
Receivables pursuant to this Section. Subject to the conditions contained
herein, neither the Owner Trustee, the Issuer nor the Indenture Trustee shall
have a duty to conduct any
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affirmative investigation as to the occurrence of any conditions requiring the
repurchase of any Receivable pursuant to this Section.
(b) Pursuant to (i) Section 2.3 hereof, the Transferor conveyed to
the Depositor and (ii) Section 2.4 hereof, the Depositor conveyed to the Trust,
all of the such party's right, title and interest in its rights and benefits,
but none of its obligations or burdens, under this Agreement including the
Seller's and the Transferor's representations and warranties and the cure or
repurchase obligations of the Seller hereunder. Each of the Seller and the
Transferor hereby represents and warrants to the Trust that such assignment is
valid, enforceable and effective to permit the Trust to enforce such obligations
of the Seller hereunder.
Section 3.3 CUSTODY OF RECEIVABLES FILES. To assure uniform quality
in servicing the Receivables and to reduce administrative costs, the Transferor,
Depositor, Indenture Trustee and Owner Trustee hereby appoint the Custodian, and
the Custodian hereby accepts such appointment, to act exclusively as the agent
for the Indenture Trustee, on behalf of the Noteholders, and the Insurer until
the Notes are paid in full and thereafter, on behalf of the Owner Trustee, on
behalf of the Certificateholders as custodian of the following documents or
instruments which shall be delivered to the Custodian, as of the Initial Cutoff
Date (in the case of Initial Receivables) and as of each Subsequent Transfer
Date (in the case of Subsequent Receivables transferred on such Subsequent
Transfer Date) as pledgee of the Issuer with respect to each Receivable:
(a) the original loan agreement, promissory note, security agreement
or other evidence of the Obligor's indebtedness to repay such Receivable;
(b) an electronic file containing the information supplied by
the Obligor in the original credit application;
(c) the original certificate of title or such documents that the
Servicer shall keep on file, in accordance with its customary procedures,
evidencing the security interest of [__________] in the Financed Vehicle (it
being understood that the original certificates of title generally are not
delivered to the Seller for 120 days but that promptly upon delivery they shall
be delivered to the Custodian); and
(d) any and all other documents that the Servicer shall keep on
file, in accordance with its customary procedures, relating to a Receivable, an
Obligor or a Financed Vehicle.
Section 3.4 DUTIES OF CUSTODIAN. The duties and obligations of
the Custodian are set forth in full in the Custodial Agreement.
Section 3.5 RETENTION AND TERMINATION OF SERVICER. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term, commencing on the Closing Date and ending on [__________], 200[_],, which
term shall be extendible by the Insurer (provided no Insurer Default has
occurred and is continuing) for successive quarterly terms ending on each
successive June 30, September 30, December 31 and March 31 (or, pursuant to
revocable written standing instructions from time to time to the Servicer and
the Indenture Trustee for any specific number of terms greater than one), until
the Notes are paid in
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full. Each such notice (including each notice pursuant to standing instructions,
which shall be deemed delivered at the end of successive quarterly terms for so
long as such instructions are in effect) (a "SERVICER EXTENSION NOTICE") shall
be delivered by the Insurer to the Indenture Trustee and the Servicer. The
Servicer hereby agrees that, as of the date hereof and upon its receipt of any
such Servicer Extension Notice, the Servicer shall become bound, for the initial
term beginning on the Closing Date and for the duration of the term covered by
Servicer Extension Notice, to continue as Servicer subject to and in accordance
with the other provisions of this Agreement. Until such time as an Insurer
Default shall have occurred and be continuing, the Indenture Trustee agrees that
if as of the fifteenth day prior to the last day of any term of the Servicer,
the Indenture Trustee shall not have received any Servicer Extension Notice from
the Insurer, the Indenture Trustee shall, within [___] days after, give written
notice of such non-receipt to the Insurer and the Servicer and the Servicer's
term shall not be extended unless a Servicer Extension Notice is received on or
before the last day of such term. Notwithstanding the foregoing, in the event an
Insurer Default has occurred and is continuing, the Servicer Extension Notice
shall be deemed to have been delivered as of the last day of the current term of
the Servicer and extended until the next quarterly period.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 4.1 APPOINTMENT AND DUTIES OF SERVICER. (a) The managing,
servicing, administering and making collections on the Contracts shall be
conducted by the Person so designated from time to time as Servicer in
accordance with this Agreement. [__________] is hereby initially designated as,
and hereby agrees to perform, the duties and obligations of the Servicer
pursuant to the terms hereof and the other Basic Documents. Subject to the
resignation of [__________] as Servicer pursuant to Section 7.5 or the
termination of [__________] as Servicer pursuant to Section 8.1 and, in either
case, the assumption by the Backup Servicer, or the designation of a successor
Servicer hereunder as the case may be, of the Servicer's duties and
responsibilities in accordance with Section 8A.7, [__________] shall continue to
manage, service, administer and collect on the Receivables pursuant to this
Agreement, unless and until expressly agreed otherwise by the Seller, the Issuer
and the Controlling Party. The Servicer, as agent for the Issuer and the Insurer
(to the extent provided herein), shall manage, service, administer and make
collections on the Receivables (other than Purchased Receivables) in accordance
with all applicable federal, state or local laws and regulations and with
reasonable care, using that degree of skill and attention that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others, and in any event with no less degree of skill and care
than would be exercised by a prudent servicer of motor vehicle loans (the
"SERVICING STANDARD"), except that the Servicer shall not be obligated, and does
not currently intend, to (i) obtain force-placed insurance concerning any
Financed Vehicle or (ii) monitor any Obligor's maintenance of such insurance.
The Servicer's duties shall include collection and posting of all payments,
responding to inquiries of Obligors on such Receivables, investigating
delinquencies, sending payment statements to Obligors, accounting for
collections and furnishing monthly and annual statements to the Owner Trustee,
Indenture Trustee and the Insurer with respect to distributions, reporting tax
information, if any, to Obligors and delivering Receivable Files to the
Custodian. Subject to
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the provisions of Section 4.2, the Servicer shall follow its customary
standards, policies and procedures in performing its duties as Servicer. Without
limiting the generality of the foregoing, the Servicer is authorized and
empowered to execute and deliver, on behalf of itself, the Issuer, the Owner
Trustee, the Indenture Trustee, the Insurer, the Certificateholders and the
Noteholders or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments without recourse to the Trust, with respect to such Receivables or
to the Financed Vehicles securing such Receivables. If the Servicer shall
commence a legal proceeding to enforce a Receivable, the Trust (in the case of a
Receivable other than a Purchased Receivable) shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
the Servicer. If in any enforcement suit or legal proceeding it shall be held
that the Servicer may not enforce a Receivable on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Owner Trustee or the Indenture Trustee shall, at the Servicer's expense and
direction, take steps to enforce such Receivable, including bringing suit in its
name or the name of the Trust, the Owner Trustee, the Certificateholders,
Indenture Trustee or the Noteholders. The Owner Trustee and the Insurer shall
upon the written request of the Servicer furnish the Servicer with any powers of
attorney and other documents reasonably necessary or appropriate (as certified
to the Owner Trustee and/or the Insurer by the Servicer) to enable the Servicer
to carry out its servicing and administrative duties hereunder.
(b) [__________] hereby agrees that upon the designation of a
successor Servicer hereunder or the assumption by the Backup Servicer of the
Servicer's duties and responsibilities in accordance with Section 8A.7,
[__________] will terminate its activities as Servicer hereunder in accordance
with Section 8.1 and, in any case, in a manner which the Indenture Trustee
reasonably determines will facilitate the transition of the performance of such
activities to such successor Servicer or the Backup Servicer, as the case may
be, and [__________] shall cooperate with and assist such successor Servicer or
the Backup Servicer, as the case may be.
Section 4.2 COLLECTION AND ALLOCATION OF RECEIVABLE PAYMENTS. (a)
The Servicer shall collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due and shall
follow such collection procedures as is consistent with the Servicing Standard.
The Servicer shall allocate collections between principal and interest in
accordance with its customary servicing procedures.
(b) The Servicer may at any time agree to a modification, amendment
or extension of a Receivable in order to (i) change the Obligor's regular due
date to a date within the Collection Period in which such due date occurs, (ii)
reamortize the scheduled payments on the Receivable following a partial
prepayment of principal and (iii) grant extensions of a Receivable, provided
that the Servicer shall not be permitted to extend the monthly payments on a
Receivable more than two times in any twelve-month period, and provided further
that the aggregate period of all extensions on a Receivable shall not exceed six
months. The Servicer may in its discretion waive any late payment charge or any
other fees that may be collected in the ordinary course of servicing a
Receivable.
(c) The Servicer may grant payment extensions or deferrals on, or
other modifications or amendments to, a Receivable (in addition to those
modifications permitted by
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Section 4.2(a)) in accordance with its customary procedures if the Servicer
believes in good faith that such extension, deferral, modification or amendment
is necessary to avoid a default on such Receivable, will maximize the amount to
be received by the Trust with respect to such Receivable, and is otherwise in
the best interests of the Trust; PROVIDED HOWEVER, that:
(i) In no event may a Receivable be extended beyond the Collection
Period immediately preceding the Final Scheduled Distribution Date;
(ii) So long as an Insurer Default shall not have occurred and be
continuing, the Servicer shall not amend or modify a Receivable (except as
provided in Section 4.2(b)) without the consent of the Insurer;
(iii) So long as an Insurer Default shall not have occurred and
be continuing, the Aggregate Principal Balance of Receivables which have
been extended during any Collection Period (A) shall not exceed [__]% of
the Aggregate Principal Balance of Receivables during such Collection
Period (computed as of the Accounting Date immediately prior to the first
date of the related Collection Period) and (B) shall not exceed [__]% of
the average of the Aggregate Principal Balance of Receivables for such
Collection Period and the three prior Collection Periods (computed as of
the Determination Date immediately prior to the first day of the related
Collection Period);
(iv) So long as an Insurer Default shall not have occurred and be
continuing, the Aggregate Principal Balance of Receivables for which
payment deferrals have been granted during any Collection Period (A) shall
not exceed [__]% of the Aggregate Principal Balance of Receivables during
such Collection Period (computed as of the Accounting Date immediately
prior to the first day of the related Collection Period) and (B) shall not
exceed [__]% of the average of the Aggregate Principal Balance of
Receivables for such Collection Period and the three prior Collection
Periods (computed as of the Determination Date immediately prior to the
first day of the related Collection Period);
(v) No such extension, modification or amendment shall be granted
if such action, when aggregated with all previous extensions,
modifications and amendments of Receivables, would have the effect of
causing any Notes to be deemed to have been exchanged for other Notes
within the meaning of Section 1001 of the Internal Revenue Code of 1986,
as amended, or any proposed, temporary or final Treasury Regulations
issued thereunder; and
(vi) If an Insurer Default shall have occurred and be continuing,
the Servicer may not extend or modify any Receivable (other than as
permitted by Section 4.2(b)).
(d) Notwithstanding anything in this Agreement to the contrary, the
Servicer may refinance any Receivable by accepting a new promissory note from
the related Obligor and depositing the full outstanding Principal Balance of
such Receivable into the Collection Account. The receivable created by the
refinancing shall not be property of the Issuer.
Section 4.3 REALIZATION UPON RECEIVABLES. The Servicer shall, in
accordance with the Servicing Standard and in a manner consistent with its
customary servicing procedures,
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repossess or otherwise convert the ownership of the Financed Vehicle securing
any Receivable as to which the Servicer shall have determined eventual payment
in full is unlikely. From time to time, as appropriate for servicing or
foreclosing upon any Receivable, the Owner Trustee shall, upon written request
of the Servicer, execute or shall cause to be executed such documents as shall
be reasonably necessary to prosecute any such proceedings. The Servicer shall
follow such customary and usual practices and procedures as it shall deem
necessary or advisable, consistent with the Servicing Standard, which practices
and procedures may include the sale of the related Financed Vehicles at a public
or private sale, the submission of claims under an insurance policy and other
actions by the Servicer to realize upon a Receivable. The foregoing shall be
subject to the provision that, in any case in which the Financed Vehicle shall
have suffered damage, the Servicer shall not expend funds in connection with the
repair or the repossession of such Financed Vehicle unless it shall determine in
its reasonable discretion that such repair and/or repossession will increase the
Net Liquidation Proceeds by an amount greater than the amount of such expenses.
Section 4.4 [RESERVED]
Section 4.5 MAINTENANCE OF SECURITY INTERESTS IN FINANCED Vehicles.
(a) The Servicer shall, in accordance with the Servicing Standard and its
customary procedures, take such steps as are necessary to maintain perfection of
the first priority security interest created by each Receivable in the related
Financed Vehicle in favor of the Seller. The Servicer is hereby authorized to
take such steps as are necessary to re-perfect such security interest on behalf
of the Issuer and the Indenture Trustee in the event of the relocation of a
Financed Vehicle or for any other reason.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
and subject to the other provisions of this Agreement, the Controlling Party may
instruct the Indenture Trustee and the Servicer to take or cause to be taken,
upon the occurrence of a Servicer Default, the Owner Trustee and the Servicer
shall take or cause to be taken such action as may, in the opinion of counsel to
the Controlling Party, be necessary to perfect or reperfect the security
interests in the Financed Vehicles securing the Receivables in the name of the
Indenture Trustee by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the
Controlling Party, be necessary or prudent. The Servicer hereby agrees to pay
all expenses related to such perfection or reperfection and to take all action
necessary therefor.
Section 4.6 COVENANTS OF SERVICER. The Servicer shall not release
the Financed Vehicle securing any Receivable from the security interest granted
by such Receivable in whole or in part except in the event of payment in full by
the Obligor thereunder or payment in full less a deficiency which the Servicer
would not attempt to collect in accordance with the Servicing Standard and its
customary procedures or in connection with repossession or except as may be
required by an insurer in order to receive proceeds from insurance covering such
Financed Vehicle, nor shall the Servicer impair the rights of the Issuer, the
Indenture Trustee, the Owner Trustee, the Certificateholders, the Insurer or the
Noteholders in such Receivables, nor shall the Servicer amend or otherwise
modify a Receivable (including the grant of any extension thereunder), except as
provided in Section 4.2 hereof.
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Section 4.7 PURCHASE OF RECEIVABLES UPON BREACH. The Seller, the
Servicer, the Owner Trustee, or the Insurer, as the case may be, shall inform
the other parties and the Indenture Trustee promptly, in writing, upon the
discovery of any breach of the Servicer's covenants pursuant to Section 4.2(b),
4.5 or 4.6, or of any breach of the Servicer's representations and warranties
made pursuant to Section 7.1; PROVIDED, HOWEVER, that the failure to give any
such notice shall not affect the obligation of the Servicer under this Section
4.7. As of the last day of the first month following the discovery by the
Servicer or receipt by the Servicer of notice from any of the Seller, the
Servicer, the Owner Trustee, Insurer or the Indenture Trustee of such breach,
unless such breach is cured by such date, the Servicer shall (i) purchase any
Receivable in which the interests of the Insurer, the Noteholders or the
Certificateholders are materially and adversely affected by such breach as of
such date. The "first month" shall mean the calendar month following the month
in which discovery occurs or notice is given. In consideration of the purchase
of any such Receivable pursuant to the preceding sentence, the Servicer shall
remit the Purchase Amount in the manner specified in Section 5.5. The sole
remedy of the Issuer, the Indenture Trustee, the Insurer, the Noteholders or the
Certificateholders with respect to a breach pursuant to Section 4.2(b), 4.5 or
4.6, or to a breach of representations and warranties pursuant to Section 7.1,
shall be limited to the purchase of Receivables in accordance with this Section
4.7. The Indenture Trustee and the Owner Trustee shall have no duty to conduct
any affirmative investigation as to the occurrence of any condition requiring
the purchase of any Receivable pursuant to this Section 4.7.
Section 4.8 SERVICING FEE. The Servicing Fee for a Payment Date
shall equal the sum of the Base Servicing Fee, all Investment Earnings on the
Collection Account plus any reimbursement pursuant to Section 5.2. The Servicer
also shall be entitled to retain from collections the Base Servicing Fee as
provided herein. The Servicer, in its discretion at its election, may defer
receipt of all or any portion of the Servicing Fee for any Collection Period to
and until a later Collection Period for any reason, including in order to avoid
a shortfall in any payments due on any Notes or Certificates. Any such deferred
amount shall be payable to (or may be retained from subsequent collections by)
the Servicer on demand.
Section 4.9 SERVICER'S CERTIFICATE. No later than 12:00 noon New
York City time on each Determination Date, the Servicer shall deliver to the
Owner Trustee, the Indenture Trustee, the Insurer, the Backup Servicer, the
Indenture Collateral Agent and each Rating Agency, a Servicer's Certificate
containing, among other things, (i) all information necessary to enable the
Indenture Trustee to make any withdrawal and deposit required by Section 5.6, to
give any notice required by Section 5.4 and make the distributions required by
Section 5.6 and 5.7; (ii) all information necessary to enable the Indenture
Trustee to send the statements required by Section 5.8 to the Owner Trustee, the
Noteholders, each Rating Agency and the Insurer; (iii) a listing of all
Purchased Receivables for the related Collection Period; (iv) all information
necessary to enable the Indenture Trustee to reconcile all deposits to, and
withdrawals from, the Collection Account for the related Collection Period and
Payment Date, including the accounting required by Section 5.9; (v) the
Delinquency Ratio, the Cumulative Default Rate and the Cumulative Net Loss Rate
for such Determination Date; (vi) whether any Insurance Agreement Event of
Default has occurred as of such Determination Date; (vii) whether any Insurance
Agreement Event of Default that may have occurred as of a prior Determination
Date is cured as of such Determination Date; (viii) whether to the knowledge of
the Servicer an Insurer Default has occurred; and (ix) if the Servicer has
granted payment extensions on, or other modifications
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or amendments to, any Receivables during the related Collection Period, the
number of such Receivables extended, modified or amended, the Aggregate
Principal Balance of such Receivables and the Principal Balance of such
Receivables expressed as a percentage of the outstanding Aggregate Principal
Balance as of the related Determination Date. Receivables purchased by the
Servicer, the Seller and each receivable which became a Liquidated Receivable or
which was paid in full during the related Collection Period shall be identified
by account number (as set forth in the Schedule of Receivables on Schedule A
hereof). A copy of such certificate may be obtained by any Noteholder or by any
Certificateholder by a request in writing to the Indenture Trustee or the Owner
Trustee, respectively, addressed to the applicable Corporate Trust Office. The
Indenture Trustee shall not be under any obligation to confirm or reconcile the
information provided pursuant to this Section 4.9.
If a Servicer's Certificate contains a manifest error, the Insurer's
written notice to the Servicer, the Owner Trustee, and the Indenture Trustee,
containing the corrected information shall be deemed to amend such Servicer's
Certificate.
Section 4.10 ANNUAL STATEMENT AS TO COMPLIANCE; NOTICE OF DEFAULT.
(a) The Servicer shall deliver to the Indenture Trustee, the Owner Trustee, the
Backup Servicer, and the Insurer, on or before [_________] of each year
beginning [_________], 200[_], an Officer's Certificate, dated as of the
preceding [_________], stating that (i) a review of the activities of the
Servicer during the preceding 12-month period and of its performance under this
Agreement has been made under such officer's supervision and (ii) based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officers and the
nature and status thereof. The Indenture Trustee shall send a copy of such
certificate and the report referred to in Section 4.11 to the Rating Agencies. A
copy of such certificate and the report referred to in Section 4.11 may be
obtained by any Certificateholder by a request in writing to the Owner Trustee
addressed to the Corporate Trust Office or by any Noteholder by a request in
writing to the Indenture Trustee addressed to the Corporate Trust Office.
(b) The Servicer shall deliver to the Owner Trustee, the Indenture
Trustee, the Backup Servicer, the Indenture Collateral Agent, the Insurer and
the Rating Agencies, promptly after having obtained knowledge thereof, but in no
event later than [____] Business Days thereafter, an Officer's Certificate
specifying any event which with the giving of notice or lapse of time, or both,
would become a Servicer Default under Section 8.1.
Section 4.11 FINANCIAL STATEMENTS. (a) The Servicer shall cause a
firm of nationally recognized independent certified public accountants, which
may also render other services to the Servicer or the Seller, to deliver to the
Seller, the Backup Servicer, the Indenture Trustee, the Owner Trustee and the
Insurer on or before [___________] of each year beginning [_________], 200[_],
an agreed-upon procedures report addressed to the Servicer, the Seller, the
Owner Trustee, the Indenture Trustee, the Insurer and each Rating Agency,
expressing a summary of findings (based on certain procedures performed on the
documents, records and accounting records that such accountants considered
appropriate under the circumstances) relating to the servicing of the
Receivables, or the administration of the Receivables and of the Trust, as the
case may be, during the preceding calendar year and that, on the basis of the
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accounting and auditing procedures considered appropriate under the
circumstances, such firm is of the opinion that such servicing or administration
was conducted in compliance with the terms of this Agreement, except for (i)
such exceptions as such firm shall believe to be immaterial and (ii) such other
exceptions as shall be set forth in such report. In the event such accounting
firm requires the Backup Servicer to agree to the procedures to be reported on
by such accounting firm in any report delivered pursuant to this Section 4.11,
the Servicer shall direct the Backup Servicer in writing to so agree. It is
understood and agreed that the Backup Servicer will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and that
the Backup Servicer will not make any independent inquiry or investigation as
to, and shall have no obligation or liability with respect to, the sufficiency,
validity or correctness of such procedures.
Such report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
(b) The Servicer shall deliver to the Owner Trustee, the Backup
Servicer, the Indenture Trustee and the Insurer on or before the 45th day
following the end of each calendar quarter the unaudited balance sheet of the
Servicer as of the end of the most recent calendar quarter and the related
unaudited statements of income and retained earnings of the Servicer for such
calendar quarter and for the period equal to the portion of the calendar year
ending with such calendar quarter.
Section 4.12 ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION
REGARDING RECEIVABLES. The Servicer shall provide to representatives of the
Indenture Trustee, the Owner Trustee, the Insurer, and the Backup Servicer
reasonable access to the Receivable Files and if there is a single Holder of the
Notes or if there is a single Holder of the Certificates, each such Holder. The
Servicer shall provide to the Certificateholders and Noteholders access to the
Receivable Files in such cases where the Certificateholders or Noteholders shall
be required by applicable statutes or regulations to review such documentation
as demonstrated by evidence satisfactory to the Servicer in its reasonable
judgment. Access shall be afforded without charge, but only upon reasonable
request and during the normal business hours at the respective offices of the
Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors and the failure of the Servicer to provide access to information as a
result of such obligation shall not constitute a breach of this Section.
Section 4.13 SERVICER EXPENSES. The Servicer shall be required to
pay all expenses incurred by it in connection with its activities hereunder and
under any of the Basic Documents, including fees and disbursements of
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Certificateholders and Noteholders.
Section 4.14 APPOINTMENT OF SUBSERVICER. The Servicer may at any
time, with the consent of the Insurer (unless an Insurer Default shall have
occurred and be continuing), appoint a subservicer to perform all or any portion
of its obligations as Servicer hereunder; provided, however, that the Rating
Agency Condition shall have been satisfied in connection therewith; provided
further, that the Servicer shall remain obligated and be liable to the
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Transferor, the Depositor, the Issuer, the Indenture Trustee, the Owner Trustee,
the Certificateholders, the Insurer and the Noteholders for the servicing and
administering of the Receivables in accordance with the provisions hereof
without diminution of such obligation and liability by virtue of the appointment
of such subservicer and to the same extent and under the same terms and
conditions as if the Servicer alone were servicing and administering the
Receivables. The Insurer's consent shall not be required for appointment of
subservicers or agents in connection with repossession of any Financed Vehicle.
The fees and expenses of the subservicer shall be as agreed between the Servicer
and its subservicer from time to time and none of the Transferor, the Depositor,
the Issuer, the Indenture Trustee, the Owner Trustee, the Certificateholders,
the Insurer or the Noteholders shall have any responsibility therefor. Any such
subservicer shall perform its duties with the same standard of care applicable
to the Servicer pursuant to Section 4.1 of this Agreement.
Section 4.15 OBLIGATIONS UNDER BASIC DOCUMENTS. The
Servicer shall perform all of its obligations under the Basic Documents.
Section 4.16 REPORTS TO THE COMMISSION. The Servicer shall, on
behalf of the Trust, cooperate with Depositor in connection with the filing with
the Commission any periodic reports required to be filed under the provisions of
the Exchange Act, and the rules and the regulations of the Commission
thereunder.
ARTICLE V
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
Section 5.1 ESTABLISHMENT OF TRUST ACCOUNTS.
(a) (i) On or prior to the Closing Date, the Servicer, for the
benefit of the Indenture Trustee on behalf of the Noteholders, the Owner Trustee
on behalf of the Certificateholders, and the Insurer, shall establish and
maintain in the name of the Indenture Trustee an Eligible Deposit Account (the
"COLLECTION ACCOUNT"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Indenture Trustee on behalf of
the Noteholders, the Owner Trustee on behalf of the Certificateholders and the
Insurer. Investment Earnings on funds in the Collection Account shall be paid to
the Servicer. The Collection Account shall initially be established with the
Indenture Trustee.
(ii) On or prior to the Closing Date, the Reserve Account shall
be established in accordance with the terms of the Reserve Account
Agreement. On the Closing Date, the Transferor will deposit the Reserve
Account Initial Deposit into the Reserve Account from the net proceeds of
the sale of the Initial Receivables. On each Subsequent Transfer Date, the
Servicer shall instruct the Indenture Trustee to withdraw from the
Pre-Funding Account and deposit to the Reserve Account an amount equal to
the applicable Subsequent Reserve Account Deposit as provided in Section
5.6(a) hereof.
(iii) On or prior to the Closing Date, the Issuer shall cause the
Servicer, for the benefit of the Indenture Trustee on behalf of the
Noteholders and the Insurer, to establish
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and maintain in the name of the Indenture Trustee an Eligible Deposit
Account (the "YIELD SUPPLEMENT ACCOUNT"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Indenture Trustee on behalf of the Noteholders and the Insurer.
Investment Earnings on funds in the Yield Supplement Account shall be
retained in the Yield Supplement Account, subject to Section 5.6 of the
Agreement. The Yield Supplement Account shall be initially established
with the Indenture Trustee. On the Closing Date, the Transferor will
deposit the Yield Supplement Account Initial Deposit into the Yield
Supplement Account from the net proceeds of the sale of the Initial
Receivables. To the extent, on any Payment Date, the amount on deposit in
the Yield Supplement Account (after giving effect to any withdrawals to be
made on such Payment Date, but exclusive of net income) is greater than
the Yield Supplement Account Required Amount for such Payment Date, then
in such event, the Servicer shall instruct the Indenture Trustee in
writing to deposit such excess amount into the Reserve Account.
(iv) On or prior to the Closing Date, the Servicer, for the
benefit of the Indenture Trustee on behalf of the Noteholders, shall
establish and maintain in the name of the Indenture Trustee an Eligible
Deposit Account (the "NOTE DISTRIBUTION ACCOUNT"), bearing a designation
clearly indicating that the funds deposited therein are held for the
benefit of the Indenture Trustee on behalf of the Noteholders and the
Insurer. The Note Distribution Account shall initially be established with
the Indenture Trustee.
(v) On or prior to the Closing Date, the Servicer, for the benefit
of the Indenture Trustee on behalf of the Noteholders, the Owner Trustee
on behalf of the Certificateholders, and the Insurer, shall establish and
maintain in the name of the Indenture Trustee an Eligible Deposit Account
(the "PRE-FUNDING ACCOUNT"), bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Indenture
Trustee on behalf of the Noteholders, the Owner Trustee on behalf of the
Certificateholders and the Insurer. Investment Earnings in the Pre-Funding
Account shall be paid to the Seller in accordance with Section 5.1(a)(ii)
hereof.
(vi) With respect to amounts on deposit in the Pre-Funding
Account, in order to assure that sufficient amounts to make required
distributions of interest to Noteholders will be available during the
Pre-Funding Period, the Issuer shall instruct the Servicer to establish
and maintain an Eligible Deposit Account (the "CAPITALIZED INTEREST
ACCOUNT") with the Indenture Trustee, bearing a designation clearly
indicating that the funds deposited therein are held in trust for the
benefit of the Noteholders and the Insurer. On or prior to the Closing
Date, the Transferor shall deposit an amount equal to the Capitalized
Interest Account Initial Deposit into the Capitalized Interest Account. On
the Payment Dates occurring prior to the Mandatory Redemption Date, the
Indenture Trustee shall withdraw from the Capitalized Interest Account the
Monthly Capitalized Interest Amount for such Payment Date as further
provided in Section 5.6. Any amounts remaining in the Capitalized Interest
Account on the Mandatory Redemption Date after taking into account such
transfer shall be distributed by the Indenture Trustee to the Transferor.
Upon any such distributions to the Transferor, the Noteholders, the
Certificateholders and the Insurer will have no further rights in, or
claims to, such amounts.
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(b) Funds on deposit in the Collection Account, the Pre-Funding
Account, the Note Distribution Account and the Yield Supplement Account (the
"TRUST ACCOUNTS") and the Certificate Distribution Account shall be invested by
the Indenture Trustee (or any custodian with respect to funds on deposit in any
such account) in Eligible Investments selected in writing by the Servicer
(pursuant to standing instructions or otherwise); provided, however, it is
understood and agreed that the Indenture Trustee shall not be liable for any
loss arising from such investment in Eligible Investments. If the Servicer does
not provide the Indenture Trustee, with written direction as to the Eligible
Investments, the funds in the Trust Accounts and Certificate Distribution
Account shall be invested in the investments specified in clause (1) of the
definition of Eligible Investments. All such Eligible Investments shall be held
by or on behalf of the Indenture Trustee, for the benefit of the Noteholders
and/or the Certificateholders, as applicable. Other than as permitted by the
Rating Agencies and the Insurer, funds on deposit in the Collection Account, the
Pre-Funding Account, the Capitalized Interest Account, the Note Distribution
Account and the Certificate Distribution Account shall be invested in Eligible
Investments that will mature so that such funds will be available at the close
of business on the Business Day immediately preceding the following Payment
Date. Funds deposited in a Trust Account or the Certificate Distribution Account
on the day immediately preceding a Payment Date upon the maturity of any
Eligible Investments are not required to be invested overnight.
(c) (i) The Indenture Trustee shall possess all right, title and
interest in all funds on deposit from time to time in the Trust Accounts and in
all proceeds thereof (excluding all Investment Earnings on the Collection
Account) and all such funds, investments, proceeds and income shall be part of
the Owner Trust Estate. Except as otherwise provided herein, the Trust Accounts
shall be under the sole dominion and control of the Indenture Trustee. If, at
any time, any of the Trust Accounts or the Certificate Distribution Account
ceases to be an Eligible Deposit Account, the Indenture Trustee (or the Servicer
on its behalf) shall within ten (10) Business Days (or such longer period as to
which each Rating Agency and the Insurer may consent) establish a new Trust
Account or a new Certificate Distribution Account, as applicable, as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such new
Trust Account or a new Certificate Distribution Account, as applicable. In
connection with the foregoing, the Servicer agrees that, in the event that any
of the Trust Accounts are not accounts with the Indenture Trustee, the Servicer
shall notify the Indenture Trustee in writing promptly upon any of such Trust
Accounts ceasing to be an Eligible Deposit Account.
(ii) With respect to the Trust Account Property, the Indenture
Trustee, and with respect to the Certificate Distribution Account, the
Owner Trustee agrees, by its respective acceptance hereof, that:
(A) any Trust Account Property or any property in the
Certificate Distribution Account that is held in deposit accounts
shall be held solely in the Eligible Deposit Accounts subject to the
penultimate sentence of Section 5.1(c)(i); and, except as otherwise
provided herein, each such Eligible Deposit Account shall be subject
to the exclusive custody and control of the Indenture Trustee with
respect to the Trust Accounts and the Owner Trustee (and Certificate
Paying Agent) with respect to the Certificate Distribution Account,
and the Indenture Trustee or the Owner Trustee (and Certificate
Paying Agent), as applicable, shall have sole signature authority
with respect thereto;
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(B) any Trust Account Property that constitutes Physical
Property shall be delivered to the Indenture Trustee in accordance
with paragraph (a) of the definition of "DELIVERY" and shall be
held, pending maturity or disposition, solely by the Indenture
Trustee or a securities intermediary (as such term is defined in
Section 8-102(a)(14) of the UCC) acting for the Indenture Trustee;
(C) any Trust Account Property that is a "CERTIFICATED
SECURITY" under Article 8 of the UCC shall be delivered to the
Indenture Trustee in accordance with paragraph (b) of the definition
of "DELIVERY" and shall be held, pending maturity or disposition,
solely by the Indenture Trustee or a securities intermediary (as
such term is defined in Section 8-102(a)(14) of the UCC) acting for
the Indenture Trustee;
(D) any Trust Account Property that is a book-entry security
held through the Federal Reserve System pursuant to Federal
book-entry regulations shall be delivered in accordance with
paragraph (d) of the definition of "DELIVERY" and shall be
maintained by the Indenture Trustee, pending maturity or
disposition, through continued book-entry registration of such Trust
Account Property in the name of the Indenture Trustee or a
securities intermediary (as such term is defined in Section
8-102(a)(14) of the UCC) acting for the Indenture Trustee's;
(E) any Trust Account Property that is an "UNCERTIFICATED
SECURITY" under Article 8 of the UCC and that is not governed by
clause (D) above shall be delivered to the Indenture Trustee in
accordance with paragraph (c) of the definition of "DELIVERY" and
shall be maintained by the Indenture Trustee, pending maturity or
disposition, through continued registration of the Indenture
Trustee's (or its nominee's) ownership of such security; and (F) any
Trust Account Property held through a securities intermediary (as
such term is defined in Section 8-102(a)(14) of the UCC) shall be
held in a securities account (as such term is defined in Section
8-501(a) of the UCC) that is established by such securities
intermediary in the name of the Indenture Trustee for which the
Indenture Trustee is the sole entitlement holder (as defined in
Section 8-102(a)(7) of the UCC).
Section 5.2 COLLECTIONS. (a) The Servicer shall remit within two (2)
Business Days of receipt thereof to the Collection Account all payments by or on
behalf of the Obligors with respect to the Receivables (other than Purchased
Receivables) and all Liquidation Proceeds, both as collected during the
Collection Period less any payments owed thereon to the Servicer. For purposes
of this Article V, the phrase "PAYMENTS BY OR ON BEHALF OF OBLIGORS" shall mean
payments made with respect to the Receivables by Persons other than the Servicer
or the Seller.
(b) The Servicer will be entitled to be reimbursed from amounts on
deposit in the Collection Account with respect to a Collection Period for
amounts previously deposited in the Collection Account but later determined by
the Servicer to have resulted from mistaken deposits or postings or checks
returned for insufficient funds. The amount to be reimbursed hereunder shall be
paid to the Servicer on the related Payment Date pursuant to Section 5.6(b)(ii)
upon certification by the Servicer of such amounts and the provision of such
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information to the Indenture Trustee and the Insurer as may be necessary in the
opinion of the Insurer to verify the accuracy of such certification. In the
event that the Insurer has not received evidence satisfactory to it of the
Servicer's entitlement to reimbursement pursuant to Section 5.2(b), the Insurer
(unless an Insurer Default shall have occurred and be continuing) shall give the
Indenture Trustee notice to such effect following receipt of which the Indenture
Trustee shall not make a distribution to the Servicer in respect of such amount
pursuant to Section 5.6, or if the Servicer prior thereto has been reimbursed
pursuant to Section 5.6 or Section 5.9, the Indenture Trustee shall withhold
such amounts from amounts otherwise distributable to the Servicer on the next
succeeding Payment Date.
(c) If at any time the percentage of Obligors using the automated
payment option, which percentage shall be the equivalent of a fraction, the
numerator of which is the aggregate Principal Balance of such Obligors'
Receivables calculated as of the last day of the immediately preceding
Collection Period and the denominator of which is the Aggregate Principal
Balance calculated as of the last day of the immediately preceding Collection
Period, is below [__]%, then the Servicer shall cause all payments by or on
behalf of the Obligors that are not using the automated payment option to be
deposited into a lockbox account established at a depository institution
acceptable to Insurer.
Section 5.3 APPLICATION OF COLLECTIONS. All collections for the
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied first to interest and
then to principal in accordance with the Simple Interest Method.
Section 5.4 DEFICIENCY NOTICE. (a) In the event that the Servicer's
Certificate with respect to any Determination Date shall state that the amount
of the Available Funds with respect to such Determination Date is less than the
sum of the amounts payable on the related Payment Date pursuant to clauses (i)
through (v) of Section 5.6(b) (such deficiency being a "DEFICIENCY CLAIM
AMOUNT"), then on the Deficiency Claim Date immediately preceding such Payment
Date, the Indenture Trustee shall deliver to the Indenture Collateral Agent, the
Insurer, the Owner Trustee, the Servicer and the Backup Servicer, by hand
delivery, telex or facsimile transmission, a written notice (a "DEFICIENCY
NOTICE"), specifying the Deficiency Claim Amount for such Payment Date. (b) Any
Deficiency Notice shall be delivered by 10:00 am, New York City time, on the
related Deficiency Claim Date. The amounts distributed to the Indenture Trustee
pursuant to a Deficiency Notice shall be deposited by the Indenture Trustee into
the Collection Account pursuant to Section 5.5.
Section 5.5 ADDITIONAL DEPOSITS. The Servicer and the Seller, as
applicable, shall deposit or cause to be deposited in the Collection Account on
the Determination Date following the date on which such obligations are due the
aggregate Purchase Amount with respect to Purchased Receivables. On or before
each Draw Date, the Indenture Trustee shall remit to the Note Distribution
Account any amounts delivered to the Indenture Trustee pursuant to a Notice of
Claim and Section 5.10 hereof. All such deposits with respect to a Collection
Period shall be made in immediately available funds no later than 10:00 a.m. New
York City
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time, on the Business Day immediately preceding the Payment Date related to such
Collection Period.
Section 5.6 DISTRIBUTIONS.
(a) No later than 12:00 noon New York City time on each Payment
Date, the Indenture Trustee shall (based solely on the information contained in
the Servicer's Certificate delivered on the related Determination Date) cause to
be made the following transfers and distributions in the amounts set forth in
the Servicer's Certificate for such Payment Date:
(i) during the Pre-Funding Period, from the Capitalized Interest
Account (a) to the Collection Account, in immediately available funds, the
Monthly Capitalized Interest Amount for such Payment Date and (b) to the
Seller, in immediately available funds, all Investment Earnings on funds
in the Capitalized Interest Account with respect to the Collection Period
related to such Payment Date or, if such Payment Date is the Mandatory
Redemption Date, all remaining funds in the Capitalized Interest Account
after distribution of interest on the Notes on such date;
(ii) during the Pre-Funding Period from the Pre-Funding Account
(a) if such Payment Date is the Mandatory Redemption Date, to the Note
Distribution Account, in immediately available funds, the Pre-Funded
Amount (exclusive of Pre-Funding Earnings) after giving effect to the
purchase of Subsequent Receivables, if any, on the Mandatory Redemption
Date, and (b) to the Seller, in immediately available funds, all
Pre-Funding Earnings with respect to the Collection Period related to such
Payment Date or, if such Payment Date is the Mandatory Redemption Date,
all remaining funds in the Pre-Funding Account after giving effect to the
purchase of Subsequent Receivables, if any, on the Mandatory Redemption
Date;
(iii) to the Collection Account from the Yield Supplement
Account, the Yield Supplement Amount;
(iv) if, the transfers pursuant to subsection (ii) and (iii)
above are insufficient for distributions pursuant to subsections 5.6(b)(i)
through 5.6(b)(v), pursuant to the Reserve Account Agreement, to the
Collection Account, the Deficiency Claim Amount, in accordance with
Section 5.4 hereof;
(b) On each Payment Date, the Indenture Trustee shall (based solely
on the information contained in the Servicer's Certificate delivered with
respect to the related Determination Date) distribute the following amounts and
in the following order of priority:
(i) from the Distribution Amount, to the Servicer, the Base
Servicing Fee for the related Collection Period, and any amounts specified
in Section 5.2(b), to the extent the Servicer has not reimbursed itself in
respect of such amounts pursuant to Section 5.9 and to the extent not
retained by the Servicer;
(ii) from the Distribution Amount, PRO RATA, (i) to the Indenture
Trustee, the Indenture Trustee Fee, to the Backup Servicer, the Backup
Servicer Fee and expenses (provided that all expenses incurred by the
Backup Servicer in connection with its
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assumption of the role of Servicer shall not exceed $[_________] in the
aggregate, at any time when the Notes are Outstanding); and (ii) to the
Owner Trustee, the Owner Trustee fee in accordance with the agreement
between the Servicer and the Owner Trustee;
(iii) from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Interest Distributable Amount;
(iv) from the Distribution Amount, to the Note Distribution
Account, the Noteholders' Principal Distributable Amount;
(v) from the Distribution Amount, to the Insurer, to the extent of
any amounts owing to the Insurer under the Insurance Agreement and not
paid;
(vi) from the Available Funds, to the Reserve Account, all
Available Funds remaining after distributions pursuant to clauses (i)
through (v) above;
(vii) from amounts, if any, released from the Reserve Account on
such Payment Date pursuant to the terms of the Reserve Account Agreement
for deposit in the Certificate Distribution Account (A) the
Certificateholders' Monthly Principal Distributable Amount, and second,
(B) the remaining amount, for distribution to the Class R
Certificateholders.
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing, following the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iii),
5.1(v) or 5.1(vi) of the Indenture, amounts deposited in the Note Distribution
Account and the Certificate Distribution Account shall be paid to the
Noteholders and the Certificateholders in accordance with the provisions of
Section 5.6 of the Indenture.
(c) In the event that the Collection Account is maintained with an
institution other than the Indenture Trustee, the Servicer shall instruct and
cause such institution to make all deposits and distributions pursuant to
Section 5.6(b).
Section 5.7 PRE-FUNDING ACCOUNT. (a) On the Closing Date, the
Transferor will deposit, on behalf of the Seller, in the Pre-Funding Account
$[___________] from the proceeds of the sale of the Receivables. On each
Subsequent Transfer Date, the Servicer shall instruct the Indenture Trustee to
withdraw from the Pre-Funding Account an amount equal to [__]% of the Principal
Balance of the Subsequent Receivables transferred to the Issuer on such
Subsequent Transfer Date and to distribute such amount to or upon the order of
the Seller upon satisfaction of the conditions set forth in this Agreement with
respect to such transfer net of the Subsequent Reserve Account Deposit and the
Servicer shall instruct the Indenture Trustee to deposit to the Reserve Account,
the Subsequent Reserve Account Deposit.
(b) If the Pre-Funded Amount has not been reduced to zero on the
date on which the Pre-Funding Period ends after giving effect to any reductions
in the Pre-Funded Amount on such date, the Servicer shall instruct the Indenture
Trustee to withdraw from the Pre-Funding Account on the Mandatory Redemption
Date, the Pre-Funded Amount and deposit such amount in the Note Distribution
Account in accordance with Section 5.6(a)(ii).
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Section 5.8 STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS. On or
prior to each Determination Date, the Servicer shall provide to the Indenture
Trustee (with a copy to the Insurer and the Rating Agencies) for the Indenture
Trustee to forward to each Noteholder of record, and to the Owner Trustee (or
Certificate Paying Agent) for the Owner Trustee to forward to each
Certificateholder of record, statements substantially in the form of Exhibit B
and Exhibit C, respectively, setting forth at least the following information
with respect to distributions on the related Payment Date as to the Notes and
the Certificates to the extent applicable:
(i) the amount of such distribution allocable to principal
of each Class of Notes and to the Certificate Balance of the Class A
Certificates;
(ii) the amount of such distribution allocable to interest
on or with respect to each Class of Notes;
(iii) the amount of such distribution payable pursuant to a
Deficiency Notice;
(iv) the amount of such distribution payable pursuant to a
Notice of Claim, specifying, in addition to the foregoing, any remaining
amount available to be draw under the Policy;
(v) the Pool Balance as of the close of business on the last
day of the preceding Collection Period;
(vi) the aggregate outstanding principal amount of each Class
of the Notes, the Note Pool Factor for each such Class, the Certificate
Balance and the Certificate Pool Factor after giving effect to payments
allocated to principal reported under (i) above;
(vii) the amount of the Servicing Fee paid to the Servicer
with respect to the related Collection Period and/or due but unpaid with
respect to such Collection Period or prior Collection Periods, as the case
may be;
(viii) the Noteholders' Interest Carryover Shortfall, the
Noteholders' Principal Carryover Shortfall, and the Certificateholders'
Principal Carryover Shortfall;
(ix) the amount of the aggregate Realized Losses, if any,
for the second preceding Collection Period;
(x) the aggregate Purchase Amounts for Receivables, if
any, that were repurchased in such period;
(xi) for Payment Dates during the Pre-Funding Period (if
any), the remaining Pre-Funded Amount and the amount remaining in the
Capitalized Interest Account;
(xii) for the final Subsequent Transfer Date, the amount of
any remaining Pre-Funded Amount that has not been used to fund the
purchase of Subsequent Receivables and is passed through as principal to
Noteholders;
(xiii) the amounts which were collected by the Servicer;
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(xiv) the aggregate amount which was received by the Trust
from the Servicer;
(xv) any reimbursements to the Insurer; and
(xvi) delinquency information relating to Receivables which
are 30, 60 or 90 days delinquent.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (iv),
(viii), (xi) and (xii) above shall be expressed as a dollar amount per $1,000 of
the initial principal balance of the Notes (or Class thereof) or the initial
Certificate Balance, as applicable.
Section 5.9 NET DEPOSITS. As an administrative convenience, unless a
Servicer Default has occurred and is continuing, the Servicer is required to
remit collections within two (2) Business Days of receipt thereof. The Servicer
will be permitted to make the deposit of collections on the Receivables and
Purchase Amounts for or with respect to each Collection Period net of
distributions to be made to the Servicer with respect to such Collection Period;
PROVIDED, HOWEVER, that if an error is made by the Servicer in calculating the
amount to be deposited or retained by it, with the result that an amount less
than required is deposited into the Collection Account, the Servicer shall make
a payment of the deficiency to the Collection Account immediately upon becoming
aware or receiving notice from the Indenture Trustee, the Servicer, the Insurer
or any Noteholders of such error. The Servicer, however, will account to the
Owner Trustee, the Indenture Trustee, the Indenture Collateral Agent, the
Noteholders and the Certificateholders as if all deposits, distributions and
transfers were made individually.
Section 5.10 OPTIONAL DEPOSITS BY THE INSURER. The Insurer shall at
any time, and from time to time, with respect to a Payment Date, have the option
(but shall not be required, except in accordance with the terms of the Policy)
to deliver amounts from its own funds to the Indenture Trustee for deposit into
the Collection Account for any of the following purposes: (i) to provide funds
in respect of the payment of fees or expenses of any provider of services to the
Issuer with respect to such Payment Date, or (ii) to include such amount to the
extent that without such amount a draw would be required to be made on the
Policy.
ARTICLE V-A
THE POLICY
Section 5A.1 CLAIMS UNDER POLICY.
(a) In the event that the Indenture Trustee has delivered a
Deficiency Notice with respect to any Determination Date, if the Policy Claim
Amount for the related Payment Date is greater than zero, the Indenture Trustee
shall furnish to the Insurer (with a copy to the Servicer) no later than 12:00
noon New York City time on the related Draw Date a completed Notice of Claim in
the amount of the Policy Claim Amount. Amounts paid by the Insurer under the
Policy shall be deposited by the Indenture Trustee into the Note Distribution
Account on the Business Day immediately preceding the Payment Date for payment
to Noteholders on the related Payment Date. The "Policy Claim Amount" for any
Payment Date shall equal the lesser of (i) the sum of the Noteholders' Interest
Distributable Amount and the Noteholders' Principal Distributable Amount for
such Payment Date and (ii) the excess, if any, of the amount required
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to be distributed pursuant to clauses (i) through (iv) of Section 5.6(b) over
the Distribution Amount for such Payment Date.
(b) Any notice delivered by the Indenture Trustee to the Insurer
pursuant to subsection 5A.1(a) shall specify the Policy Claim Amount claimed
under the Policy and shall constitute a "Notice of Claim" under the Policy. In
accordance with the provisions of the Policy, the Insurer is required to pay to
the Indenture Trustee the Policy Claim Amount properly claimed thereunder by
12:00 noon, New York City time, on the earlier of (i) the third Business Day
following receipt on a Business Day of the Notice of Claim, and (ii) the
Business Day preceding the applicable Payment Date. Any payment made by the
Insurer under the Policy shall be applied solely to the payment of the Notes,
and for no other purpose.
(c) The Indenture Trustee shall (i) receive as attorney-in-fact of
each Noteholder any Policy Claim Amount from the Insurer and (ii) deposit the
same in the Collection Account for disbursement to the Noteholders as set forth
in the Indenture. Any and all Policy Claim Amounts disbursed by the Indenture
Trustee from claims made under the Policy shall not be considered payment by the
Issuer with respect to such Notes, and shall not discharge the obligations of
the Issuer with respect thereto. The Insurer shall, to the extent it makes any
payment with respect to the Notes, become subrogated to the rights of the
recipients of such payments to the extent of such payments. Subject to and
conditioned upon any payment with respect to the Notes by or on behalf of the
Insurer, the Indenture Trustee shall assign to the Insurer all rights to the
payment of interest or principal with respect to the Notes which are then due
for payment to the extent of all payments made by the Insurer and the Insurer
may exercise any option, vote, right, power or the like with respect to the
Notes to the extent that it has made payment pursuant to the Policy. To evidence
such subrogation, the Note Registrar shall note the Insurer's rights as subrogee
upon the register of Noteholders upon receipt from the Insurer of proof of
payment by the Insurer of any Noteholders' Interest Distributable Amount or
Noteholders' Principal Distributable Amount.
(d) The Indenture Trustee shall be entitled to enforce on behalf of
the Noteholders the obligations of the Insurer under the Policy. Notwithstanding
any other provision of this Agreement or any Basic Document, the Noteholders are
not entitled to make a claim directly under the Policy or institute proceedings
directly against the Insurer.
(e) The Indenture Trustee shall keep a complete and accurate record
of all funds on deposit in the Collection Account and the Note Distribution
Account and the allocation of such funds to payments of interest on and
principal paid in respect of any Note. The Insurer shall have the right to
inspect such records at reasonable times upon one (1) Business Day's prior
notice to the Indenture Trustee.
Section 5A.2 PREFERENCE CLAIMS; DIRECTION OF PROCEEDINGS.
(a) In the event that the Indenture Trustee has received a certified
copy of an order of the appropriate court that any Noteholders' Interest
Distributable Amount or Noteholders' Principal Distributable Amount paid on a
Note has been avoided in whole or in part as a preference payment under
applicable bankruptcy law, the Indenture Trustee shall so notify the Insurer,
shall comply with the provisions of the Policy to obtain payment by the Insurer
of
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such avoided payment, and shall, at the time it provides notice to the Insurer,
notify Holders of the Notes by mail that, in the event that any Noteholder's
payment is so recoverable, such Noteholder will be entitled to payment pursuant
to the terms of the Policy. Pursuant to the terms of the Policy, the Insurer
will make such payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Policy) and not to the Indenture Trustee or any Noteholder directly (unless
a Noteholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Insurer will
make such payment to the Indenture Trustee for distribution to such Noteholder
upon proof of such payment satisfactory to the Insurer).
(b) The Indenture Trustee shall promptly notify the Insurer of any
proceeding or the institution of any action (of which a responsible officer of
the Indenture Trustee has actual knowledge) seeking the avoidance as a
preferential transfer under applicable bankruptcy, insolvency, receivership,
rehabilitation or similar law (a "PREFERENCE CLAIM") of any distribution made
with respect to the Notes. Each Holder, by its purchase of Notes, and the
Indenture Trustee hereby agree that so long as an Insurer Default shall not have
occurred and be continuing, the Insurer may at any time during the continuation
of any proceeding relating to a Preference Claim direct all matters relating to
such Preference Claim including, without limitation, (i) the direction of any
appeal of any order relating to any Preference Claim and (ii) the posting of any
surety, supercede as or performance bond pending any such appeal at the expense
of the Insurer, but subject to reimbursement as provided in the Insurance
Agreement. In addition, and without limitation of the foregoing, as set forth in
Section 5A.1(c), the Insurer shall be subrogated to, and each Noteholder and the
Indenture Trustee hereby delegate and assign, to the fullest extent permitted by
law, the rights of the Indenture Trustee and each Noteholder in the conduct of
any proceeding with respect to a Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Preference Claim.
Section 5A.3 SURRENDER OF POLICY. The Indenture Trustee shall
surrender the Policy to the Insurer for cancellation upon the expiration of such
Policy in accordance with the terms thereof.
ARTICLE VI
THE SELLER
Section 6.1 REPRESENTATIONS OF THE SELLER. The Seller makes the
following representations on which each of the Transferor, the Depositor and the
Issuer are deemed to have relied in acquiring its interest in the Receivables.
The representations speak as of the execution and delivery of this Agreement and
as of the Closing Date, in the case of Initial Receivables, and as of the
applicable Subsequent Transfer Date in the case of Subsequent Receivables, and
shall survive the sale of the Receivables to the Transferor, the transfer
thereof to the Depositor, the transfer by the Depositor to the Issuer and pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Seller is duly organized and
validly existing as a limited liability company in good standing under the laws
of the State of
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[__________] with the limited liability company power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the power, authority and legal right to acquire and own the Receivables.
(b) DUE QUALIFICATION. The Seller is duly qualified to do business
as a foreign company in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property,
including the Receivables, or the conduct of its business shall require such
qualifications.
(c) POWER AND AUTHORITY OF THE SELLER. The Seller has the power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement and each of the Basic Documents to which the Seller is a
party; the Seller has full power and authority to sell and assign the property
to be sold and assigned to and deposited with the Transferor, and the Seller has
duly authorized such sale and assignment to the Transferor by all necessary
limited liability company action, and the execution, delivery and performance of
each of the Basic Documents to which the Seller is a party and of each
Subsequent Transfer Agreement has been duly authorized by the Seller by all
necessary limited liability company action.
(d) BINDING OBLIGATION; VALID SALE. This Agreement effects a valid
sale, transfer, and assignment of the Receivables, enforceable against creditors
of and purchasers from the Seller. This Agreement, each Subsequent Transfer
Agreement and each of the Basic Documents to which the Seller is a party
constitute legal, valid and binding obligations of the Seller, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization and similar laws now or
hereafter in effect relating to creditors' rights generally and subject to
general principles of equity (whether applied in a proceeding at law or in
equity).
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and each of the Basic Documents and by each Subsequent
Transfer Agreement to which the Seller is a party and the fulfillment of the
terms hereof and thereof do not result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time or both)
a default under, the operating agreement of the Seller, or any indenture,
agreement or other instrument to which the Seller is a party or by which it is
bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any law or,
to the best of its knowledge, any order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over the Seller
or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Seller or, to its best knowledge, threatened against the
Seller, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents to which the Seller is a party, the Notes or the Certificates, (ii)
seeking to prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions
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contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement, the Basic Documents to which the
Seller is a party, or the Notes or the Certificates or (iv) that might adversely
affect the federal, state and local income tax attributes of the Issuer, the
Notes or the Certificates or seeking to impose any excise, franchise, transfer
or similar tax upon the Notes, the Certificates or the sale and assignment of
the Receivables and the other Transferor Property hereunder.
(g) ALL CONSENTS. All authorizations, consents, orders or approvals
of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Seller in connection with the execution and
delivery by the Seller of this Agreement, any Subsequent Transfer Agreement or
any of the Basic Documents to which it is a party and the performance by the
Seller of the transactions contemplated by this Agreement, any Subsequent
Transfer Agreement or any of the Basic Documents to which it is a party, have
been duly obtained, effected or given and are in full force and effect, except
where failure to obtain the same would not have a material and adverse effect
upon the rights of the Issuer, or the Noteholders.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at [Address]
(i) Upon the transfer of each Receivable to the Transferor and other
items of Trust Property delivered by the Seller to the Transferor under this
Agreement or any Subsequent Transfer Agreement, the Transferor will have good
title to such Receivable and such other items of Transferor Property, free and
clear of any lien, charge, mortgage, encumbrance or rights of others (other than
liens that will be simultaneously released).
Section 6.2 EXISTENCE. (a) During the term of this Agreement, the
Seller will keep in full force and effect its existence, rights and franchises
as a limited liability company under the laws of the jurisdiction of its
organization 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, any Subsequent
Transfer Agreement, the Basic Documents and each other instrument or agreement
necessary or appropriate to the proper administration of this Agreement and the
transactions contemplated hereby.
(b) During the term of this Agreement, the Seller shall observe the
applicable legal requirements for the recognition of the Transferor as a legal
entity separate and apart from the Seller and its other Affiliates, including as
follows:
(i) the Transferor shall maintain corporate records and books
of account separate from those of the Seller and its other Affiliates;
(ii) except as otherwise provided in this Agreement, the
Transferor shall not commingle its assets and funds with those of the
Seller or its other Affiliates;
(iii) the Transferor shall hold such appropriate meetings of
its Board of Directors as are necessary to authorize all the Transferor's
limited liability company
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actions required by law to be authorized by the Board of Directors, shall
keep minutes of such meetings and of meetings of its members and observe
all other customary limited liability company formalities (and any
successor Transferor not a corporation shall observe similar procedures in
accordance with its governing documents and applicable law);
(iv) the Transferor shall at all times hold itself out to the
public under its own name as a legal entity separate and distinct from the
Seller and its other Affiliates; and
(v) all transactions and dealings between the Transferor and
the Seller and its other Affiliates will be conducted on an arm's-length
basis.
Section 6.3 LIABILITY OF SELLER; INDEMNITIES. (a) The Seller
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Seller under this Agreement.
(b) The Seller shall indemnify, defend and hold harmless the
Transferor, the Depositor, the Backup Servicer, the Custodian, the Insurer, the
Owner Trustee, the Issuer, the Indenture Trustee and the Indenture Collateral
Agent from and against any taxes that may at any time be asserted against any
such Person with respect to the transactions contemplated in this Agreement and
any of the Basic Documents (except any income taxes arising out of fees paid to
the Owner Trustee or the Indenture Trustee and except any taxes to which the
Owner Trustee or the Indenture Trustee may otherwise be subject to), including
any sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Issuer, not including any
taxes asserted with respect to, federal or other income taxes arising out of
distributions on the Certificates and the Notes) and costs and expenses in
defending against the same.
(c) The Seller shall indemnify, defend and hold harmless the
Depositor, the Backup Servicer, the Custodian, the Transferor, the Issuer, the
Indenture Trustee, the Owner Trustee, the Indenture Collateral Agent, the
Insurer, the Certificateholders and the Noteholders from and against any loss,
liability or expense incurred by reason of (i) the Seller's willful misfeasance,
bad faith or negligence in the performance of its duties under this Agreement,
or by reason of reckless disregard of its obligations and duties under this
Agreement or (ii) the Seller's, the Transferor's or the Issuer's violation of
Federal or state securities laws in connection with the offering and sale of the
Notes and the Certificates or (iii) the failure of any Receivable conveyed to
the Transferor hereunder to comply with all requirements of applicable law and
for breach of its representations and warranties contained herein or failure to
perform in all material respects its obligations and duties contained herein.
(d) The Seller shall indemnify, defend and hold harmless the Owner
Trustee, the Indenture Trustee, the Insurer and the Indenture Collateral Agent
and their respective officers, directors, employees and agents from and against
any and all costs, expenses, losses, claims, damages and liabilities arising out
of, or incurred in connection with the acceptance or performance of the trusts
and duties set forth herein and in the Basic Documents except to the extent that
such cost, expense, loss, claim, damage or liability shall be due to the
misfeasance, bad faith or negligence (except for errors in judgment) of the
Insurer or
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the Indenture Trustee or the Indenture Collateral Agent, as the case
may be or, in the case of the Owner Trustee, if such cost, expense, loss, claim,
damage or liability arises or results from any of the matters described in the
third sentence of Section 7.1 of the Trust Agreement.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee, the Indenture Trustee, the Backup Servicer, the
Custodian or the Indenture Collateral Agent and the termination of this
Agreement, the Indenture or the Trust Agreement, as applicable and shall include
reasonable fees and expenses of counsel and other expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the
Person to or on behalf of whom such payments are made thereafter shall collect
any of such amounts from others, such Person shall promptly repay such amounts
to the Seller, without interest.
Section 6.4 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER. ANY PERSON (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that (i) the Seller shall have received the
written consent of the Controlling Party prior to entering into any such
transaction, (ii) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.1 shall have been breached
and no Servicer Default or an Insurance Agreement Event of Default, and no event
which, after notice or lapse of time, or both, would become a Servicer Default
or Insurance Agreement Event of Default shall have occurred and be continuing,
(iii) the Seller shall have delivered to the Owner Trustee, the Indenture
Trustee, the Rating Agencies and the Insurer an Officer's Certificate and an
Opinion of Counsel each stating that such consolidation, merger or succession
and such agreement of assumption comply with this Section and that all
conditions precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, (iv) the Rating Agency Condition shall have
been satisfied with respect to such transaction and (v) the Seller shall have
delivered to the Owner Trustee, the Indenture Trustee and the Insurer an Opinion
of Counsel stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Transferor, the Depositor, the Issuer, the Owner Trustee and the
Indenture Trustee, respectively, in the Receivables and reciting the details of
such filings or (B) no such action shall be necessary to preserve and protect
such interest. Notwithstanding anything herein to the contrary, the execution of
the foregoing agreement of assumption and compliance with clauses (i), (ii),
(iii), (iv) and (v) above shall be conditions to the consummation of the
transactions referred to in clauses (a), (b) or (c) above.
Section 6.5 LIMITATION ON LIABILITY OF SELLER AND OTHERS. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
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obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
Section 6.6 SELLER MAY OWN CERTIFICATES OR NOTES. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority, or distinction as among all
of the Notes or Certificates, provided, however, that any Notes or Certificates
owned by the Seller or any Affiliate thereof, during the time such Notes or
Certificates are owned by them, shall be without voting rights for any purpose
set forth in the Basic Documents and will not be entitled to the benefits of the
Policy. The Seller shall notify the Owner Trustee, the Indenture Trustee and the
Insurer promptly after it or any of its Affiliates become the owner of a
Certificate or a Note.
ARTICLE VII
THE SERVICER
Section 7.1 REPRESENTATIONS OF SERVICER. The Servicer makes the
following representations on which the Insurer shall be deemed to have relied in
executing and delivering the Policy and on which each of the Transferor, the
Depositor and the Issuer is deemed to have relied in acquiring the Receivables.
The representations speak as of the execution and delivery of this Agreement and
as of the Closing Date, in the case of the Initial Receivables, and as of the
applicable Subsequent Transfer Date, in the case of the Subsequent Receivables,
and shall survive the sale of the Receivables from the Seller to the Transferor,
the Transferor to the Depositor and the Depositor to the Issuer and the pledge
thereof to the Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Servicer is duly organized
and validly existing as a limited liability company in good standing under the
laws of the state of its formation, with the limited liability company power and
authority to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and has, the power, authority and legal right to acquire, own,
sell and service the Receivables.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do business
and has obtained all necessary licenses and approvals in all jurisdictions in
which the ownership or lease of property or the conduct of its business
(including the servicing of the Receivables as required by this Agreement) shall
require such qualifications, and was duly qualified and had all licenses in all
relevant jurisdictions required for the origination of the Receivables.
(c) POWER AND AUTHORITY OF THE SERVICER. The Servicer has the power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and the execution, delivery and performance of this
Agreement have been duly authorized by the Servicer by all necessary action. All
authorizations, consents, orders or approvals of or registrations or
declarations with any court, regulatory body, administrative agency or other
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government instrumentality required to be obtained, effected or given by the
Servicer in connection with the execution and delivery by the Servicer of this
Agreement or any of the Basic Documents to which it is a party and the
performance by the Servicer of the transactions contemplated by this Agreement
or any of the Basic Documents to which it is a party, have been duly obtained,
effected or given and are in full force and effect, except where failure to
obtain the same would not have a material adverse effect upon the rights of the
Issuer, the Insurer, the Noteholders or the Certificateholders.
(d) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Servicer, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect relating
to creditors' rights generally, and subject to general principles of equity
(whether applied in a proceeding at law or in equity).
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the Basic Documents and the fulfillment of the terms
hereof and thereof do not result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a default
under the organizational documents of the Servicer, or any indenture, agreement
or other instrument to which the Servicer is a party or by which it shall be
bound; or result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); or violate any law or,
to the best of the Servicer's knowledge, any order, rule or regulation
applicable to the Servicer of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Servicer, or, to its best knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents to which the Servicer is a party or the Notes or the Certificates,
(ii) seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of the Basic Documents to
which the Servicer is a party, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of this Agreement or any of
the Basic Documents to which the Servicer is a party or the Notes or the
Certificates or (iv) relating to the Servicer and which might adversely affect
the federal income tax or ERISA attributes of the Issuer or the Notes or the
Certificates or seeking to impose any excise, franchise, transfer or similar tax
upon the Notes or the Certificates or the sale and assignment of the Receivables
hereunder.
(g) FIDELITY BOND. The Servicer maintains a fidelity bond in such
form and amount as is customary for finance companies acting as custodian of
funds and documents in respect of motor vehicle loans.
(h) YEAR 2000 PROGRAM. The Servicer has taken, all steps necessary
and appropriate to prevent any problems in its computer and information systems
arising from or in
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connection with the information processing challenges associated with the Year
2000. The Servicer's computer and other systems used in servicing the
Receivables are currently capable of operating in a manner so that on or after
January 1, 2000, the Servicer (i) can service the Receivables in accordance with
the terms hereof and (ii) operate its business in the same manner as it is
operating on the date hereof. The Servicer will provide to the Insurer and the
Indenture Trustee such information and reports as the Insurer or the Indenture
Trustee may request from time to time with respect to such steps as have or will
be taken with respect thereto.
Section 7.2 INDEMNITIES OF SERVICER. (a) The Servicer shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement and the representations made by
the Servicer herein.
(b) The Servicer shall defend, indemnify and hold harmless the
Transferor, the Depositor, the Backup Servicer, the Custodian, the Owner
Trustee, the Indenture Trustee, the Issuer, the Indenture Collateral Agent, the
Insurer, the Noteholders, the Certificateholders and the Seller from and against
any and all costs, expenses, losses, damages, claims, and liabilities, arising
out of or resulting from the use, ownership or operation by the Servicer or any
Affiliate thereof of a Financed Vehicle.
(c) The Servicer shall indemnify, defend and hold harmless the
Transferor, the Depositor, the Backup Servicer, the Custodian, the Owner
Trustee, the Indenture Trustee, the Seller, the Issuer, the Indenture Collateral
Agent, the Insurer, their respective officers, directors, agents and employees
and the Noteholders and the Certificateholders from and against any and all
costs, expenses, losses, claims, damages, and liabilities to the extent that
such cost, expense, loss, claim, damage, or liability arose out of, or was
imposed upon any such Person through, (i) the negligence, misfeasance or bad
faith of the Servicer in the performance of its duties under this Agreement or
(ii) by reason of disregard of its obligations and duties under this Agreement.
(d) The Servicer shall indemnify, defend and hold harmless the
Transferor, the Depositor, the Backup Servicer, the Custodian, the Owner
Trustee, the Indenture Trustee, the Insurer and the Indenture Collateral Agent
and their respective officers, directors, employees and agents from and against
all costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties herein contained and in the Trust Agreement, except to the extent that
such costs, expense, loss, claim, damage or liability shall be due to the
willful misfeasance, bad faith or negligence (except for errors in judgment) of
the Transferor, the Depositor, the Backup Servicer, or in the case of the Owner
Trustee, if such cost, expense, loss, claim, damage or liability arises or
results from any of the matters described in the third sentence of Section 7.1
of the Trust Agreement, the Indenture Trustee, the Insurer or the Indenture
Collateral Agent, as the case may be.
For purposes of this Section, in the event of the termination of the
rights and obligations of [__________] (or any successor thereto pursuant to
Section 7.3) as Servicer pursuant to Section 8.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer (other than the Indenture
Trustee) pursuant to Section 8.2.
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Indemnification under this Section shall survive the resignation or
removal of the Backup Servicer, the Custodian, Owner Trustee, the Indenture
Trustee or the Indenture Collateral Agent, and the termination of this Agreement
or the Indenture or the Trust Agreement, as applicable, and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, such Person shall
promptly repay such amounts to the Servicer, without interest.
Section 7.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SERVICER. Any Person (a) into which the Servicer may be merged
or consolidated, (b) which may result from any merger, conversion or
consolidation to which the Servicer shall be a party or (c) which may succeed to
the properties and assets of the Servicer, substantially as a whole or (d) with
respect to the Servicer's obligations hereunder, which is a corporation or
limited liability company 50% or more of the voting interest of which is owned,
directly or indirectly, by [__________], which Person executed an agreement of
assumption to perform every obligation of the Servicer hereunder shall be the
successor to the Servicer under the Agreement without further act on the part of
any of the parties to the Agreement; provided, however, that (i) the Servicer
shall have received the written consent of the Controlling Party prior to
entering into any such transaction; (ii) immediately after giving effect to such
transaction, no Servicer Default or Insurance Agreement Event of Default and no
event which, after notice or lapse of time, or both, would become a Servicer
Default or Insurance Agreement Event of Default shall have occurred and be
continuing, (iii) the Servicer shall have delivered to the Owner Trustee, the
Indenture Trustee, the Rating Agencies and the Insurer an Officer's Certificate
and an Opinion of Counsel each stating that such consolidation, merger or
succession and such agreement of assumption comply with this Section and that
all conditions precedent provided for in this Agreement relating to such
transaction have been complied with, (iv) the Rating Agency Condition shall have
been satisfied with respect to such transaction and (v) the Servicer shall have
delivered to the Owner Trustee, the Indenture Trustee, the Rating Agencies and
the Insurer an Opinion of Counsel stating that, in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary fully to preserve and
protect the interest of the Owner Trustee and, the Indenture Trustee in the
Receivables and reciting the details of such filings or (B) no such action shall
be necessary to preserve and protect such interest. Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of assumption
and compliance with clauses (i), (ii), (iii), (iv) and (v) above shall be
conditions to the consummation of the transactions referred to in clauses (a),
(b), (c) or (d) above. Notwithstanding anything herein to the contrary,
compliance with clause (i) shall not apply if the Backup Servicer becomes the
Servicer.
Section 7.4 LIMITATION ON LIABILITY OF SERVICER AND OTHERS. Neither
the Servicer nor any of its directors, officers, employees or agents shall be
under any liability to the Issuer, the Noteholders or the Certificateholders
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
or any such person against any liability that would otherwise be imposed by
reason of misfeasance, bad faith or negligence in the performance of duties or
by reason of reckless disregard of obligations and duties under this Agreement.
The Servicer or any subservicer and any of their respective
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directors, officers, employees or agents may rely in good faith on any document
of any kind prima facie properly executed and submitted by any Person respecting
any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute or defend any legal action that
shall not be incidental to its duties to service the Receivables in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer, may (but shall not be required
to) undertake any reasonable action that it may deem necessary or desirable to
protect the interests the Certificateholders under the Trust Agreement of the
Noteholders under the Indenture.
Section 7.5 SERVICER NOT TO RESIGN. Subject to the provisions of
Section 7.3, the Servicer may not resign from the obligations and duties hereby
imposed on it as Servicer under this Agreement except upon determination that by
reason of a change in legal requirements the performance of its duties under
this Agreement would cause it to be in violation of such legal requirements in a
manner which would result in a material adverse effect on the Servicer and the
Controlling Party does not elect to waive the obligations of the Servicer to
perform the duties which render it legally unable to act or does not elect to
delegate those duties to another Person. Notice of any such determination
permitting the resignation of the Servicer shall be communicated to the Issuer,
the Indenture Trustee and the Controlling Party at the earliest practicable time
(and, if such communication is not in writing, shall be confirmed in writing at
the earliest practicable time) and any such determination shall be evidenced by
an Opinion of Counsel to such effect delivered to and satisfactory to the Owner
Trustee, the Indenture Trustee and the Insurer concurrently with or promptly
after such notice. No such resignation of the Servicer shall become effective
until a successor servicer shall have assumed the responsibilities and
obligations of the resigning servicer in accordance with Section 8.2 of this
Agreement.
ARTICLE VII-A
THE TRANSFEROR
Section 7A.1 REPRESENTATIONS OF THE TRANSFEROR. The Transferor makes
the following representations to the Depositor and the Issuer on which the
Depositor and the Issuer are deemed to have relied in acquiring the Receivables
and the Insurer is deemed to have relied in issuing the Policy. The
representations speak as of the execution and delivery of this Agreement and as
of the Closing Date, in the case of Initial Receivables, and as of the
applicable Subsequent Transfer Date in the case of Subsequent Receivables, and
shall survive the sale of the Receivables to the Depositor and the Issuer and
the pledge thereof to the Indenture Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Transferor is duly organized
and validly existing as a limited liability company in good standing under the
laws of the State of [__________] with the power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted, and had at all relevant times, and
has, the power, authority and legal right to acquire and own the Receivables.
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(b) DUE QUALIFICATION. The Transferor is duly qualified to do
business as a foreign company in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property, including the Receivables, or the conduct of its business shall
require such qualifications.
(c) POWER AND AUTHORITY OF THE TRANSFEROR. The Transferor has the
power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement and each of the Basic Documents to which the
Transferor is a party; the Transferor has full power and authority to sell and
assign the property to be sold and assigned to the Depositor and deposited with
the Issuer, and the Transferor has duly authorized such sale and assignment to
the Issuer by all necessary limited liability company action, and the execution,
delivery and performance of each of the Basic Documents to which the Transferor
is a party and of each Subsequent Transfer Agreement has been duly authorized by
the Transferor by all necessary limited liability company action.
(d) BINDING OBLIGATION; VALID TRANSFER. This Agreement effects a
valid transfer, and assignment of the Receivables, enforceable against creditors
of and purchasers from the Transferor. This Agreement, each Subsequent Transfer
Agreement and each of the Basic Documents to which the Transferor is a party
constitute legal, valid and binding obligations of the Transferor, enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization and similar laws now or
hereafter in effect relating to creditors' rights generally and subject to
general principles of equity (whether applied in a proceeding at law or in
equity).
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and each of the Basic Documents and by each Subsequent
Transfer Agreement to which the Transferor is a party and the fulfillment of the
terms hereof and thereof do not result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time or both)
a default under, the operating agreement of the Transferor, or any indenture,
agreement or other instrument to which the Transferor is a party or by which it
is bound; nor result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate any law or,
to the best of its knowledge, any order, rule or regulation applicable to the
Transferor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Transferor or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Transferor or, to its best knowledge, threatened against the
Transferor, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Transferor or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents to which the Transferor is a party, the Notes or the Certificates,
(ii) seeking to prevent the issuance of the Notes or the Certificates or the
consummation of any of the transactions contemplated by this Agreement or any of
the Basic Documents to which the Transferor is a party, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Transferor of its obligations under, or
the validity or enforceability of, this Agreement, the Basic Documents to which
the Transferor is a party, or the Notes or the Certificates or (iv) that might
adversely affect the
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federal, state or local income tax attributes of the Issuer, the Notes or the
Certificates or seeking to impose any excise, franchise, transfer or similar tax
upon the Notes, the Certificates or the sale and assignment of the Receivables
and other Depositor Property hereunder.
(g) ALL CONSENTS. All authorizations, consents, orders or approvals
of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Transferor in connection with the execution
and delivery by the Transferor of this Agreement, any Subsequent Transfer
Agreement or any of the Basic Documents to which it is a party and the
performance by the Transferor of the transactions contemplated by this
Agreement, any Subsequent Transfer Agreement or any of the Basic Documents to
which it is a party, have been duly obtained, effected or given and are in full
force and effect, except where failure to obtain the same would not have a
material and adverse effect upon the rights of the Issuer, or the Noteholders.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Transferor is at [Address].
(i) Upon the transfer of each Receivable to the Depositor and other
items of Depositor Property delivered by the Transferor to the Depositor under
this Agreement or any Subsequent Transfer Agreement, the Depositor will have
good title to such Receivable and such other items of Depositor Property, free
and clear of any lien, charge, mortgage, encumbrance or rights of others (other
than liens that will be simultaneously released).
Section 7A.2 EXISTENCE.
(a) During the term of this Agreement, the Transferor will keep in
full force and effect its existence, rights and franchises as a limited
liability company under the laws of the jurisdiction of its organization 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, any Subsequent Transfer Agreement, the Basic
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby.
(b) During the term of this Agreement, the Transferor shall observe
the applicable legal requirements for the recognition of the Transferor as a
legal entity separate and apart from its Affiliates, including as follows:
(i) the Transferor shall maintain limited liability company
records and books of account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement, the
Transferor shall not commingle its assets and funds with those of its
Affiliates;
(iii) the Transferor shall hold such appropriate meetings of its
Board of Directors as are necessary to authorize all the Transferor's
limited liability company actions required by law to be authorized by the
Board of Directors, shall keep minutes of such meetings and of meetings of
its stockholder(s) and observe all other customary
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corporate formalities (and any successor Transferor not a corporation
shall observe similar procedures in accordance with its governing
documents and applicable law);
(iv) the Transferor shall at all times hold itself out to
the public under the Transferor's own name as a legal entity separate
and distinct from its Affiliates; and
(v) all transactions and dealings between the Transferor and
its Affiliates will be conducted on an arm's-length basis.
Section 7A.3 LIABILITY OF TRANSFEROR; INDEMNITIES.
(a) The Transferor shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Transferor under
this Agreement.
(b) The Transferor shall indemnify, defend and hold harmless the
Depositor, the Backup Servicer, the Issuer, the Insurer, the Owner Trustee, the
Custodian, the Indenture Trustee, the Indenture Collateral Agent, the
Certificateholders and the Noteholders from and against any taxes that may at
any time be asserted against any such Person with respect to the transactions
contemplated in this Agreement and any of the Basic Documents (except any income
taxes arising out of fees paid to the Owner Trustee or the Indenture Trustee and
except any taxes to which the Owner Trustee or the Indenture Trustee may
otherwise be subject to), including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but, in the
case of the Issuer, not including any taxes asserted with respect to, federal or
other income taxes arising out of distributions on the Certificates and the
Notes) and costs and expenses in defending against the same.
(c) The Transferor shall indemnify, defend and hold harmless the
Depositor, the Backup Servicer, the Issuer, the Insurer, the Owner Trustee, the
Custodian, the Indenture Trustee, the Indenture Collateral Agent, the
Certificateholders and the Noteholders from and against any loss, liability or
expense incurred by reason of (i) the Transferor'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
or (ii) the failure of any Receivable conveyed to the Depositor hereunder to
comply with all requirements of applicable law and for breach of its
representations and warranties contained herein or failure to perform in all
material respects its obligations and duties contained herein. Indemnification
under this Section shall survive the resignation or removal of the Owner
Trustee, the Indenture Trustee, the Custodian, the Backup Servicer or the
Indenture Collateral Agent and the termination of this Agreement, the Indenture
or the Trust Agreement, as applicable and shall include reasonable fees and
expenses of counsel and other expenses of litigation provided however, -------
that the liability of the Transferor for payments under this Section 7A.3 shall
be subject to the availability of funds therefor. If the Transferor 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
Transferor, without interest.
Section 7A.4 LIMITATION ON LIABILITY OF TRANSFEROR AND Others. The
Transferor and any director or officer or employee or agent of the Transferor
may rely in good faith on the
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advice of counsel or on any document of any kind, prima facie properly executed
and submitted by any Person respecting any matters arising under any Basic
Document. The Transferor 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 7A.5 TRANSFEROR MAY OWN CERTIFICATES OR NOTES. The
Transferor and any Affiliate thereof may in its individual or any other capacity
become the owner or pledgee of Certificates or Notes with the same rights as it
would have if it were not the Transferor or an Affiliate thereof, except as
expressly provided herein or in any Basic Document. Notes or Certificates so
owned by the Transferor or such Affiliate shall have an equal and proportionate
benefit under the provisions of the Basic Documents, without preference,
priority, or distinction as among all of the Notes or Certificates, provided,
however, that any Notes or Certificates owned by the Transferor or any Affiliate
thereof, during the time such Notes or Certificates are owned by them, shall be
without voting rights for any purpose set forth in the Basic Documents and will
not be entitled to the benefits of the Policy. The Transferor shall notify the
Owner Trustee, the Indenture Trustee and the Insurer promptly after it or any of
its Affiliates become the owner of a Certificate or a Note.
ARTICLE VII-B
THE DEPOSITOR
Section 7B.1 REPRESENTATIONS OF THE DEPOSITOR. The Depositor makes
the following representations on which the Issuer is deemed to have relied in
acquiring the Receivables and on which the Insurer is deemed to have relied in
issued in the Policy. The representations speak as of the execution and delivery
of this Agreement and as of the Closing Date, in the case of Initial
Receivables, and as of the applicable Subsequent Transfer Date in the case of
Subsequent Receivables, and shall survive the sale of the Receivables to the
Issuer and the pledge thereof to the Indenture Trustee pursuant to the
Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Depositor is duly organized
and validly existing as a corporation in good standing under the laws of the
State of Delaware with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such business is
presently conducted, and had at all relevant times, and has, the power,
authority and legal right to acquire and own the Receivables.
(b) DUE QUALIFICATION. The Depositor is duly qualified to do
business as a foreign company in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property, including the Receivables, or the conduct of its business shall
require such qualifications.
(c) POWER AND AUTHORITY OF THE DEPOSITOR. The Depositor has the
power and authority to execute and deliver this Agreement and to perform its
obligations under this Agreement and each of the Basic Documents to which the
Depositor is a party; the Depositor has full power and authority to sell and
assign the property to be sold and assigned to and deposited with the Issuer,
and the Depositor has duly authorized such sale and assignment to the Issuer by
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all necessary corporate action, and the execution, delivery and performance of
each of the Basic Documents to which the Depositor is a party and of each
Subsequent Transfer Agreement has been duly authorized by the Depositor by all
necessary corporate action.
(d) BINDING OBLIGATION; VALID TRANSFER. This Agreement effects a
valid transfer, and assignment of the Receivables, enforceable against creditors
of and purchasers from the Depositor. This Agreement, each Subsequent Transfer
Agreement and each of the Basic Documents to which the Depositor is a party
constitute legal, valid and binding obligations of the Depositor, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization and similar laws now or
hereafter in effect relating to creditors' rights generally and subject to
general principles of equity (whether applied in a proceeding at law or in
equity).
(e) NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and each of the Basic Documents and by each Subsequent
Transfer Agreement to which the Depositor is a party and the fulfillment of the
terms hereof and thereof do not result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time or both)
a default under, the certificate of incorporation or by-laws of the 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 its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than pursuant to the Basic Documents); nor
violate any law or, to the best of its knowledge, any order, rule or regulation
applicable to the Depositor of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending against the Depositor or, to its best knowledge, threatened against the
Depositor, before any court, regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or its
properties: (i) asserting the invalidity of this Agreement or any of the Basic
Documents, the Notes or the Certificates, (ii) seeking to prevent the issuance
of the Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (iii) seeking any
determination or ruling that could reasonably be expected to have a material and
adverse effect on the performance by the Depositor of its obligations under, or
the validity or enforceability of, this Agreement, the Basic Documents, or the
Notes or the Certificates or (iv) that might adversely affect the federal, state
or local income tax attributes of the Issuer, the Notes or the Certificates or
seeking to impose any excise, franchise, transfer or similar tax upon the Notes,
the Certificates or the sale and assignment of the Receivables and other Trust
Property hereunder.
(g) ALL CONSENTS. All authorizations, consents, orders or approvals
of or registrations or declarations with any court, regulatory body,
administrative agency or other government instrumentality required to be
obtained, effected or given by the Depositor in connection with the execution
and delivery by the Depositor of this Agreement, any Subsequent Transfer
Agreement or any of the Basic Documents to which it is a party and the
performance by the Depositor of the transactions contemplated by this Agreement,
any Subsequent Transfer Agreement or any of the Basic Documents to which it is a
party, have been duly obtained,
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effected or given and are in full force and effect, except where failure to
obtain the same would not have a material and adverse effect upon the rights of
the Issuer, or the Noteholders.
(h) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Depositor is at [Address].
(i) Upon the transfer of each Receivable or interests therein to the
Issuer and other items of Trust Property delivered by the Depositor to the
Issuer under this Agreement or any Subsequent Transfer Agreement, the Issuer
will have good title to such Receivable or interests therein and such other
items of Trust Property, free and clear of any lien, charge, mortgage,
encumbrance or rights of others (other than liens that will be simultaneously
released) granted by the Depositor.
Section 7B.2 EXISTENCE.
(a) 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 organization 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, any Subsequent Transfer Agreement, the Basic
Documents and each other instrument or agreement necessary or appropriate to the
proper administration of this Agreement and the transactions contemplated
hereby.
(b) During the term of this Agreement, the Depositor shall observe
the applicable legal requirements for the recognition of the Depositor as a
legal entity separate and apart from its Affiliates, including as follows:
(i) the Depositor shall maintain corporate records and books of
account separate from those of its Affiliates;
(ii) except as otherwise provided in this Agreement and except as
expressly permitted by any other agreement to which it is a party, the
Depositor shall not commingle its assets and funds with those of its
Affiliates;
(iii) the Depositor shall hold such appropriate meetings of its
Board of Directors as are necessary to authorize all the Depositor's
corporate actions required by law to be authorized by the Board of
Directors, shall keep minutes of such meetings and of meetings of its
stockholder(s) and observe all other customary corporate formalities (and
any successor Depositor not a corporation shall observe similar procedures
in accordance with its governing documents and applicable law);
(iv) the Depositor shall at all times hold itself out to the public
under the Depositor's own name as a legal entity separate and distinct
from its Affiliates; and
(v) all transactions and dealings between the Depositor and its
Affiliates will be conducted on an arm's-length basis.
Section 7B.3 LIABILITY OF DEPOSITOR; INDEMNITIES.
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(a) The Depositor shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Depositor under this
Agreement.
(b) The Depositor shall indemnify, defend and hold harmless the
Backup Servicer, the Servicer, the Insurer, the Owner Trustee, the Custodian,
the Issuer, the Indenture Trustee, the Indenture Collateral Agent, the
Noteholders and the Certificateholders from and against any loss, liability or
expense incurred by reason of (i) the Depositor's willful misfeasance, bad faith
or negligence in the performance of its duties under this Agreement, or (ii) by
reason of reckless disregard of its obligations and duties under this Agreement
or (iii) for breach of its representations and warranties contained herein or
failure to perform in all material respects its obligations and duties contained
herein.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee, the Custodian, the Indenture Trustee or the
Indenture Collateral Agent and the termination of this Agreement, the Indenture
or the Trust Agreement, as applicable and shall include reasonable fees and
expenses of counsel and other 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 7B.4 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 the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising under any Basic Document. The 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 7B.5 DEPOSITOR MAY OWN CERTIFICATES OR NOTES. The Depositor
and any Affiliate thereof may in its individual or any other capacity become the
owner or pledgee of Certificates or Notes with the same rights as it would have
if it were not the Depositor or an Affiliate thereof, except as expressly
provided herein or in any Basic Document. Notes or Certificates so owned by the
Depositor or such Affiliate shall have an equal and proportionate benefit under
the provisions of the Basic Documents, without preference, priority, or
distinction as among all of the Notes or Certificates, provided, however, that
any Notes or Certificates owned by the Depositor or any Affiliate thereof,
during the time such Notes or Certificates are owned by them, shall be without
voting rights for any purpose set forth in the Basic Documents and will not be
entitled to the benefits of the Policy. The Depositor shall notify the Owner
Trustee, the Indenture Trustee and the Insurer promptly after it or any of its
Affiliates become the owner of a Certificate or a Note.
ARTICLE VIII
DEFAULT
Section 8.1 SERVICER DEFAULT. If any one of the following events
(a "Servicer Default") shall occur and be continuing:
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(a) Any failure by the Servicer to deliver to the Owner Trustee or
the Indenture Trustee any deposit or payment proceeds or payment required to be
so made, which failure continues unremedied for a period of one Business Day
after the written notice of such failure is received by the Servicer from the
Insurer, the Owner Trustee or the Indenture Trustee or after discovery of such
failure by the Servicer; or
(b) The breach of any representation or warranty or covenant of the
Servicer or failure by the Servicer duly to observe or to perform in any
material respect any covenants or agreements of the Servicer or the Seller (as
the case may be) set forth in the Notes, the Certificates, this Agreement or any
other Basic Document, which breach or failure shall (i) materially and adversely
affect the rights of the Insurer, Certificateholders or the Noteholders and (ii)
continue unremedied for a period of 30 days after the date on which written
notice of such breach or failure, requiring the same to be remedied, shall have
been given (A) to the Servicer by the Indenture Trustee or the Controlling Party
or (B) to the Servicer, the Insurer, the Owner Trustee and the Indenture Trustee
by the Holders of Notes evidencing not less than [__]% of the outstanding
principal amount of the Notes or Holders of Certificates evidencing not less
than [__]% of the outstanding Certificate Balance, as applicable (or for such
longer period, not in excess of 60 days, as may be reasonably necessary to
remedy such default; provided that such default is capable of remedy within 60
days and the Servicer delivers an Officers' Certificate to the Insurer, the
Owner Trustee and the Indenture Trustee to such effect and to the effect that
the Servicer has commenced or will promptly commence, and will diligently
pursue, all reasonable efforts to remedy such default); or
(c) An Insolvency Event occurs with respect to the Servicer or any
successor;
(d) Failure to deliver a Servicer's Certificate within 3 days of the
related Determination Date;
(e) Failure to deliver the annual statement of compliance required
to be delivered pursuant to Section 4.10 hereof within 30 days of the date on
which such statement is required to be delivered.
(f) Unless an Insurer Default shall have occurred and be continuing,
an Insurance Agreement Event of Default described in Section 5.1 of the
Insurance Agreement shall have occurred.
(g) Unless an Insurer Default shall have occurred and be continuing,
failure of the Insurer to deliver a Servicer Extension Notice pursuant to
Section 3.5 hereof.
then, and in each and every case, the Controlling Party or holders
of Notes representing not less than [__]% of the voting rights thereof (or, if
the Notes have been paid in full and the Indenture has been discharged in
accordance with its terms, by holders of Certificates evidencing not less than
[__]% of the voting interest thereof) in any case by notice given in writing to
the Servicer (and to the Indenture Trustee if given by the Insurer or, as
applicable, the Noteholders or the Certificateholders) may terminate all of the
rights and obligations of the Servicer under this Agreement. For purposes of
Section 8.1(b), any determination of an adverse effect on the interest of the
Certificateholders or the Noteholders
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pursuant to Section 8.1(b) shall be made without consideration of the
availability of funds under the Policy. On or after the receipt by the Servicer
of such written notice, all authority, power, obligations and responsibilities
of the Servicer under this Agreement, whether with respect to the Notes, the
Certificates, the Receivables, the autodebit account payments, the other Trust
Property or otherwise, automatically shall pass to, be vested in and become
obligations and responsibilities of the Backup Servicer (or such other successor
Servicer appointed by the Controlling Party); provided, however, that the
successor Servicer shall have no liability with respect to any obligation which
was required to be performed by the prior Servicer prior to the date that the
successor Servicer becomes the Servicer or any claim of a third party based on
any alleged action or inaction of the prior Servicer. The successor Servicer is
authorized and empowered by this Agreement, as successor Servicer to execute and
deliver, on behalf of the prior Servicer, as attorney- in-fact or otherwise, any
and all documents and other instruments and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Trust Property and related documents, to show the Issuer or
Indenture Trustee as lienholder or secured party on the related Lien
Certificates, or otherwise. The prior Servicer agrees to cooperate with the
successor Servicer in effecting the termination of the responsibilities and
rights of the prior Servicer under this Agreement, including, without
limitation, the transfer to the successor Servicer for administration by it of
all cash amounts that shall at the time be held by the prior Servicer for
deposit, or have been deposited by the prior Servicer, in the Collection Account
or thereafter received with respect to the Receivables and the delivery to the
successor Servicer of all Receivables Files, records and a computer tape in
readable form containing all information necessary to enable the successor
Servicer to service the Receivables and the other Trust Property. The terminated
Servicer shall grant the successor Servicer, the Indenture Trustee, the Insurer
(so long as no Insurer Default shall have occurred and be continuing) and the
Owner Trustee reasonable access to the terminated Servicer's premises at the
terminated Servicer's expense.
Section 8.2 APPOINTMENT OF SUCCESSOR. (a) Upon the Servicer's
receipt of notice of termination pursuant to Section 8.1 or the Servicer's
resignation in accordance with the terms of this Agreement, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement, in the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of termination,
until receipt of such notice and, in the case of resignation, until the later of
(x) the date 45 days from the delivery to the Owner Trustee, the Controlling
Party, the Backup Servicer and the Indenture Trustee of written notice of such
resignation (or written confirmation of such notice) in accordance with the
terms of this Agreement and (y) the date upon which the predecessor Servicer
shall become unable to act as Servicer, as specified in the notice of
resignation and accompanying Opinion of Counsel. In the event of the Servicer's
termination hereunder, the Backup Servicer shall assume the obligations of
Servicer hereunder and shall accept its appointment by a written assumption in
form acceptable to the Controlling Party. Notwithstanding the above, the
Indenture Trustee with the prior written consent of the Controlling Party, or
the Controlling Party shall, if the Indenture Trustee shall be unwilling or
legally unable so to act, appoint, or petition a court of competent jurisdiction
to appoint, any established institution having a net worth of not less than
$[__________] and whose regular business shall include the servicing of
automotive receivables as the successor to the Servicer under the Agreement.
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(b) Upon appointment, the successor Servicer (including the Backup
Servicer acting as successor Servicer) shall be the successor in all respects to
the predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer, and shall be entitled to the Servicing Fee and all the
rights granted to the predecessor Servicer by the terms and provisions of this
Agreement. In addition, the successor Servicer shall have (i) no obligation to
perform any repurchase or advancing obligations, if any, of the Servicer, (ii)
no obligation to pay any taxes required to be paid by the Servicer, (iii) no
obligation to pay any of the fees and expenses of any other party involved in
this transaction and (iv) no liability or obligation with respect to any
Servicer indemnification obligations of any prior Servicer including the
original Servicer. The Successor Servicer as Servicer shall have control over
and the right to direct any autodebit account payments. Furthermore,
notwithstanding anything contained in this Agreement to the contrary, the
successor Servicer as Servicer is authorized to accept and rely on all of the
accounting, records and work of the prior Servicer relating to the Receivables
(collectively, "Predecessor Servicer Work Product") without any audit or other
examination thereof, and the successor Servicer as Servicer shall have no duty,
responsibility, obligation or liability for the acts and omissions of any prior
Servicer. If any error, inaccuracy or omission (collectively, "Errors") exist in
any Predecessor Servicer Work Product received by the successor Servicer from
the prior Servicer and such Errors should cause or materially contribute to the
successor Servicer as Servicer making or continuing any Errors (collectively,
"Continued Errors"), the successor Servicer as Servicer shall have no duty,
responsibility, obligation or liability for such Continued Errors; PROVIDED,
HOWEVER, that the successor Servicer agrees to perform its duties as successor
Servicer in accordance with the standard of care set forth in Section 4.1. In
the event that the successor Servicer as Servicer becomes aware of Errors or
Continued Errors, the successor Servicer shall use its best efforts to
reconstruct and reconcile such data as is commercially reasonable to correct
such Errors and Continued Errors and to prevent future Continued Errors. The
successor Servicer as Servicer shall be entitled to recover from the Trust its
costs thereby expended.
Section 8.3 NOTIFICATION TO NOTEHOLDERS, CERTIFICATEHOLDERS AND
BACKUP SERVICER. Upon any Servicer Default or any termination of, or appointment
of a successor to, the Servicer pursuant to this Article VIII the Owner Trustee
shall give prompt written notice thereof to Certificateholders and the Indenture
Trustee shall give prompt written notice thereof to Noteholders, the Insurer and
to the Rating Agencies.
Section 8.4 WAIVER OF PAST DEFAULTS. So long as no Insurer Default
shall have occurred and be continuing, the Insurer (or, if an Insurer Default
shall have occurred and be continuing, the Controlling Party) may, on behalf of
all Noteholders and Certificateholders, waive any default by the Servicer in the
performance of its obligations hereunder and its consequences, except a default
in making any required deposits to or payments from any of the Trust Accounts in
accordance with this Agreement. Upon any such waiver of a past default, such
default shall cease to exist, and any Servicer Default arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
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ARTICLE VIII-A
THE BACKUP SERVICER
Section 8A.1 APPOINTMENT OF BACKUP SERVICER. On or before each
Determination Date, the Servicer shall deliver to the Indenture Trustee and the
Backup Servicer a computer tape in a format acceptable to the Indenture Trustee
and the Backup Servicer containing the information with respect to the
Receivables for the preceding Collection Period necessary for the preparation of
the Servicer's Certificate relating to such Collection Period (the "Backup
Servicer Tape"). The duties of the Backup Servicer set forth in Section 8A.2
(the "Backup Servicer Duties") shall be conducted by the Person so designated
from time to time as Backup Servicer in accordance with this Agreement.
[________] is hereby initially designated as, and hereby agrees to perform, the
duties and obligations of the Backup Servicer pursuant to the terms hereof and
each other Basic Document to which the Backup Servicer is a party. Subject to
the resignation of [________] as Backup Servicer pursuant to Section 8A.4 or the
termination of [________] as Backup Servicer pursuant to Section 8A.6 and, in
either case, the designation of a successor Backup Servicer hereunder,
[________] shall continue to perform the Backup Servicer Duties, unless and
until expressly agreed otherwise by the Issuer, the Servicer, the Indenture
Trustee and the Insurer.
Section 8A.2 DUTIES OF BACKUP SERVICER. The Backup
Servicer, for the benefit of the Issuer, the Insurer and the Noteholders,
shall perform the following duties:
(a) use the Backup Servicer Tape to verify the following
information: (w) the aggregate Principal Balance of each Receivable, (x) a list
of Receivables that are (I) 1-30; (II) 31-60, (III) 61-90, (IV) 90-120 days or
(V) 121+ delinquent in any scheduled payment, (y) the amount of principal and
interest payments on the Receivables received during the Collection Period, and
(z) the Default Rate and the Delinquency Ratio for the Collection Period;
(b) in the event that the Backup Servicer discovers a discrepancy or
discrepancies, with respect to such independent reconciliation described above,
the Backup Servicer shall (x) notify the Issuer, the Seller, the Depositor, the
Insurer, the Servicer and the Indenture Trustee of such discrepancy or
discrepancies, and (y) attempt to reconcile such discrepancy or discrepancies
with the Servicer; and
(c) such other duties as may be agreed to in writing by the Issuer,
the Seller, the Depositor, the Backup Servicer and the Insurer from time to
time.
Section 8A.3 BACKUP SERVICING STANDARD. The Backup Servicer, for the
benefit of the Issuer, the Indenture Trustee, the Insurer, the Noteholders and
the Certificateholders, shall perform the Backup Servicer Duties in accordance
with all applicable federal, state or local laws and regulations and with the
degree of skill, care and diligence of prudent lenders in the industry for the
servicing of comparable assets, but in no event, with less skill, care and
diligence that the Backup Servicer exercises with respect to all comparable
assets that it services for itself or others (such standards, the "Backup
Servicing Standard"). Other than the duties specifically set forth in this
Agreement, the Backup Servicer shall have no obligations hereunder, including,
without limitation to supervise, verify, monitor, or administer the performance
of the Servicer. The
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duties and obligations of the Backup Servicer shall be determined solely by the
express provisions of this Agreement and no implied covenants or obligations
shall be read into this Agreement against the Backup Servicer.
Section 8A.4 LIMITATION ON RESIGNATION OF THE BACKUP Servicer. The
Backup Servicer shall not resign from the obligations and duties hereby imposed
on it except (a) by mutual agreement among the Backup Servicer, the Issuer, the
Indenture Trustee and the Insurer or (b) upon determination that its duties
hereunder are no longer permissible under applicable law. Any determination
under clause (b) above permitting the resignation of the Backup Servicer shall
be evidenced by an opinion of counsel (which counsel shall be acceptable to the
Issuer, the Indenture Trustee and the Insurer) to such effect delivered to the
Issuer, the Depositor, the Indenture Trustee and the Insurer. No such
resignation shall become effective until a successor backup servicer shall have
assumed the Backup Servicer's responsibilities, duties, liabilities and
obligations hereunder. Any such successor backup servicer must be an established
servicer of consumer automobile loans and must be approved in writing by the
Issuer, the Depositor, Indenture Trustee and Insurer.
Section 8A.5 RIGHTS IN RESPECT OF THE BACKUP SERVICER. The Backup
Servicer shall afford the Indenture Trustee, the Issuer, the Depositor, and the
Insurer, upon two (2) Business Days prior notice, during normal business hours
access to all records maintained by the Backup Servicer in respect of its rights
and obligations hereunder and access to officers of the Backup Servicer
responsible for such obligations. Upon request, the Backup Servicer shall
furnish the Indenture Trustee, the Issuer, the Depositor, and the Insurer such
information as the Backup Servicer possesses regarding the transactions
contemplated hereby and any circumstance that could reasonably be expected to
affect the Backup Servicer's ability to perform its obligations hereunder. The
Indenture Trustee, the Issuer and the Insurer shall not have any responsibility
or liability for any action or failure to act by the Backup Servicer, and are
not obligated to supervise the performance of the Backup Servicer under this
Agreement or otherwise.
Section 8A.6 TERMINATION FEE.
(a) Upon 30 days' written notice, the Controlling Party may
terminate all the rights and obligations of the Backup Servicer under this
Agreement as to any or all of the Receivables or Backup Servicer Duties.
(b) In the event that (a) notice of termination of this Agreement,
or of termination of the rights and obligations of the Backup Servicer
hereunder, is given, or (b) the Backup Servicer resigns in accordance with
Section 8A.4, the Backup Servicer covenants that all funds and any item
comprising a Receivable File in its possession relating to the affected
Receivables (collectively, the "Backup Contract Records") shall, at the option
of the Controlling Party, immediately upon receipt of notice of termination or
the resignation of the Backup Servicer, be submitted to the control of the
Indenture Trustee.
(c) Notwithstanding any termination of this Agreement, or of all or
a portion of the rights and obligations of the Backup Servicer hereunder, the
Backup Servicer shall not be relieved of liability for all amounts due, or
responsibilities owed the Issuer, the Indenture
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Trustee, the Insurer, the Noteholders or the Certificateholders in respect of
its obligations hereunder while it served as the Backup Servicer. The Backup
Servicer forthwith upon such termination or resignation shall (a) use its best
efforts to effect the orderly and efficient transfer of Backup Servicer Duties
to a new backup servicer or other designee selected by the Controlling Party,
and (b) arrange for the physical transfer and delivery to the Controlling Party
or to a new backup servicer or other designee selected by the Controlling Party
of all Contract Receivable Records and copies thereof in its possession. Any
successor servicer hereunder shall meet the requirements and be selected in
accordance with the procedures specified in Section 8A.4. Notwithstanding any
termination of this Agreement, or any termination of all the rights and
obligations of the Backup Servicer hereunder as to all or any number of
Receivables, or any resignation of the Backup Servicer, in any case pursuant to
any provision of this Agreement, the Backup Servicer shall be entitled to
receive all amounts accrued and owing to it under this Agreement from the
Borrower in accordance with Section 8A.8 hereof.
Section 8A.7 RESIGNATION OR TERMINATION OF BACKUP SERVICER FEE. Upon
the termination of the Servicer in accordance with Article VIII or the
resignation of the Servicer in accordance with Section 7.5, the Backup Servicer
shall either (i) assume all of the responsibilities, duties, liabilities and
obligations the Servicer hereunder, without further action by any Person, or
(ii) designate a successor Servicer who shall (x) assume all of the
responsibilities, duties, liabilities and obligations the Servicer hereunder,
without further action by any Person, and (y) be acceptable to the Controlling
Party in its sole discretion. Any such assumption or appointment by the Backup
Servicer pursuant to this Section 8A.7 shall occur as soon as reasonably
practical (but, in any event, no later than 30 days) after the Indenture Trustee
provides notice to the Backup Servicer of any such resignation or termination of
the Servicer. Neither the Backup Servicer nor any successor Backup Servicer
shall have (i) any liability with respect to any obligation which was required
to be performed by the terminated Backup Servicer prior to the date that the
successor Backup Servicer or the Backup Servicer became the Servicer or any
claim of a third party based on any alleged action or inaction of the terminated
Backup Servicer and (ii) any obligation to pay any of the fees and expense of
any other party involved in this transaction.
Section 8A.8 BACKUP SERVICING FEE. At any time the Backup Servicer
or one of its Affiliates is not the Servicer hereunder, the Backup Servicer
shall be paid the Backup Servicer Fee for the performance of its obligations as
Backup Servicer hereunder and under the Basic Documents.
Section 8A.9 INDEMNITY. The Backup Servicer its officers, directors,
agents and employees shall be indemnified and held harmless in accordance with
the terms of the separate agreement between the Servicer and the Backup
Servicer, against any and all claims, losses, liabilities, damages or expenses
(including, but not limited to, attorney's fees, court costs and costs of
investigation) of any kind or nature whatsoever arising out of or in connection
with this Agreement that may be imposed upon, incurred by or asserted against
the Backup Servicer, except in each case to the extent arising from the Backup
Servicer's misfeasance, bad faith or negligence. The provisions of this Section
8A.9 shall survive the resignation or removal of the Backup Servicer and the
termination of this Agreement.
Section 8A.10 LIMITATION OF LIABILITY.
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(a) In the absence of bad faith, negligence or misconduct on the
part of the Backup Servicer, the Backup Servicer shall not be liable to the
Issuer, the Indenture Trustee, the Seller, the Indenture Collateral Agent, the
Insurer or any other Person with respect to any action taken or not taken by it
in the performance of its obligations under this Agreement. The obligations of
the Backup Servicer shall be determined solely by the express provisions of this
Agreement. No representation, warranty, covenant, agreement, obligation or duty
of the Backup Servicer shall be implied with respect to this Agreement or the
Backup Servicer's services hereunder.
(b) The Backup Servicer may rely, and shall be protected in acting
or refraining to act, upon and need not verify the accuracy of, any written
instruction, notice, order, request, direction, certificate, opinion or other
instrument or document believed by the Backup Servicer to be genuine and to have
been signed and presented by the proper party or parties, which, with respect to
the Issuer, Indenture Trustee, Indenture Collateral Agent or Insurer, shall mean
signature and presentation by Authorized Representatives (as such term is
defined in the Custodial Agreement) whether such presentation is by personal
delivery, express delivery or facsimile.
(c) The Backup Servicer may consult with counsel selected by it with
regard to legal questions arising out of or in connection with this Agreement,
and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, omitted or suffered
by the Backup Servicer in reasonable reliance, in good faith, and in accordance
therewith.
(d) Except as expressly provided for herein, the provisions of this
Agreement shall not require the Backup Servicer to expend or risk its own funds
or otherwise incur financial liability in the performance of its duties under
this Agreement if it shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity is not reasonably assured to it.
(e) The Backup Servicer shall not be responsible or liable for, and
makes no representation or warranty with respect, the validity, adequacy or
perfection of any lien upon, or security interest in any Receivables or
Custodian's Receivable Files (as such term is defined in the Custodial
Agreement) purported to be granted at any time to the Indenture Trustee.
ARTICLE IX
TERMINATION
Section 9.1 OPTIONAL PURCHASE OF ALL RECEIVABLES. (a) On the last
day of any Collection Period as of which the Pool Balance shall be less than or
equal to [__]% of the Original Pool Balance, the Transferor shall have the
option to purchase the Owner Trust Estate, other than the Trust Accounts and the
Certificate Distribution Account (with the consent of the Insurer if such
purchase would result in a claim on either Policy or would result in any amount
owing to the Insurer under the Insurance Agreement remaining unpaid); provided
however, that the amount to be paid for such purchase (as set forth in the
following sentence) shall be sufficient to pay the full amount of principal,
premium, if any, and interest then due and payable on the Notes and the
Certificates. To exercise such option, the Servicer shall deposit pursuant to
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Section 5.5 in the Collection Account an amount equal to the amount set forth in
the preceding sentence.
(b) Notice of any termination of the Trust pursuant to subsection
(a) of this Section 9.1 shall be given by the Servicer to the Owner Trustee,
Issuer and the Indenture Trustee, the Insurer and the Rating Agencies as soon as
practicable after the Servicer has received notice thereof.
FOLLOWING THE SATISFACTION AND DISCHARGE OF THE INDENTURE AND THE
PAYMENT IN FULL OF THE PRINCIPAL OF AND INTEREST ON THE NOTES AND ALL AMOUNTS
DUE TO THE INSURER UNDER THE INSURANCE AGREEMENT, THE CERTIFICATEHOLDERS WILL
SUCCEED TO THE RIGHTS OF THE NOTEHOLDERS AND THE INSURER HEREUNDER AND THE OWNER
TRUSTEE WILL SUCCEED TO THE RIGHTS OF, AND ASSUME THE OBLIGATIONS (OTHER THAN
ANY SERVICING OBLIGATION) OF, THE INDENTURE TRUSTEE PURSUANT TO THIS AGREEMENT.
ARTICLE X
ADMINISTRATIVE DUTIES OF THE SERVICER
Section 10.1 (a) DUTIES WITH RESPECT TO THE INDENTURE, THE TRUST
AGREEMENT AND DEPOSITORY AGREEMENT. The Servicer shall perform all its duties
and the duties of the Issuer under the Indenture, the Trust Agreement and the
Depository Agreement. In addition, the Servicer shall consult with the Owner
Trustee as the Servicer deems appropriate regarding the duties of the Issuer
under the Indenture, the Trust Agreement and the Depository Agreement. The
Servicer shall monitor the performance of the Issuer and shall advise Owner
Trustee when action is necessary to comply with the Issuer's duties under the
Indenture, the Trust Agreement and the Depository Agreement. The Servicer shall
prepare for execution by the Issuer or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare, file
or deliver pursuant to the Indenture, the Trust Agreement and the Depository
Agreement. In furtherance of the foregoing, the Servicer shall take all
necessary action that is the duty of the Issuer to take pursuant to the
Indenture, the Trust Agreement and the Depository Agreement, including, without
limitation, pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 7.2, 7.3, 11.1 and
11.15 of the Indenture.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner
Trustee or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions
as it shall be the duty of the Issuer or the Owner Trustee to prepare,
file or deliver pursuant to this Agreement or any of the Basic Documents,
and at the request of the Owner Trustee, shall take all appropriate action
that it is the duty of the Issuer to take pursuant to this Agreement or
any of the Basic Documents, including, without limitation,
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pursuant to Sections 2.6 and 2.11 of the Trust Agreement. In accordance
with the directions of the Issuer or the Owner Trustee, the Servicer shall
administer, perform or supervise the performance of such other activities
in connection with the Collateral (including the Basic Documents) as are
not covered by any of the foregoing provisions and as are expressly
requested by the Issuer or the Owner Trustee and are reasonably within the
capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the Servicer shall be responsible for
promptly notifying the Owner Trustee in the event that any withholding tax
is imposed on the Issuer's payments (or allocations of income) to a
Certificateholder as contemplated in Section 5.2(f) of the Trust
Agreement. Any such notice shall be in writing and specify the amount of
any withholding tax required to be withheld by the Owner Trustee pursuant
to such provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for
performance of the duties of the Issuer or the Owner Trustee and the
Depositor set forth in Section 5.6(a), (b), (c) and (d) of the Trust
Agreement with respect to, among other things, accounting and reports to
Holders (as defined in the Trust Agreement); provided, however, that once
prepared by the Servicer the Owner Trustee shall retain responsibility for
the distribution of the Schedule K-1s necessary to enable each
Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in Section 10.2 of the Trust Agreement required to be performed
in connection with the resignation or removal of the Owner Trustee, and
any other duties expressly required to be performed by the Servicer under
this Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
the terms of any such transactions or dealings shall be in accordance with
any directions received from the Issuer and shall be, in the Servicer's
opinion, no less favorable to the Issuer in any material respect.
(c) TAX MATTERS. The Servicer shall prepare and the Owner Trustee
shall file, on behalf of the Depositor, all tax returns, tax elections,
financial statements and such annual or other reports of the Issuer as are
necessary for preparation of tax reports as provided in Article V of the Trust
Agreement, including without limitation Forms 1099 and 1066. All tax returns
will be signed by the Transferor.
(d) NON-MINISTERIAL MATTERS. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article X unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Indenture Trustee of the proposed action and the Owner Trustee
and, with respect to items (A), (B), (C) and (D) below, the Indenture Trustee
shall not have withheld consent or provided an alternative direction. For the
purpose of the preceding sentence, "non-ministerial matters" shall include:
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(A) the amendment of or any supplement to the Indenture;
(B) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Receivables);
(C) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(D) the appointment of successor Note Registrars, successor
Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the consent
to the assignment by the Note Registrar, Paying Agent or Indenture
Trustee of its obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(e) EXCEPTIONS. Notwithstanding anything to the contrary in this
Agreement, except as expressly provided herein or in the other Basic Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (1) make any payments to the Noteholders or Certificateholders under the
Basic Documents, (2) sell the Owner Trust Estate pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
Section 10.2 RECORDS. The Servicer shall maintain appropriate books
of account and records relating to services performed under this Agreement,
which books of account and records shall be accessible for inspection by the
Issuer and the Insurer at any time during normal business hours.
Section 10.3 ADDITIONAL INFORMATION TO BE FURNISHED TO THE ISSUER.
The Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.1 AMENDMENT. This Agreement may not be amended except
that this Agreement may be amended from time to time by the Seller, the
Transferor, the Depositor, the Servicer the Backup Servicer, the Issuer, the
Indenture Trustee and the Custodian, with the prior written consent of the
Insurer (so long as no Insurer Default has occurred and is continuing), but
without the consent of any of the Noteholders or Certificateholders to cure any
ambiguity, to correct or supplement any provisions in this Agreement, to comply
with any changes in the Code, or to make any other provisions with respect to
matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Insurance Agreement;
provided, however, that such action shall not, as evidenced by an
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Opinion of Counsel delivered to the Owner Trustee, Insurer, the Rating Agencies
and the Indenture Trustee, adversely affect in any material respect the
interests of any Noteholder or Certificateholder.
This Agreement may also be amended from time to time by the Seller,
the Transferor, the Depositor, the Servicer, the Backup Servicer, the Indenture
Trustee and the Custodian, with (i) the consent of the Insurer, if the Insurer
is the Controlling Party, but without the consent of any Noteholders or
Certificateholders, or (ii) if the Insurer is no longer the Controlling Party,
with the consent of a Note Majority and the consent of the holders of
Certificates evidencing not less than a majority of the aggregate outstanding
principal amount of the Certificates, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Noteholders or the
Certificateholders; provided, however, that no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the outstanding principal amount of the Notes
and the Certificate Balance, the Holders of which are required to consent to any
such amendment, without the consent of the Holders of all the outstanding Notes
and the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates, of each class affected thereby provided further, that if an
Insurer Default has occurred and is continuing, such action shall not materially
adversely affect the interest of the Insurer.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder and the Rating Agencies. It shall
not be necessary for the consent of Noteholders or Certificateholders pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Noteholders or Certificateholders provided for in this Agreement) and of
evidencing the authorization of any action by Noteholders or Certificateholders
shall be subject to such reasonable requirements as the Indenture Trustee or the
Owner Trustee, as may prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Indenture Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
11.2(b) has been delivered. The Owner Trustee and the Indenture Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Issuer's, the Owner Trustee's or the Indenture Trustee's, as applicable, own
rights, duties or immunities under this Agreement or otherwise.
Section 11.2 PROTECTION OF TITLE TO THE TRUST. (a) The Seller, the
Transferor and the Depositor shall execute and file such financing statements
and cause to be executed and filed such continuation statements, all in such
manner and in such places as may be required by law fully to preserve, maintain
and protect the interest of the Issuer and the interests of the
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Indenture Trustee in the Receivables and in the proceeds thereof. The Seller,
the Transferor and the Depositor shall deliver (or cause to be delivered) to the
Insurer, 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) None of the Seller, the Transferor and the Depositor or the
Servicer shall change its name, identity or organizational structure in any
manner that would, could or might make any financing statement or continuation
statement filed in accordance with paragraph (a) above seriously misleading
within the meaning of Section 9-402(7) of the UCC, unless it shall have given
the Insurer, Owner Trustee and the Indenture Trustee at least [____] days' prior
written notice thereof and shall have promptly filed appropriate amendments to
all previously filed financing statements or continuation statements. Promptly
upon such filing, the Seller or the Servicer, the Transferor and the Depositor,
as the case may be, shall deliver an Opinion of Counsel to the Insurer and the
Indenture Trustee, in form and substance reasonably satisfactory to the Insurer,
stating either (A) all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and protect the
interest of the Transferor, the Depositor, the Issuer and the Indenture Trustee,
as the case may be, in the Receivables and the other Transferor Property, other
Depositor Property and other Trust Property, as the case may be, and reciting
the details of such filings or referring to prior Opinions of Counsel in which
such details are given, or (B) no such action shall be necessary to preserve and
protect such interest.
(c) Each of the Seller, the Servicer, the Transferor and the
Depositor shall have an obligation to give the Insurer, the Owner Trustee, the
Backup Servicer and the Indenture Trustee at least 60 days' prior written notice
of any relocation of its principal executive office if, as a result of such
relocation, the applicable provisions of the UCC would require the filing of any
amendment of any previously filed financing or continuation statement or of any
new financing statement and shall promptly file any such amendment. The Servicer
shall at all times maintain each office from which it shall service Receivables,
and its principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the
Issuer, the Servicer's master computer records (including any backup archives)
that refer to a Receivable shall indicate clearly the interest of the Issuer and
the Indenture Trustee in such Receivable and that such Receivable is owned by
the Issuer and has been pledged to the Indenture Trustee. Indication of the
Issuer's and the Indenture Trustee's interest in a Receivable shall be deleted
from or modified on the Servicer's computer systems when, and only when, the
related Receivable shall have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender
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or other transferee, the Servicer shall give to such prospective purchaser,
lender or other transferee computer tapes, records or printouts (including any
restored from backup archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable has
been sold and is owned by the Issuer and has been pledged to the Indenture
Trustee.
(g) The Servicer shall permit the Indenture Trustee, the Backup
Servicer, and the Insurer and their respective agents at any time during normal
business hours to inspect, audit and make copies of and abstracts from the
Servicer's records regarding any Receivable or any other portion of the Trust
Property. The preceding sentence shall not create any duty or obligation on the
part of the Indenture Trustee to perform any such acts.
(h) Upon request, the Servicer shall furnish to the Insurer, the
Owner Trustee, the Backup Servicer, the Depositor, or to the Indenture Trustee,
within [____] Business Days, a list of all Receivables (by contract number and
name of Obligor) then held as part of the Trust Property, together with a
reconciliation of such list to the Schedule of Receivables and to each of the
Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust Property.
(i) The Servicer shall deliver to the Insurer, the Depositor, Owner
Trustee and the Indenture Trustee:
(1) promptly after the execution and delivery of the Agreement
and, if required pursuant to Section 11.1, of each amendment, an
Opinion of Counsel stating that, in the opinion of such counsel, in
form and substance reasonably satisfactory to the Indenture Trustee,
either (A) all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the Indenture Trustee in the
Receivables, and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (B)
no such action shall be necessary to preserve and protect such
interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the Cutoff Date, an Opinion of Counsel, dated as of a
date during such 90-day period, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the Indenture
Trustee in the Receivables, and reciting the details of such filings
or referring to prior Opinions of Counsel in which such details are
given, or (B) no such action shall be necessary to preserve and
protect such interest.
Each Opinion of Counsel referred to in clause (l) or (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
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(j) The Seller shall, to the extent required by applicable law,
cause the Notes to be registered with the Commission pursuant to Section 12(b)
or Section 12(g) of the Exchange Act within the time periods specified in such
sections.
Section 11.3 NOTICES. All demands, notices and communications upon
or to the Seller, the Servicer, the Owner Trustee, the Indenture Trustee or the
Rating Agencies under this Agreement shall be in writing, personally delivered,
or mailed by certified mail, return receipt requested, and shall be deemed to
have been duly given upon receipt (a) in the case of the Seller and the
Servicer, to [__________________] [Address] Attention: [____________], (b) in
the case of the Issuer or the Owner Trustee, at the [_______________], (c) in
the case of [______________] c/o [__________________] [Address], Attention:
[_______________], (d) in the case of the Depositor, to PaineWebber Asset
Acceptance Corporation, 1285 Avenue of the Americas, New York, New York 10019,
Attention: [________________], (e) in the case of the Indenture Trustee, the
Indenture Collateral Agent, the Backup Servicer or the Custodian, at
[________________], (f) in the case of the Insurer, to [_______________],
[Address], Attention: [_______________], Surveillance (in each case in which
notice or other communication to the Insurer refers to a Servicer Default, a
claim on the Policy, a Deficiency Notice pursuant to Section 5.4 of this
Agreement or with respect to which failure on the part of the Insurer to respond
shall be deemed to constitute consent or acceptance, then a copy of such notice
or other communication should also be sent to the attention of each of the
General Counsel and the Head Financial Guaranty Group and shall be marked to
indicate "URGENT MATERIAL ENCLOSED"); (g) in the case of [____________], to
[______________], [Address]; and (h) in the case of [____________], to
[________________], [Address], Attention: Asset Backed Surveillance Department.
Upon the written request of the Owner Trustee, the Indenture Trustee will
promptly furnish the Owner Trustee a list of Noteholders as of the date
specified by the Owner Trustee. Each Noteholder, by its acceptance of a Note,
shall be deemed to agree that the Indenture Trustee shall be under no liability
for providing the list of Noteholders to the Owner Trustee as described in the
immediately preceding sentence. Any notice required or permitted to be mailed to
a Noteholder or Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register or
Note Register, as applicable. Any notice so mailed within the time prescribed in
the Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder or Noteholder shall receive such notice.
Section 11.4 ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.4 and 7.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Owner Trustee, the Depositor, the Indenture Trustee
and the Insurer (or if an Insurer Default shall have occurred and be continuing
the Holders of Notes evidencing not less than [__]% of the principal amount of
the outstanding Notes and the Holders of Certificates evidencing not less than
[__]% of the Certificate Balance).
Section 11.5 LIMITATIONS ON RIGHTS OF OTHERS. The provisions of this
Agreement are solely for the benefit of the parties hereto, the Insurer and the
Noteholders, as third-party beneficiaries. Nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person, other than
express third-party beneficiaries, any legal or equitable right,
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remedy or claim in the Owner Trustee Estate or under or in respect of this
Agreement or any covenants, conditions or provisions contained herein.
Section 11.6 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.7 SEPARATE COUNTERPARTS. This Agreement may be executed
by the parties hereto in separate counterparts, each of which when so executed
and delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 11.8 HEADINGS. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
Section 11.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATION LAW, BUT OTHERWISE WITHOUT REFERENCE TO ITS CONFLICT OF
LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.10 ASSIGNMENT TO INDENTURE TRUSTEE. Each of the Seller,
the Transferor and the Depositor hereby acknowledge and consent to any mortgage,
pledge, assignment and grant of a security interest expressly as contemplated by
this Agreement and by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders of all right, title and interest of
the Issuer in, to and under the Receivables and/or the assignment of any or all
of the Issuer's rights and obligations hereunder to the Indenture Trustee.
Section 11.11 NONPETITION COVENANTS. (a) Notwithstanding any prior
termination of this Agreement, none of the Backup Servicer, the Custodian, the
Servicer, the Seller, the Transferor (with respect to the Issuer) or the
Depositor shall, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Transferor or the Issuer,
acquiesce, petition or otherwise invoke or cause any of the Transferor or the
Issuer to invoke the process of any court or government authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of any of the Transferor or the Issuer or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, none of
the Backup Servicer, the Custodian, the Transferor, the Seller or the Servicer
shall, prior to the date that is one year and one day after the termination of
this Agreement with respect to the Depositor, acquiesce to, petition or
otherwise invoke or cause the Depositor to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
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against the Depositor under any federal or state bankruptcy, insolvency or
similar law, appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Depositor or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Depositor.
Section 11.12 LIMITATION OF LIABILITY OF OWNER TRUSTEE AND INDENTURE
TRUSTEE. (a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by [_________________] not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer and in no
event shall [_________________] in its individual capacity or, except as
expressly provided in the Trust Agreement, as Owner Trustee have any liability
for the representations, warranties, covenants, agreements or other obligations
of the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Issuer. For all purposes of this Agreement, in the performance
of its duties or obligations hereunder or in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been accepted by [________], not in its individual capacity but
solely as Indenture Trustee, Backup Servicer and Custodian, and in no event
shall [________] have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
(c) It is expressly understood and agreed by the parties hereto that (a)
this Sale and Servicing Agreement is executed and delivered by [______________],
not individually or personally but solely as Owner Trustee of [_______________]
200[_]-[_], in the exercise of the powers and authority conferred and vested in
it, (b) each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal representations,
undertakings and agreements by [_________________] but is made and intended for
the purpose for binding only the Trust, (c) nothing herein contained shall be
construed as creating any liability on [_________________], individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties hereto
and (d) under no circumstances shall [_________________] be personally liable
for the payment of any indebtedness or expenses of the Trust or be liable for
the breach or failure of any obligation, representation, warranty or covenant
made or undertaken by the Trust under this Sale and Servicing Agreement or any
other related documents.
Section 11.13 INDEPENDENCE OF THE SERVICER. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer or the Owner Trustee, the
Servicer shall have no authority to act for or represent the Issuer in any way
and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.
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Section 11.14 NO JOINT VENTURE. Nothing contained in this Agreement
(i) shall constitute the Servicer and any of the Issuer, the Depositor, the
Transferor or the Owner Trustee as members of any partnership, joint venture,
association, syndicate, unincorporated business or other separate entity, (ii)
shall be construed to impose any liability as such on any of them or (iii) shall
be deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
Section 11.15 THIRD-PARTY BENEFICIARIES. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. The Insurer and its successors and assigns
shall be a third-party beneficiary to the provisions of this Agreement, and
shall be entitled to rely upon and directly to enforce such provisions of this
Agreement so long as no Insurer Default shall have occurred and be continuing.
Except as expressly stated otherwise herein or in the Basic Documents, any right
of the Insurer to direct, appoint, consent to, approve of, or take any action
under this Agreement, shall be a right exercised by the Insurer in its sole and
absolute discretion.
Section 11.16 DISCLAIMER BY INSURER. The Insurer may disclaim any of
its rights and powers under this Agreement (but not its duties and obligations
under the Policies) upon delivery of a written notice to the Owner Trustee and
the Indenture Trustee.
Section 11.17 INSURER AS CONTROLLING PARTY. Each Noteholder by
purchase of Notes and Certificateholder by purchase of a Certificate
acknowledges that the Indenture Trustee on behalf of the Noteholders, and the
Owner Trustee on behalf of the Certificateholders, as partial consideration for
issuance of the Policy, has agreed that the Insurer shall have certain rights
hereunder for so long as no Insurer Default shall have occurred and be
continuing. Any provision giving the Insurer the right to direct, appoint or
consent to, approve of, or take any action under this Agreement shall be
inoperative during the prior of such Insurer Default and shall instead vest in
the Servicer, or in the event that Notes remain Outstanding, the Indenture
Trustee at the direction of a Note Majority or in the event that no Notes remain
Outstanding, the Owner Trustee, at the direction of a Certificate Majority, as
applicable.
Section 11.18 LIMITED RECOURSE. Notwithstanding anything to the
contrary contained in this Agreement, the obligations of each of the Depositor,
the Transferor and Issuer under this Agreement are solely the limited liability
company obligations of the Depositor, Transferor or the trust obligations of
Issuer, as applicable, and shall be payable by the Depositor, Transferor or
Issuer, as applicable, solely as provided in this Section 11.18 Each of the
Depositor, Transferor and the Issuer shall only be required to pay (a) any fees,
expenses, indemnities or other liabilities that it may incur under this
Agreement to the extent it has funds available therefor on the date of such
determination and (b) any expenses, indemnities or other liabilities that it may
incur under this Agreement only to the extent it receives funds designated for
such purposes or to the extent it has funds available therefor. In addition, no
amount owing by any of the Depositor, the Transferor or Issuer hereunder (other
than principal and interest in respect of the Notes) in excess of the
liabilities that it is required to pay in accordance with the preceding sentence
shall constitute a "claim" (as defined in Section 101(5) of the Bankruptcy Code)
against it. No recourse shall be had for the payment of any amount owing
hereunder or for the payment of any fee hereunder or any other obligation of, or
claim against, the Depositor, Transferor or the Issuer arising out of or based
upon this Agreement, against any member,
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employee, officer, agent, director or authorized person of the Depositor,
Transferor or affiliate thereof or any stockholder, employee, officer, director,
incorporator or Affiliate thereof; PROVIDED, HOWEVER, that the foregoing shall
not relieve any such person or entity of any liability they might otherwise have
as a result of fraudulent actions or omissions taken by them. The obligation of
the parties under this Section 11.18 shall survive termination of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective duly authorized officers as
of the day and year first above written.
[_____________________] 200[_]-[_]
By [_________________],
not in its individual capacity but
solely as Owner Trustee on behalf
of the Issuer,
By__________________________________
Name:
Title:
[__________________], Seller and
Servicer,
By:____________________________________
Name:
Title:
[______________], as Transferor,
By:____________________________________
Name:
Title:
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[____________________], as Depositor,
By:____________________________________
Name:
Title:
[__________________] as Backup
Servicer,
By:____________________________________
Name:
Title:
[__________________] as Custodian,
By:____________________________________
Name:
Title:
[__________________], not in its
individual capacity, but solely as
Indenture Trustee,
By:____________________________________
Name:
Title:
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EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
TRANSFER No. [___] OF SUBSEQUENT RECEIVABLES dated as of ,
[________], among [_____________________] 200[_]-[_], a [__________] business
trust (the "Issuer"), [______________], a [_____________] company, as transferor
(the "Transferor") [__________________], a [_____________] company and as seller
and servicer (the "Seller" and the "Servicer"), [_________________], a
[__________] corporation, as depositor (the "Depositor"), and
[__________________], as Indenture Trustee, Backup Servicer and Custodian.
W I T N E S E T H:
WHEREAS the Issuer, the Transferor, the Seller, the Servicer, the
Depositor, the Indenture Trustee, the Backup Servicer and the Custodian are
parties to the Sale and Servicing Agreement, dated as of [________], 200[_] (as
amended or supplemented, the "Sale and Servicing Agreement");
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller
wishes to convey the Subsequent Receivables to the Transferor; and
WHEREAS, the Transferor is willing to accept such conveyance
subject to the terms and conditions hereof,
WHEREAS pursuant to the Sale and Servicing Agreement, the
Transferor wishes to convey the Receivables to the Depositor,
WHEREAS the Depositor is willing to accept such conveyance
subject to the terms and conditions hereof;
WHEREAS pursuant to the Sale and Servicing Agreement, the
Depositor wishes to convey the Receivables to the Trust, and
WHEREAS the Trust is willing to accept such conveyance subject to
the terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller and the Servicer hereby agree
as follows:
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1. DEFINED TERMS. Capitalized terms used herein shall have the
meanings ascribed to them in the Sale and Servicing Agreement unless otherwise
defined herein.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, ____________, _______.
"Subsequent Transfer Date" shall mean, with respect to the
Subsequent Receivables conveyed hereby, __________, ____.
2. SCHEDULE OF RECEIVABLES. Annexed hereto is a supplement to
Schedule A to the Sale and Servicing Agreement listing the Receivables that
constitute the Subsequent Receivables to be conveyed pursuant to this Agreement
on the Subsequent Transfer Date.
3. CONVEYANCE OF SUBSEQUENT RECEIVABLES TO TRANSFEROR. In
consideration of the Transferor's delivery to or upon the order of the Seller of
$[_______] , the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Transferor, without recourse (except as expressly
provided in the Sale and Servicing Agreement), all right, title and interest of
the Seller in and to:
(a) the Subsequent Receivables, and all moneys due thereon, on
or after the related Subsequent Cutoff Date and all Net Liquidation
Proceeds with respect to such Receivables;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent Receivables and any other interest of
the Seller in such Financed Vehicles;
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<PAGE>
(c) any proceeds with respect to the Subsequent Receivables from
claims on any physical damage, credit life or disability insurance
policies covering Financed Vehicles or Obligors;
(d) all rights under any Service Contracts on the related
Financed Vehicles;
(e) the related Receivables Files;
(f) the proceeds of any and all of the foregoing.
4. CONVEYANCE OF SUBSEQUENT RECEIVABLES TO DEPOSITOR. For good
and valuable consideration, the Transferor does hereby transfer, assign, set
over and otherwise convey to the Depositor, without recourse, (except as
expressly provided in the Sale and Servicing Agreement), all right, title and
interest of the Transferor in and to:
(a) the Subsequent Receivables, and all moneys due thereon, on
or after the related Subsequent Cutoff Date and all Net Liquidation
Proceeds with respect to such Receivables;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent Receivables and any other interest of
the Seller in such Financed Vehicles;
(c) any proceeds with respect to the Subsequent Receivables from
claims on any physical damage, credit life or disability insurance
policies covering Financed Vehicles or Obligors;
(d) all rights under any Service Contracts on the related
Financed Vehicles;
(e) the related Receivables Files;
(f) its rights and benefits, but none of its obligations or
burdens, under the Subsequent Transfer Agreement, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of the Seller under the Sale and Servicing Agreement, on or
after the Subsequent Cutoff Date; and
(g) the proceeds of any and all of the foregoing.
5. CONVEYANCE OF SUBSEQUENT RECEIVABLES TO TRUST. For good and
valuable consideration, the Depositor does hereby transfer, assign, set over and
otherwise convey to the Trust, without recourse, (except as expressly provided
in the Sale and Servicing Agreement), all right, title and interest of the
Depositor in and to:
(a) the Subsequent Receivables, and all moneys due thereon, on
or after the related Subsequent Cutoff Date and all Net Liquidation
Proceeds with respect to such Receivables;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent Receivables and any other interest of
the Seller in such Financed Vehicles;
(c) any proceeds with respect to the Subsequent Receivables from
claims on any physical damage, credit life or disability insurance
policies covering Financed Vehicles or Obligors;
(d) all rights under any Service Contracts on the related
Financed Vehicles;
(e) the related Receivables Files;
(f) its rights and benefits, but none of its obligations or
burdens, under the Subsequent Transfer Agreement, including the delivery
requirements, representations and warranties and the cure and repurchase
obligations of the Seller and the Transferor under the Sale and Servicing
Agreement, on or after the Subsequent Cutoff Date; and the proceeds of any
and all of the foregoing.
(g) the proceeds of any and all of the foregoing.
6. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
hereby represents and warrants to the Transferor and the Depositor as of the
date of this Agreement and as of the Subsequent Transfer Date that:
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<PAGE>
(a) LEGAL, VALID AND BINDING OBLIGATION. This Agreement
constitutes a legal, valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or equity).
(b) ORGANIZATION AND GOOD STANDING. The Seller is duly organized
and validly existing as a limited liability company in good standing under
the laws of the State of [__________], with the power and authority to own
its properties and to conduct its business as such properties are
currently owned and such business is presently conducted, and had at all
relevant times, and has, the power, authority and legal right to acquire
and own the Receivables.
(c) DUE QUALIFICATION. The Seller is duly qualified to do
business as a limited liability company 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 shall
require such qualifications.
(d) POWER AND AUTHORITY. The Seller has the power and authority
to execute and deliver this Agreement and to carry out its terms; the
Seller has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Issuer and the Seller and
shall have duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of
this Agreement has been duly authorized by the Seller by all necessary
corporate action.
(e) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Seller enforceable in accordance with
its terms.
(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the certificate of formation or limited liability company agreement
of the Seller, or any indenture, agreement or other instrument to which
the Seller is a party or by which it shall be bound; nor result in the
creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the best of
the Seller's knowledge, any order, rule or regulation applicable to the
Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(g) NO PROCEEDINGS. To the Seller's best knowledge, there are no
proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties: (i)
asserting the invalidity of this Agreement, the Indenture or any of the
other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the
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Notes or the Certificates or the consummation of any of the transactions
contemplated by this Agreement, the Indenture or any of the other Basic
Documents, (iii) seeking any determination or ruling that might materially
and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement, the
Indenture, any of the other Basic Documents, the Notes or the Certificates
or (iv) which might adversely affect the Federal or state income tax
attributes of the Notes or the Certificates.
(h) PRINCIPAL BALANCE. The aggregate Principal Balance of the
Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Transferor pursuant to this Agreement as of the Subsequent
Cutoff Date is $[___________].
7. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The Depositor
hereby represents and warrants to the Depositor as of the date of this Agreement
and as of the Subsequent Transfer Date that:
(a) LEGAL, VALID AND BINDING OBLIGATION. This Agreement
constitutes a legal, valid and binding obligation of the Depositor,
enforceable against the Depositor in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or equity).
(b) ORGANIZATION AND GOOD STANDING. The Depositor is duly
organized and validly existing as a corporation in good standing under the
laws of the State of Delaware, with the power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant
times, and has, the power, authority and legal right to acquire and own
the Receivables.
(c) DUE QUALIFICATION. The Depositor is duly qualified to do
business as a 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 shall require such
qualifications.
(d) POWER AND AUTHORITY. 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 Issuer and the
Seller and shall have duly authorized such sale and assignment to the
Issuer by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the Seller by
all necessary corporate action.
(e) BINDING OBLIGATION. This Agreement constitutes a legal,
valid and binding obligation of the Depositor enforceable in accordance
with its terms.
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<PAGE>
(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the certificate of formation or the limited liability company
agreement of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Depositor's knowledge, any order, rule or
regulation applicable to the Depositor of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(g) NO PROCEEDINGS. To the Depositor's best knowledge, there are
no proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its properties:
(i) asserting the invalidity of this Agreement, the Indenture or any of
the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation
of any of the transactions contemplated by this Agreement, the Indenture
or any of the other Basic Documents, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of,
this Agreement, the Indenture, any of the other Basic Documents, the Notes
or the Certificates or (iv) which might adversely affect the Federal or
state income tax attributes of the Notes or the Certificates.
(h) PRINCIPAL BALANCE. The aggregate Principal Balance of the
Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Depositor pursuant to this Agreement as of the Subsequent
Cutoff Date is $[________].
8. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. The
Transferor hereby represents and warrants to the Depositor as of the date of
this Agreement and as of the Subsequent Transfer Date that:
(a) LEGAL, VALID AND BINDING OBLIGATION. This Agreement
constitutes a legal, valid and binding obligation of the Transferor,
enforceable against the Transferor in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights in general and
except as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or equity).
(b) ORGANIZATION AND GOOD STANDING. The Transferor is duly
organized and validly existing as a limited liability company in good
standing under the laws of the State of [__________], with the power and
authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently
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<PAGE>
conducted, and had at all relevant times, and has, the power, authority
and legal right to acquire and own the Receivables.
(c) DUE QUALIFICATION. The Transferor is duly qualified to do
business as a limited liability company 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 shall
require such qualifications.
(d) POWER AND AUTHORITY. The Transferor has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Transferor has full power and authority to sell and assign the
property to be sold and assigned to and deposited with the Issuer and the
Seller and shall have duly authorized such sale and assignment to the
Issuer by all necessary corporate action; and the execution, delivery and
performance of this Agreement has been duly authorized by the Seller by
all necessary corporate action.
(e) BINDING OBLIGATION. This Agreement constitutes a legal, valid
and binding obligation of the Transferor enforceable in accordance with
its terms.
(f) NO VIOLATION. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do
not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the certificate of formation or the limited liability company
agreement of the Transferor, or any indenture, agreement or other
instrument to which the Transferor is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement or
other instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Transferor `s knowledge, any order, rule or
regulation applicable to the Transferor of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties.
(g) NO PROCEEDINGS. To the Transferor's best knowledge, there
are no proceedings or investigations pending, or threatened, before any
court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Transferor or its properties:
(i) asserting the invalidity of this Agreement, the Indenture or any of
the other Basic Documents, the Notes or the Certificates, (ii) seeking to
prevent the issuance of the Notes or the Certificates or the consummation
of any of the transactions contemplated by this Agreement, the Indenture
or any of the other Basic Documents, (iii) seeking any determination or
ruling that might materially and adversely affect the performance by the
Transferor of its obligations under, or the validity or enforceability of,
this Agreement, the Indenture, any of the other Basic Documents, the Notes
or the Certificates or (iv) which might adversely affect the Federal or
state income tax attributes of the Notes or the Certificates.
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<PAGE>
(h) PRINCIPAL BALANCE. The aggregate Principal Balance of the
Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Depositor pursuant to this Agreement as of the Subsequent
Cutoff Date is $[________].
9. CONDITIONS PRECEDENT. The obligation of the Transferor,
Depositor and Trust to acquire the Receivables hereunder is subject to the
satisfaction, on or prior to the Subsequent Transfer Date, of the following
conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations
and warranties made by the Seller, the Transferor and Depositor in this
Agreement and in the Sale and Servicing Agreement (provided, however, that
the representations and warranties set forth in Section 3.1 of the Sale
and Servicing Agreement shall apply solely to the applicable Subsequent
Receivables) shall be true and correct as of the date of this Agreement
and as of the Subsequent Transfer Date.
(b) SALE AND SERVICING AGREEMENT CONDITIONS. Each of the
conditions set forth in Section 2.2(b) to the Sale and Servicing Agreement
shall have been satisfied.
(c) ADDITIONAL INFORMATION. The Seller shall have delivered to
the Transferor such information as was reasonably requested by the
Transferor to satisfy itself as to (i) the accuracy of the representations
and warranties set forth in Section 4 of this Agreement and in Section 3.1
of the Sale and Servicing Agreement and (ii) the satisfaction of the
conditions set forth in this Section 9.
10. RATIFICATION OF AGREEMENT. As supplemented by this Agreement,
the Sale and Servicing Agreement is in all respects ratified and confirmed and
the Sale and Servicing Agreement as so supplemented by this Agreement shall be
read, taken and construed as one and the same instrument.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
12. It is expressly understood and agreed by the parties hereto
that (a) this Subsequent Transfer Agreement is executed and delivered by
[_________________], not individually or personally but solely as Owner Trustee
of [_____________________] 200[_]-[_], in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Trust is made and
intended not as personal representations, undertakings and agreements by
[_________________] but is made and intended for the purpose for binding only
the Trust, (c) nothing herein contained shall be construed as creating any
liability on [_________________], individually or personally, to perform any
covenant either expressed or implied contained herein, all such liability, if
any, being expressly waived by the parties hereto and (d) under no circumstances
shall [_________________] be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by the
Trust under this Subsequent Transfer Agreement or any other related documents.
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<PAGE>
13. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK INCLUDING TITLE 14 OF THE NEW YORK
GENERAL OBLIGATIONS LAW, 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.
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<PAGE>
IN WITNESS WHEREOF, the Issuer, the Seller and the Servicer have
caused this Agreement to be duly executed and delivered by their respective duly
authorized officers as of the day and the year first above written.
[_____________________] 200[_]-[_] by
[_________________] not in its
individual capacity but solely as
Owner Trustee on behalf of the
Trust,
By:____________________________________
Name:
Title:
[______________], Transferor,
By:____________________________________
Name:
Title:
[__________________], Seller and
Servicer,
By:____________________________________
Name:
Title:
[___________________], Depositor,
By:____________________________________
Name:
Title:
<PAGE>
[__________________], Backup Servicer
By:____________________________________
Name:
Title:
[__________________], Custodian
By:____________________________________
Name:
Title:
[__________________], not in its
individual capacity but solely as
Indenture Trustee
By:____________________________________
Name:
Title:
<PAGE>
EXHIBIT B
FORM OF MONTHLY CERTIFICATEHOLDER STATEMENT
[_____________________] 200[_]-[_]
CLASS A CERTIFICATES
CLASS R CERTIFICATES
Payment Date:
Collection Period:
Under the Sale and Servicing Agreement dated as of [________],
200[_] among [_____________________] 200[_]-[_], a [__________] business trust
(the "Issuer"), [______________], a [_____________] company, as transferor (the
"Transferor") [__________________], a [____________] company and as seller and
servicer (the "Seller" and the "Servicer"), [___________________], as depositor
(the "Depositor) and [__________________], as Backup Servicer and Custodian, the
Servicer is required to prepare certain information each month regarding current
distributions to Certificateholders and the performance of the Trust during the
previous month. The information that is required to be prepared with respect to
the Payment Date and Collection Period listed above is set forth below. Certain
of the information is presented on the basis of an original principal amount of
$1,000 per Certificate, and certain other information is presented based upon
the aggregate amounts for the Trust as a whole.
A. Information Regarding the Current Monthly Distribution.
14. CERTIFICATES.
(a) The aggregate amount of the
distribution to the Certificateholders . $________
(b) The amount of the distribution set
forth in paragraph A.1.(a) above in
respect of interest on the Certificates $________
(c) The amount of the distribution set
forth in paragraph A.1.(a) above in
respect of principal of the
Certificates ........................... $________
(d) The amount of the distribution set
forth in paragraph A.1.(a) above per
$1,000 interest in the Certificates .... $________
(e) The amount of the distribution set
forth in paragraph A.1.(b) above per
$1,000 interest in the Certificates .... $________
(f) The amount of the distribution set
forth in paragraph A.1.(c) above per
$1,000 interest in the Certificates .... $________
(g) The amount of the distribution set
forth in paragraph A.1.(d) above per
$1,000 interest in the Certificates..... $________
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<PAGE>
B. Information Regarding the Performance of the Trust.
1. POOL BALANCE AND CERTIFICATE PRINCIPAL BALANCE.
(a) The Pool Balance at the close of
business on the last day of the $________
Collection Period .......................
(b) The Certificate Principal Balance after
giving effect to payments allocated to
principal as set forth in Paragraph $________
A.1(c) ..................................
(c) The Certificate Pool Factor after giving
affect to the payments set forth in $________
paragraph A.1(c) ........................
(d) The amount of aggregate Realized Losses
for the second preceding Collection $________
Period ..................................
(e) The aggregate Purchase Amount for all
Receivables that were repurchased in the
Collection Period ....................... $________
2. SERVICING FEE.
(a) The aggregate amount of the Servicing Fee
paid to the Servicer with respect to
the preceding Collection Period.......... $________
3. PAYMENT SHORTFALLS.
(a) The amount of the Certificates' Interest
Carryover Shortfall after giving effect
to the payments set forth in paragraph
A.1(b) above............................. $________
(b) The amount of the Certificateholders' $________
Interest Carryover Shortfall set forth
in paragraph B.3.(a) above per $1,000
interest with respect to the Certificate:
(c) The amount of the Certificates' $________
Principal Carryover Shortfall after
giving effect to the payments set forth
in paragraph A.1(b) above ...............
(d) The amount of the Certificateholders' $________
Principal Carryover Shortfall set forth
in paragraph B.3.(a) above per $1,000
interest with respect to the Certificate:
4. TRANSFER OF SUBSEQUENT RECEIVABLES.
(a) Aggregate amount on deposit in the
Pre-Funding Account on such Payment Date
after giving effect to all withdrawals
therefrom on such Payment Date........... $________
(b) Aggregate amount on deposit in the
Capitalized Interest Account on such
distribution date after giving effect $________
giving effect to all withdrawals
therefrom on such Payment Date........... $________
(c) Aggregate amount on deposit in the
Pre-Funding Account on the final
Subsequent Transfer Date after $________
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<PAGE>
giving effect to all withdrawals therefrom
on such Payment Date....................
(d) The amount set forth in paragraph B.4(a)
per $1,000 interest in the Certificates $________
(e) The amount set forth in paragraph B.4(b)
to be distributed to Certificateholders
per $1,000 interest in the Certificates... $________
(f) The amount set forth in paragraph B.4(c)
to be distributed to Certificateholders per
$1,000 interest in the Certificates... $________
5. (a) The aggregate amount of collections by the
Servicer during the preceding Collection Period.
(b) The aggregate amount which was received
by the Trust from the Servicer............ $........
(c) The aggregate amount of reimbursements to
the Security Insurer...................... $........
(d) The number of Receivables that are
delinquent for over:
30 days.................................. $........
60 days.................................. $........
90 days.................................. $........
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<PAGE>
EXHIBIT C
FORM OF MONTHLY NOTEHOLDER STATEMENT
[__________________] TRUST 200[_]-[_]
Class A-1 [______]% Asset Backed Notes
Class A-2 [______]% Asset Backed Notes
Class A-3 [______]% Asset Backed Notes
Payment Date:
Collection Period:
Under the Sale and Servicing Agreement dated as of [________],
200[_] among [_____________________] 200[_]-[_], a [__________] business trust
(the "Issuer"), [______________], a [______________] company, as transferor (the
"Transferor") [__________________], a [______________] company and as seller and
servicer (the "Seller" and the "Servicer"), [___________________], as depositor
(the "Depositor) and [__________________], as Backup Servicer and Custodian, the
Servicer is required to prepare certain information each month regarding current
distributions to Noteholders and the performance of the Trust during the
previous month. The information that is required to be prepared with respect to
the Payment Date and Collection Period listed above is set forth below. Certain
of the information is presented on the basis of an original principal amount of
$1,000 per Note, and certain other information is presented based upon the
aggregate amounts for the Trust as a whole.
A. Information Regarding the Current Monthly Distribution.
1. Notes.
(a) The aggregate amount of the distribution with
respect to:
the Class A-1 Notes.......................... $________
the Class A-2 Notes.......................... $________
the Class A-3 Notes.......................... $________
(b) The amount of the distribution set forth in $________
paragraph A.1.(a) above in respect of interest
on:
the Class A-1 Notes..........................
the Class A-2 Notes.......................... $________
the Class A-3 Notes.......................... $________
(c) The amount of the distribution set forth in $_________
paragraph A.1.(a) above in respect of
principal of:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
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(d) The amount of the distribution in A.1.(a)
payable pursuant to a claim on the Note
Policy with respect to:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
(e) The remaining outstanding balance available to
be drawn under the Note Policy
(f) The amount of the distribution set forth in
paragraph A.1.(a) above per $1,000 interest
in:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
(g) The amount of the distribution set forth in
paragraph A.1.(b) above per $1,000 interest
in:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes ......................... $_________
the Class A-3 Notes ......................... $_________
(h) The amount of the distribution set forth in
paragraph A.1.(c) above per $1,000 interest
in:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
(i) The amount of the distribution set forth in
paragraph A.1.(d)above per $1,000 interest in:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
B. Information Regarding the Performance of the Trust.
1. Pool Balance and Note Principal Balance.
(a) The Pool Balance at the close of business on
the last day of the Collection Period.......
(b) The aggregate outstanding principal amount of
each Class of Notes after giving effect to
payments allocated to principal as set forth
in Paragraph A.1(c) above with respect to:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
(c) The Note Pool Factor for each Class of Notes
after giving affect to the payments set forth
in paragraph A.1(c) with respect to:
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<PAGE>
the Class A-1 Notes ......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-3 Notes.......................... $_________
(d) The amount of aggregate Realized Losses for $_________
the second preceding Collection Period.......
(e) The aggregate Purchase Amount for all $_________
Receivables that were repurchased in the
Collection Period............................
2. Servicing Fee.
(a) The aggregate amount of the Servicing Fee paid
to the Servicer with respect to the preceding
Collection Period...........................
3. Payment Shortfalls
(a) The amount of the Noteholders' Interest Carryover
Shortfall after giving effect to the payments
set forth in paragraph A.1(b) above with respect to:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
(b) The amount of the Noteholders' Interest
Carryover Shortfall set forth in paragraph
B.3.(a) above per $1,000 interest with
respect to:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
(c) The amount of the Noteholders' Principal
Carryover Shortfall after giving effect to the
payments set forth in paragraph A.1..........
(b) above with respect to:.......................
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
(d) The amount of the Noteholders' Principal
Carryover Shortfall set forth in paragraph
B.3.(a) above per $1,000 interest with respect
to:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
C-3
<PAGE>
4. Transfer of Subsequent Receivables.
(a) Aggregate amount on deposit in the Pre-Funding
Account on such Payment Date after giving
effect to all withdrawals therefrom on such
Payment Date................................. $_________
(b) Aggregate amount on deposit in the Capitalized
Interest Account on such distribution date
after giving effect to all withdrawals
therefrom on such Payment Date............... $_________
(c) Aggregate amount on deposit in the Pre- Funding
Account on the final Subsequent Transfer Date
after giving effect to all withdrawals therefrom
on such Payment Date........................ $_________
(d) the amount set forth in paragraph B.4(a) per
$1,000 interest in:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
(e) the amount set forth in paragraph B.4(b) to be
distributed to Noteholders per $1,000 interest
in:
the Class A-1 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
the Class A-2 Notes.......................... $_________
(f) the amount set forth in paragraph B.4(c) to be
distributed to Noteholders per $1,000 interest
in:
the Class A-1 Notes $_________
he Class A-2 Notes $_________
the Class A-2 Notes $_________
5. (a) The aggregate amount of collections by the
Servicer during the preceding Collection Period.
(b) The aggregate amount which was received by the
Trust from the Servicer
(c) The aggregate amount of reimbursements to the
Security Insurer
(d) The number of Receivables that are delinquent
for over:
30 days...................................... $_________
60 days...................................... $_________
90 days...................................... $_________
C-4
<PAGE>
EXHIBIT D
Form of Servicer's Certificate
[Omitted]
D-5
<PAGE>
EXHIBIT E
Form of Policy
[SEE EXHIBIT 99.1]
E-1
<PAGE>
EXHIBIT F
Form of Stamp
THIS CONTRACT/NOTE IS SUBJECT TO A SECURITY INTEREST GRANTED TO
[__________________], AS TRUSTEE, FOR WHICH UCC-1 FINANCING STATEMENTS HAVE BEEN
FILED WITH THE SECRETARY OF STATE OF [__________]. AS THE LIEN WILL BE RELEASED
ONLY BY FILINGS IN SUCH OFFICES, PURCHASE DOCUMENTS MUST REFER TO SUCH FILINGS
TO DETERMINE WHETHER THE LIEN HAS BEEN RELEASED.
[________________________] TRUST 200[_]-[_]
CLASS A-1 [______]% Asset Backed Notes
CLASS A-2 [______]% Asset Backed Notes
CLASS A-3 [______]% Asset Backed Notes
--------------------------------
INDENTURE
Dated as of [________], 200[_]
------------------------------
[------------------]
Trustee, and Indenture Collateral Agent
F-1
<PAGE>
>
SCHEDULE A
Schedule of Receivables
<PAGE>
SCHEDULE B
Location of Receivables
Exhibit 5.1
[Letterhead of Cadwalader, Wickersham & Taft]
May 16, 2000
PaineWebber Asset Acceptance Corporation
1285 Avenue of the Americas
New York, New York 10019
Re: Asset-Backed Certificates and Asset-Backed Notes
Ladies and Gentlemen:
We have acted as special counsel to PaineWebber Asset Acceptance
Corporation (the "Depositor") in connection with the Registration Statement on
Form S-3 (the "Registration Statement"), which Registration Statement is being
filed with the Securities and Exchange Commission (the "Commission"), pursuant
to the Securities Act of 1933, as amended (the "Act"). The Prospectuses forming
a part of the Registration Statement describe Asset-Backed Certificates
("Certificates") and Asset-Backed Notes ("Notes") to be sold by the Depositor in
one or more series (each, a "Series") of Certificates or Notes, as applicable.
Each Series of Certificates will be issued under a separate pooling and
servicing agreement (each, a "Pooling and Servicing Agreement") among the
Depositor, a servicer (a "Servicer"), a trustee (a "Trustee") and, if
applicable, such other parties to be identified in the Prospectus Supplement for
such Series. Each Series of Notes will be issued under a separate indenture
(each, an "Indenture") between the Depositor or a trust formed by the Depositor
(in either case, the "Issuer"), an indenture trustee (an "Indenture Trustee")
and, if applicable, such other parties to be identified in the Prospectus
Supplement for such Series. The form of Pooling and Servicing Agreement (a
"Pooling and Servicing Agreement") is being filed as an exhibit to the
Registration Statement. The form of Indenture (an "Indenture") is being filed as
an exhibit to the Registration Statement. Capitalized terms used and not
otherwise defined herein have the respective meanings given to such terms in the
Registration Statement.
In rendering the opinions set forth below, we have examined and
relied upon the following: (1) the Registration Statement, including the
Prospectuses and the forms of Prospectus Supplements constituting a part
thereof, each in the form filed with the Commission; (2) the form of Pooling and
Servicing Agreement; (3) the form of Indenture; and (4) such other documents,
materials and authorities as we have deemed necessary in order to enable us to
render our opinion set forth below. We express no opinion with respect to any
Series of Certificates or Notes, as applicable, for which we do not act as
counsel to the Depositor. In addition, we express no opinion concerning the laws
of any jurisdiction other than the laws of the State of New York and, to the
extent expressly referred to in this opinion letter, the federal laws of the
United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
1. When a Pooling and Servicing Agreement for a Series of
Certificates has been duly and validly authorized, executed and
delivered by the Depositor, a Servicer, a Trustee and any other
party thereto, such Pooling and Servicing Agreement will constitute
a legal, valid and binding agreement of the Depositor, enforceable
against the Depositor in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, receivership or other laws relating to
creditors' rights generally, and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law
or in equity), and except that the enforcement of rights with
respect to indemnification and contribution obligations may be
limited by applicable law or considerations of public policy.
2. When an Indenture for a Series of Notes has been duly and
validly authorized, executed and delivered by the Depositor, an
Indenture Trustee and any other party thereto, such Indenture will
constitute a legal, valid and binding agreement of the Issuer,
enforceable against the Issuer in accordance with its terms, subject
to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, receivership or other laws relating to
creditors' rights generally, and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law
or in equity), and except that the enforcement of rights with
respect to indemnification and contribution obligations may be
limited by applicable law or considerations of public policy.
3. When a Pooling and Servicing Agreement for a Series of
Certificates has been duly and validly authorized, executed and
delivered by the Depositor, a Servicer, a Trustee and any other
party thereto, and the Certificates of such Series have been duly
executed, authenticated, delivered and sold as contemplated in the
Registration Statement, such Certificates will be legally and
validly issued, fully paid and nonassessable, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, receivership or other laws relating to creditors' rights
generally, and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity),
and will be entitled to the benefits provided by such Pooling and
Servicing Agreement.
4. When an Indenture for a Series of Notes has been duly and
validly authorized, executed and delivered by the Issuer, an
Indenture Trustee and any other party thereto, and the Notes of such
Series have been duly executed, authenticated, delivered and sold as
contemplated in the Registration Statement, such Notes will be
binding obligations of the Issuer, enforceable against the Issuer in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium,
receivership or other laws relating to creditors' rights generally,
and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), and will
be validly issued and outstanding and entitled to the benefits
provided by such Indenture.
5. The description of federal income tax consequences
appearing under the heading "Federal Income Tax Considerations" in
the Prospectuses accurately describes the material federal income
tax consequences to holders of Offered Certificates or Offered
Notes, as applicable, under existing law and subject to the
qualifications and assumptions stated therein.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm under the headings
"Legal Matters" and "Federal Income Tax Considerations" in the Prospectuses,
which are a part of the Registration Statement. This consent is not to be
construed as an admission that we are a person whose consent is required to be
filed with the Registration Statement under the provisions of the Act.
Very truly yours,
/s/ Cadwalader, Wickersham & Taft
===============================================================================
Exhibit 10.1
FORM OF RECEIVABLES SALE AGREEMENT
by and among
[NAME OF ORIGINATOR]
as Originator,
[NAME OF TRANSFEROR]
as Transferor
and
[NAME OF TRANSFEROR]
as Transferor
Dated as of [_____], 200[_]
===============================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
Section 1.01Definitions...................................................1
Section 1.02Other Definitional Provisions.................................1
ARTICLE II
TRANSFER OF CONVEYED ASSETS
Section 2.01Direction; Acquisition; Capital Contribution..................2
Section 2.02Custody of Contract Files.....................................4
Section 2.03Intention of the Parties; Grant of Security Interest..........4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01Representations and Warranties of the Originator..............4
Section 3.02Representations and Warranties of the Transferors.............7
Section 3.03Representations and Warranties of the Originator with
respect to the Conveyed Assets.............................9
Section 3.04Substitution of Contracts and Equipment by the Originator.....9
ARTICLE IV
COVENANTS
Section 4.01Originator Covenants.........................................10
Section 4.02Transferor Covenants.........................................13
Section 4.03Transfer of Conveyed Assets..................................14
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01Conditions to Transferors Obligations........................15
Section 5.02Conditions to the Originator's Obligations...................15
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<PAGE>
ARTICLE VI
TERMINATION; LIABILITIES
Section 6.01Termination..................................................16
Section 6.02Effect of Termination........................................16
Section 6.03Liabilities..................................................16
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01Amendment....................................................16
Section 7.02GOVERNING LAW................................................17
Section 7.03Notices......................................................17
Section 7.04Severability of Provisions...................................17
Section 7.05Assignment...................................................17
Section 7.06Further Assurances...........................................18
Section 7.07No Waiver; Cumulative Remedies...............................18
Section 7.08Counterparts.................................................18
Section 7.09Binding Effect: Third-Party Beneficiaries...................18
Section 7.10Merger and Integration.......................................18
Section 7.11Headings.....................................................18
Section 7.12Schedules and Exhibits.......................................18
Section 7.13No Bankruptcy Petition Against the Transferors, the
Manager or the Trust......................................18
Schedule I -- List of Initial Contracts
Exhibit A -- Form of Subsequent Receivables Sale Agreement
-ii-
<PAGE>
This RECEIVABLES SALE AGREEMENT, dated as of [_______] [__], 200[_]
(this "Agreement"), by and among [NAME OF ORIGINATOR], a [____________________]
(the "Originator"), [NAME OF TRANSFEROR], a [____________________] ("Transferor
I"), and [NAME OF TRANSFEROR], a [____________________] ("Transferor II" and,
together with Transferor I, the "Transferors").
WITNESSETH:
WHEREAS, the Originator, in the ordinary course of its business,
acquires and originates equipment contracts in the United States; and
WHEREAS, the Originator desires to convey, transfer, contribute and
assign all of its right title and interest in and to (x) Contracts, other than
any Contracts which are "true" or "operating" leases, to Transferor I, and (y)
any Contracts which are "true" or "operating" leases, the ownership interest or
security interest of the Originator in each item of Equipment and any Residual
Receipts to Transferor II, each upon the terms and conditions hereinafter set
forth; and
WHEREAS, the Originator and the Transferors agree that all
representations, warranties, covenants and agreements made by it herein shall be
for the benefit of the Depositor, the Collateral Agent, the Noteholders, the
Residual Holders, the Note Insurer, the Owner Trustee and the Indenture Trustee.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 DEFINITIONS. Whenever used in this Agreement,
capitalized terms used herein but not defined herein shall have the meanings set
forth in Annex A to the Indenture, dated as of [______] [__], 200[_] (the
"Indenture"), by and among [___________________] Trust 200[_]-[__], as issuer
(the "Issuer"), the Originator, as servicer (in such capacity, the "Servicer"),
and [___________________], as indenture trustee (the "Indenture Trustee") and as
back-up servicer (the "Back-up Servicer").
Section 1.02 OTHER DEFINITIONAL PROVISIONS.
(a) Terms used in Related Documents. Each term defined in this
Agreement will have the meaning assigned to such term in this Agreement when
used in any certificate or other document made or delivered pursuant to this
Agreement, unless such term is otherwise defined therein.
<PAGE>
(b) Accounting Terms. As used in this Agreement, accounting terms
which are not defined pursuant to Section 1.01 have the respective meanings
given to them under GAAP, as in effect on the date of this Agreement. To the
extent that the definitions of accounting terms in this Agreement are
inconsistent with the meanings of such terms under GAAP, the definitions
contained in this Agreement will control.
(c) "Hereof," etc. The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement will refer to this
Agreement as a whole and not to any particular provision of this Agreement; and
Article, Section, Schedule and Exhibit references contained in this Agreement
are references to Articles, Sections, Schedules and Exhibits in or to this
Agreement, unless otherwise specified.
(d) Number and Gender. Each defined term used in this Agreement
has a comparable meaning when used in its plural or singular form. Each
gender-specific term used in this Agreement has a comparable meaning whether
used in a masculine, feminine or gender-neutral form.
(e) Including. Whenever the term "including" (whether or not that
term is followed by the phrase "but not limited to" or "without limitation" or
words of similar effect) is used in this Agreement in connection with a listing
of items within a particular classification, that listing will be interpreted to
be illustrative only and will not be interpreted as a limitation on, or
exclusive listing of, the items within that classification.
ARTICLE II
TRANSFER OF CONVEYED ASSETS
Section 2.01 DIRECTION; ACQUISITION; CAPITAL CONTRIBUTION. (a)
Subject to the terms and condition of this Agreement, the Originator hereby
agrees to sell, convey and contribute, on the Closing Date, all of its right,
title and interest in and to the Initial Conveyed Assets to the Transferors, as
set forth in subsection (c) below, which sale, contribution and conveyance shall
be evidenced by the execution of this Agreement. Upon receipt of the
consideration specified in subsection (d) below, the Originator hereby releases
all of its right, title and interest in, to and under the related Initial
Conveyed Assets, such receipt being hereby acknowledged by the execution of this
Agreement by the Originator.
(b) Each sale, conveyance and contribution of Subsequent Conveyed
Assets shall be evidenced by the execution and delivery by the Originator and
Transferors of a Subsequent Receivables Sale Agreement in the form of Exhibit A
hereto. Each such sale, conveyance and contribution shall be effective as of the
related Subsequent Funding Date.
(c) The transfers occurring on each Conveyance Date shall be
consummated such that those Conveyed Assets which are considered "financial
assets" within the meaning of the Statement of Financial Accountings Standards
No. 125 ("FAS 125") (such Conveyed Assets include,
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<PAGE>
without limitation, the Contracts, other than any Contract which is an
"operating" or "true" lease) are acquired by Transferor I, and such that those
Conveyed Assets which are not considered "financial assets" within the meaning
of FAS 125 (such Conveyed Assets include, without limitation, any Contract which
is an "operating" or "true" lease, the ownership interest or security interest
of the Originator in each item of Equipment and any Residual Receipts) are
acquired by Transferor II.
(d) In consideration of (x) the receipt by the Originator of a
[__]% membership interest in each of the Transferors, (y) the receipt by the
Originator of $[_________] and the Class B Notes from the Transferors and (z)
other good and valuable consideration, the Originator hereby conveys to the
applicable Transferor all of its right, title and interest in, to and under the
Initial Conveyed Assets, whether now existing or hereinafter arising, without
recourse, except as may be set forth herein. The purchase price for any
Subsequent Conveyed Assets will be paid by the applicable Transferor to the
Originator in immediately available funds on the related Subsequent Funding Date
in accordance with the terms of the related Subsequent Receivables Sale
Agreement. In connection with the transfers on each Conveyance Date, the
Originator hereby makes a capital contribution to the related Transferor in the
amount by which the fair market value of the related Conveyed Assets exceeds the
cash consideration received by the Originator in connection therewith.
(e) In connection with each sale, contribution and conveyance of
Conveyed Assets, the Originator agrees to record and file, at its own expense,
financing statements (and thereafter will file continuation statements with
respect to such financing statements) with respect to such Conveyed Assets,
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary to perfect and to maintain the perfection of, (x)
the transfer, conveyance and contribution of such Conveyed Assets (subject to
the Filing Requirements with respect to the Equipment) from the Originator to
the related Transferors, (y) the pledge of such Conveyed Assets (subject to the
Filing Requirements with respect to the Equipment) from the Transferors to the
Trust as security for the Pledged Notes, and (z) the pledge of the related
Pledged Property from the Trust to the Indenture Trustee, on behalf of the
Noteholders and the Note Insurer, and to deliver a file-stamped copy of such
financing statements or other evidence of such filings to the related Transferor
(and copies to the Indenture Trustee and the Note Insurer) on or prior to each
Conveyance Date; provided, however, that the Contract Files (including each
original executed Contract) will not be physically delivered to either of the
Transferors, but instead will be held by the Collateral Agent, on behalf of the
Indenture Trustee, as bailee for the Noteholders and the Note Insurer. In
addition, the Originator will assign to the Transferors any UCC-1 financing
statement filed by the Originator against the Source with respect to any
Contract originated by a Source.
(f) In connection with each sale, contribution and conveyance of
Conveyed Assets, the Originator shall, at its own expense, on or prior to the
related Conveyance Date, and with respect to Substitute Contracts, as soon as
possible, but in no event later than two (2) Business Days after the related
Conveyance Date (i) cause the Contract Management System to be marked with a
specified code (the "Contract Management Code") to show that such Conveyed
Assets have been assigned and transferred to the Transferors in accordance with
this Agreement or a Subsequent Receivables Transfer Agreement, as applicable,
subsequently pledged by the Transferors to the Trust in accordance with the
Receivables Pledge Agreement or a Subsequent Receivables Pledge Agreement, as
applicable, and such security interest was assigned by the Trust to the
Indenture Trustee, on behalf of the Noteholders and the Note Insurer, pursuant
to the Indenture or an Assignment, as applicable, and (ii) cause the Servicer to
prepare and hold on
-3-
<PAGE>
behalf of the Transferors and the Indenture Trustee, (x) the List of Contracts
on or prior to the Closing Date and (y) the List of Contracts as supplemented by
the List of Subsequent Contracts on or prior to each Subsequent Funding Date.
Pursuant to Section 3.04, the Originator from time to time may make capital
contributions of (A) Substitute Contracts to Transferor I and (B) the ownership
interest or security interest of the Originator in each item of Substitute
Equipment and any Residual Receipts to Transferor II, at any time pursuant to
Section 3.04. Upon delivery of any such List of Subsequent Contracts or List of
Substitute Contracts, the List of Contracts shall be deemed amended to
incorporate therein the information contained in such List of Subsequent
Contracts or List of Substitute Contracts, as applicable.
(g) Except for the obligations of the Originator pursuant to
Section 3.03 and Article IV of the Indenture with respect to any breach of a
representation, warranty or covenant made herein, the sale, contribution and
conveyance of the Contracts will be without recourse to the Originator.
Section 2.02 CUSTODY OF CONTRACT FILES. In connection with the sale,
contribution, assignment, transfer and conveyance of the Conveyed Assets to the
Transferors pursuant to this Agreement, the pledge of the Conveyed Assets to the
Trust, and the pledge of the Pledged Assets to the Indenture Trustee, for the
benefit of the Noteholders and the Note Issuer, the Collateral Agent, on behalf
of the Indenture Trustee, for the benefit of the Noteholders and the Note
Insurer, will retain the Contract Files, any related evidence of insurance and
payments and original executed counterparts of each Contract in accordance with
the terms of the Indenture.
Section 2.03 INTENTION OF THE PARTIES; GRANT OF SECURITY INTEREST.
It is the intention of the parties hereto that each transfer of Conveyed Assets
to be made pursuant to the terms hereof shall constitute a sale or capital
contribution of (x) the Contracts by the Originator to Transferor I, and (y) the
ownership interest or security interest of the Originator in each item of
Equipment and any Residual Receipts by the Originator to Transferor II, and, in
either case, not a loan. In the event, however, that a court of competent
jurisdiction were to hold that any such transfer constitutes a loan and not a
sale or capital contribution, it is the intention of the parties hereto that
this Agreement is deemed to be a security agreement and that the Originator
shall be deemed to have granted to the related Transferor as of the date hereof
a first priority perfected security interest in all of the Originator's right,
title and interest in, to and under the related Conveyed Asset, and all income
and proceeds thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01 REPRESENTATIONS AND WARRANTIES OF THE Originator. The
Originator hereby makes the following representations and warranties for the
benefit of the Indenture Trustee, the Depositor, the Trust, the Owner Trustee,
the Collateral Agent, the Noteholders, the Note Insurer and the Transferors.
Such representations and warranties are made as of the Closing Date (with
respect to Initial Conveyed Assets), any Subsequent Funding Date (with respect
to Subsequent Conveyed Assets transferred to the Transferors on such
-4-
<PAGE>
date) or any Transfer Date (with respect to Substitute Conveyed Assets
transferred to the Transferors on such date) and shall survive each sale,
contribution, assignment, transfer and conveyance by the Originator of the
Conveyed Assets to the Transferors and their respective successors and assigns.
(a) Organization and Good Standing. The Originator is a
corporation duly organized, validly existing and in good standing, under the
laws of the state of its incorporation, with corporate power and authority to
own its properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant times,
and now has, power, authority, and legal right to acquire and own the Conveyed
Assets;
(b) Due Qualification. The Originator is qualified as a foreign
corporation in any state where it is required to be so qualified to conduct its
business and enforce the Source Agreements to which it is a party, and has
obtained all necessary licenses, consents, approvals,
authorizations,...registrations or declarations as required by any Person or any
Governmental Authority under federal and state law, in each case, where the
failure to be so qualified, licensed, consented to, authorized, registered,
declared or approved could reasonably be expected to materially and adversely
affect the ability of the Originator to execute and deliver, or comply with the
terms of, this Agreement or any other Transaction Document to which it is a
party;
(c) Power and Authority. The Originator has the corporate power
and authority to execute and deliver this Agreement, the Source Agreements to
which it is a party, the Contracts and any other Transaction Document to which
it is a party, and to carry out their respective terms; the Originator has duly
authorized the sale, contribution, assignment, transfer and conveyance to the
Transferors of the Conveyed Assets by all necessary corporate action; and the
execution, delivery, and performance of this Agreement, the Source Agreements,
the Contracts and any other Transaction Document to which it is a party, has
been duly authorized by the Originator by all necessary corporate action;
(d) Due Execution and Delivery. Each of this Agreement, the Source
Agreements, the Contracts and any other Transaction Document to which it is a
party has been duly executed and delivered on behalf of the Originator;
(e) Valid Assignment; Binding Obligations. This Agreement
constitutes a valid sale, contribution, assignment, transfer and conveyance to
the Transferors of all right, title, and interest of the Originator in, to and
under the Conveyed Assets and the Conveyed Assets will be held by the
Transferors free and clear of any Lien of any Person claiming, through or under
the Originator, except for Liens permitted under, or to be created by the
Indenture; and this Agreement, and the other Transaction Documents to which it
is a party, when duly executed and delivered, will constitute legal, valid, and
binding obligations of the Originator enforceable against the Originator in
accordance with their respective terms subject as to enforceability to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law);
(f) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of, this Agreement, the Source
Agreements, the Contracts and the other Transaction Documents to which it is a
party will not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time) a
-5-
<PAGE>
default under, the articles of incorporation or bylaws of the Originator, or any
material term of any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Originator is a party or by which it is bound, or result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust, or other
instrument, other than this Agreement, or violate any law or any order,
injunction, writ, rule, or regulation applicable to the Originator of any court
or of any federal or state regulatory body, administrative agency, or other
Governmental Authority having jurisdiction over the Originator or any of its
properties which would have a material adverse effect on the Conveyed Assets;
(g) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Originator, threatened, before any court,
regulatory body, administrative agency, or other tribunal or Governmental
Authority (A) asserting the invalidity of this Agreement, (B) seeking to prevent
the consummation of any of the transactions contemplated by this Agreement, or
(C) seeking any determination or ruling that might (in the reasonable judgment
of the Originator) materially and adversely affect the performance by the
Originator of its obligations under, or the validity or enforceability of, this
Agreement;
(h) Tax Returns. The Originator has filed on a timely basis all
tax returns (federal, state and local) required to be filed and has paid or made
adequate provisions for the payment of all taxes, assessments and other
governmental charges due from the Originator;
(i) Pensions. Each pension plan or profit sharing plan to which
the Originator is a party has been fully funded in accordance with the
obligations of the Originator set forth in such plan;
(j) Valid Business Reasons. The Originator has valid business
reasons for selling its interests in the Conveyed Assets rather than
obtaining a loan with the Conveyed Assets as collateral;
(k) Insolvency. The Originator is not insolvent nor will it be
rendered insolvent by the transactions contemplated by this Agreement and the
Originator has an adequate amount of capital to conduct its business in the
ordinary course and to carry out its obligations hereunder and under each
Transaction Document to which it is a party;
(l) Principal Place of Business. The principal place of business
and chief executive office of the Originator is located at the respective
addresses set forth herein and, there are now no, and during the past four
months there have not been, any other locations where the Originator is located
(as that term is used in the UCC in the state of such location) except that,
with respect to such changes occurring after the date of this Agreement, as
shall have been specifically disclosed to the Servicer, the Depositor, the
Collateral Agent, the Note Insurer and the Indenture Trustee in writing;
(m) Accounting and Tax Treatment. The Originator will treat the
assignment of the related Conveyed Assets to the Transferors pursuant to Article
II as a sale and contribution of the Conveyed Assets to the capital of the
related Transferor for Federal income tax purposes, and as a contribution for
financial reporting and accounting purposes; the Originator will respond
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to any inquiries from third parties by indicating that the Conveyed Assets are
owned by the Transferors;
(n) Legal Name. The legal name of the Originator is as set forth
in the signature line of this Agreement and the Originator has not changed its
name since its incorporation and since its incorporation, the Originator has not
used, nor does the Originator now use, any trade names, fictitious names,
assumed names or "doing business as" names;
(o) Material Adverse Change. Since March 31, 200[_], no event has
occurred and is continuing which materially and adversely affects the
Originator's operations, including, without limitation, the ability of the
Originator to perform the transactions contemplated hereunder; and
(p) Fair Consideration. The consideration received by the
Originator as set forth herein is fair consideration having value reasonably
equivalent to or in excess of the value of the related Conveyed Assets conveyed
by it and the performance of the Originator's obligations hereunder.
Section 3.02 REPRESENTATIONS AND WARRANTIES OF THE TRANSFERORS. Each
of the Transferors hereby makes the following representations and warranties for
the benefit of the Originator, the Note Insurer, the Depositor, the Collateral
Agent, the Trust, the Owner Trustee, the Indenture Trustee and the Noteholders.
Such representations and warranties speak as of the Closing Date, each
Subsequent Funding Date and each Transfer Date.
(a) Organization and Good Standing. Each of the Transferors is a
limited liability company duly organized and validly existing in good standing
under the laws of the State of [____________], with full power and authority to
own its properties and to conduct its business as presently conducted and has
the power, authority and legal right to acquire and own the related Conveyed
Assets;
(b) Due Qualification. Each of the Transferors is duly qualified
to do business as a foreign limited liability company 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
qualification, except to the extent that the failure to be so qualified,
licensed or approved would not, in the aggregate, materially and adversely
affect the ability of such Transferor to comply with the terms of this Agreement
and the other Transaction Documents to which it is a party;
(c) Power and Authority. Each of the Transferors has the power and
authority to execute and deliver this Agreement and the other Transaction
Documents to which it is a party and to carry out their respective terms; and
the execution, delivery, and performance of this Agreement and other Transaction
Documents to which it is a party have been duly authorized by such Transferor by
all necessary action;
(d) Due Execution and Delivery. This Agreement and the other
Transaction Documents to which it is a party have been duly executed and
delivered on behalf of each Transferor;
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(e) Binding Obligations. This Agreement and the other Transaction
Documents to which it is a party constitute legal, valid, and binding
obligations of each Transferor and are enforceable in accordance with their
respective terms subject as to enforceability to applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting creditors' rights
generally and to general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law);
(f) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Agreement and other
Transaction Documents to which it is a party will not conflict with, result in
any breach of any of the terms and provisions of, or constitute (with or without
notice of lapse of time) a default under, the Certificate of Formation or
Limited Liability Company Agreement of either Transferor, or any material term
to any indenture to which either Transferor is a party or violate any law or any
order, injunction, writ, rule or regulation applicable to either Transferor of
any court or of any federal or state regulatory body, administrative agency or
other Governmental Authority having jurisdiction over either Transferor or any
of its properties which would have a material adverse effect on the Conveyed
Assets;
(g) Membership Interests. The Originator is the registered owner
of [__]% of the membership interests of each of the Transferors, each of which
are owned of record, free and clear of all mortgages, assignments and pledges,
and security interests;
(h) No Proceedings. There are no proceedings or investigations
pending or, to the knowledge of each of the Transferors, threatened, before any
court, regulatory body, administrative agency or other tribunal or governmental
instrumentality (A) asserting the invalidity of or any of the Transaction
Documents, (B) seeking to prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents or (C) seeking any
determination or ruling that would materially and adversely affect the
performance by either Transferor of its obligations under, or the validity or
enforceability of, any of the Transaction Documents;
(i) Approvals and Compliance. All approvals, authorizations,
consents, orders or other actions of any person, corporation or other
organization, or of any court, governmental agency or body or official, required
in connection with the execution and delivery of the Transaction Documents, have
been or will be taken or obtained on or prior to the Closing Date and each
Transferor is in compliance with all applicable laws, rules, regulations and
orders with respect to such Transferor, its business and properties and all
Conveyed Assets, except to the extent that non-compliance, or failure to be so
approved, authorized or consented to, would not, in the aggregate, materially
and adversely affect the ability of such Transferor to comply with the terms of
this Agreement and the other Transaction Documents to which it is a party;
(j) Solvency. Each Transferor is solvent and will not be rendered
insolvent by the transactions contemplated by this Agreement and the other
Transaction Documents and each Transferor has an adequate amount of capital to
conduct its business in the ordinary course and to carry out its obligations
under this Agreement and the other Transaction Documents;
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(k) Subsidiaries. Neither of the Transferors has any
subsidiaries other than the Trust;
(l) Tax Returns. Each Transferor has filed on a timely basis all
tax returns (federal, state and local) required to be filed and has paid or made
adequate provisions for the payment of all taxes, assessments and other
governmental charges due from such Transferor;
(m) Principal Place of Business. The principal place of business
and chief executive office of each Transferor are located at the address of such
Transferor set forth herein and, there are now no, and during the past four
months there have not been, any other locations where such Transferor is located
(as that term is used in the UCC in the state of such location) except that,
with respect to such changes occurring after the date of this Agreement, as
shall have been specifically disclosed to the Servicer, the Note Insurer and the
Indenture Trustee in writing;
(n) Accounting and Tax Treatment. Each Transferor will treat the
assignment of the related Conveyed Assets from the Originator to the Transferors
pursuant to this Agreement as a contribution of such Conveyed Assets for Federal
income tax purposes, and as a sale and contribution for financial reporting and
accounting purposes; each Transferor will respond to any inquiries by third
parties by indicating that the Conveyed Assets are owned by the Transferors; and
(o) Legal Name. The legal name of each Transferor is as set forth
in the related signature line of this Agreement and neither Transferor has
changed its name since its incorporation and since its incorporation, such
Transferor did not use, nor does such Transferor now use, any trade names,
fictitious names, assumed names or "doing business as" names.
Section 3.03 REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR WITH
RESPECT TO THE CONVEYED ASSETS. (a) With respect to each Contract, the
Originator hereby remakes to the Transferors the representations, warranties and
covenants set forth in Section 2.02 of the Servicing Agreement. Such
representations, warranties and covenants are made or deemed to be made, (x)
with respect to the Initial Conveyed Assets, as of the Cut-Off Date, (y) with
respect to the Subsequent Conveyed Assets, as of the Subsequent Cut-Off Date,
and (z) with respect to the Substitute Conveyed Assets, as of the related
Transfer Date.
(b) Upon the discovery by the Originator, either Transferor, the
Collateral Agent, the Depositor, the Indenture Trustee or the Note Insurer of a
breach of any of the representations or warranties set forth in Section 2.02 of
the Servicing Agreement that materially and adversely affects any Contract, the
related Equipment or the related Contract File, as the case may be, or if the
Servicer fails to cause delivery of evidence of filing or copies of any UCC
financing statement in accordance with the Servicing Agreement (any such event,
a "Warranty Event"), the party discovering such breach shall give prompt written
notice to the other parties hereto, the Indenture Trustee, the Trust and the
Note Insurer, and the Originator shall be required to reacquire or replace such
Contract in accordance with Article IV of the Indenture.
Section 3.04 SUBSTITUTION OF CONTRACTS AND EQUIPMENT BY THE
ORIGINATOR. (a) With respect to a substitution of Contracts in accordance with
the provisions of this Section 3.04, each proposed Substitute Contract must (i)
be an Eligible Contract, (ii) satisfy all of the
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representations and warranties set forth in Section 2.02 of the Servicing
Agreement, (iii) have a Discounted Contract Principal Balance of not less than
the Discounted Contract Principal Balance of the Contract being replaced, (iv)
have a Booked Residual Value of not less than the Booked Residual Value of the
Contract being replaced, and (v) satisfy the requirements of Section 4.02(d) of
the Indenture. For purposes of determining compliance with clauses (iii) and
(iv) of the preceding sentence, if more than one Substitute Contract is being
provided on any date, the Discounted Contract Principal Balances and Booked
Residual Values of the Substitute Contracts and the Contracts being replaced
shall be determined on an aggregate basis.
(b) Any substitution of a Contract pursuant to this Agreement will
be effected by (i) delivery to the Collateral Agent, on behalf of the Indenture
Trustee, of the Contract File for each such Substitute Contracts, (ii) filing of
any UCC financing statements necessary to comply with the Filing Requirements
and to perfect the interest of the Indenture Trustee in the Substitute
Contracts, (iii) delivery to the Indenture Trustee and the Collateral Agent of a
supplement to the List of Contracts reflecting such substitution and (iv)
delivery to the Collateral Agent, on behalf of the Indenture Trustee, of a
release request for the replaced Contract and the originally executed trust
receipt relating thereto.
(c) The parties hereto agree that in addition to the obligation of
the Originator to reacquire or to substitute any Contract and the related
Equipment as to which a breach of the representations set forth in the Servicing
Agreement has occurred and is continuing, the Originator will enforce its
remedies, if any, against any Source under any Source Agreement. In
consideration of the reacquisition of the Equipment and the Contract, the
Originator shall remit the Reacquisition Amount to the Servicer for allocation
of such Reacquisition Amount pursuant to the terms of the Indenture. Except as
may be set forth in the Transaction Documents, it is understood and agreed that
the obligations of the Originator with respect to a breach as provided in this
Section 3.04 and Section 4.01 of the Indenture constitute the sole remedy
against the Originator for such breach available to the Transferor, the Note
Insurer, the Depositor, the Collateral Agent, the Indenture Trustee and
Noteholders, except to the extent that such breach is proven by final judgment
of a court of law having due jurisdiction to be the result of any fraud or
wilfull misconduct on the part of such Obligor. The representations and
warranties set forth in Sections 3.01, 3.02 and 3.03 shall survive the
assignment of the Conveyed Assets to the Transferors, the pledge of the Conveyed
Assets to the Trust and the pledge of the Pledged Property to the Indenture
Trustee.
ARTICLE IV
COVENANTS
Section 4.01 ORIGINATOR COVENANTS. The Originator hereby covenants
and agrees with the Transferor, the Trust, the Owner Trustee, the Note Insurer,
the Depositor, the Collateral Agent, the Noteholders and the Indenture Trustee
with respect to itself as follows:
(a) Preservation of Security Interest. The Originator 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 respective right,
title and interest of the Transferors, the Trust and the Indenture
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Trustee in the Conveyed Assets. The Originator shall deliver (or cause to be
delivered) to the Transferors file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.
(b) Preservation of Name, etc. The Originator will not change its
name, identity or corporate structure in any manner that would, could, or might
make any financing statement or continuation statement filed by the Originator
in accordance with paragraph (a) above or under any Transaction Document
seriously misleading within the meaning of Section 9-402(7) of the UCC, unless
it shall have given the Transferors, the Note Insurer, the Depositor, the
Collateral Agent and the Indenture Trustee at least 60 days' prior written
notice thereof.
(c) Preservation of Office. The Originator will give the
Transferors, the Depositor, the Collateral Agent, the Note Insurer and the
Indenture Trustee at least 60 days' prior written notice of any relocation of
its principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement.
(d) Obligations with Respect to Conveyed Assets. The Originator
will duly fulfill all obligations on its part to be fulfilled under or in
connection with each Contract and each Source Agreement, and will do nothing to
impair the rights of the Transferors, the Trust, the Note Insurer or the
Indenture Trustee in any of the Conveyed Assets.
(e) Compliance with Law. The Originator will comply, in all
material respects, with all acts, rules, requisitions, orders, decrees and
directions of any Governmental Authority applicable to its business and to the
Conveyed Assets or any part thereof; provided, however, that the Originator may
contest any act, regulation, order, decree or direction in any reasonable manner
which shall not materially and adversely affect the rights of the Transferors,
the Indenture Trustee, the Note Insurer or the Trust in any of the Conveyed
Assets.
(f) Conveyance of Conveyed Assets; Security Interests. Except for
the transfers and conveyances hereunder, or under any Transaction Document, the
Originator will not sell, pledge, assign or transfer to any other Person, or
grant, create, incur, assume or suffer to exist any Lien, on any Conveyed Asset,
or any interest therein and the Originator shall defend the right, title, and
interest of the Transferors, the Trust, the Indenture Trustee, the Note Insurer
and their respective successors and assigns in, to, and under the Conveyed
Assets, against all claims of third parties claiming, through or under the
Originator; provided, however, that nothing in this Section 4.01(f) shall
prevent or be deemed to prohibit the Originator from suffering to exist upon any
of the Conveyed Assets any Liens for municipal or other local taxes if such
taxes shall not at the time be due and payable or if the Originator shall
concurrently be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with respect
thereto and such contests pose no risk of forfeiture.
(g) Notification of Breach. The Originator will advise the
Transferors, the Indenture Trustee, the Collateral Agent, the Depositor, the
Trust and the Note Insurer promptly, in reasonable detail, upon discovery of the
occurrence of any breach by the Originator of any of its representations,
warranties and covenants contained herein.
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(h) Further Assurances. The Originator will make, execute or
endorse, acknowledge and file or deliver to the Transferors, the Trust, the
Collateral Agent, the Depositor, the Note Insurer and the Indenture Trustee from
time to time such schedules, confirmatory assignments, conveyances, transfer
endorsements, powers of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the Conveyed Assets and
other rights covered by this Agreement, as the Transferors, the Trust, the
Indenture Trustee, the Collateral Agent, the Depositor and the Note Insurer may
request and reasonably require; provided, that no UCC filing will be required
with respect to the Equipment, except as required by the Filing Requirements.
(i) Indemnification. The Originator agrees to indemnify, defend
and hold the Transferors, the Trust, the Owner Trustee, the Indenture Trustee,
the Collateral Agent, the Depositor and the Note Insurer harmless from and
against any and all loss, liability, damage, judgment, claim, deficiency, or
expense (including interest, penalties, reasonable attorneys' fees and amounts
paid in settlement) to which any of them may become subject insofar as such
loss, liability, damage, judgment, claim, deficiency, or expense arises out of
or is based upon a breach by the Originator of its representations and
warranties contained in Article III, its covenants contained in Section 4.01, or
in any certificate or in any schedule delivered by the Originator hereunder,
being untrue in any material respect at any time; provided, that the obligations
of the Originator with respect to the representations and warranties set forth
in Section 3.03(a) shall be limited as set forth in Section 3.04(c). The
obligations of the Originator under this Section 4.01(i) shall be considered to
have been relied upon by the Transferors, the Indenture Trustee, the Trust, the
Owner Trustee, the Collateral Agent, the Depositor and the Note Insurer and
shall survive the execution, delivery, and performance of this Agreement
regardless of any investigation made by the Transferors, the Indenture Trustee,
the Trust, the Owner Trustee, the Collateral Agent, the Depositor and the Note
Insurer or on their respective behalf. THE INDEMNIFICATION OBLIGATIONS OF THE
ORIGINATOR PURSUANT TO THE PRECEDING PROVISIONS OF THIS PARAGRAPH SHALL APPLY
REGARDLESS OF ANY NEGLIGENCE OR OTHER FAULT ON THE PART OF THE TRANSFERORS, THE
INDENTURE TRUSTEE, THE DEPOSITOR, THE TRUST, THE OWNER TRUSTEE, THE COLLATERAL
AGENT, THE NOTE INSURER OR ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES OR
AGENTS.
(j) Notice of Liens. The Originator shall notify the Transferors,
the Depositor, the Collateral Agent, the Indenture Trustee and the Note Insurer
promptly after becoming aware of any Lien (other than any Permitted Liens) on
any Conveyed Asset.
(k) Taxes. The Originator shall promptly pay all applicable taxes
required to be paid in connection with the assignment of the Conveyed Assets and
acknowledges that the Transferors shall have no responsibility with respect
thereto. The Originator shall promptly pay and discharge, or cause the payment
and discharge of, all federal income taxes (and all other material taxes) when
due and payable by the Originator, except (i) such as may be paid thereafter
without penalty or (ii) such as may be contested in good faith by appropriate
proceedings and for which an adequate reserve has been established and is
maintained in accordance with GAAP. The Originator shall promptly notify the
Transferors, the Depositor, the Collateral Agent, the Indenture Trustee, the
Noteholders and the Note Insurer of any material challenge, contest or
proceeding pending by or against the Originator before any taxing authority.
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(l) Taxes and Other Liabilities. The Originator shall promptly pay
and discharge all material taxes, assessments, fees, claims and other
governmental charges when due and payable by the Originator, except (i) such as
may be paid thereafter without penalty or (ii) such as may be contested in good
faith by appropriate proceedings and for which an adequate reserve has been
established and is maintained in accordance with GAAP. The Originator shall
promptly notify the Transferors, the Depositor, the Collateral Agent, the Note
Insurer, the Rating Agencies and the Indenture Trustee of any material
challenge, contest or proceeding pending by or against the Originator before any
taxing authority.
(m) Non-Consolidation. The Originator shall take all action
necessary to ensure that neither of the Transferors nor the Manager would be
substantially consolidated with the Originator, such that the separate corporate
existence of the Originator and either Transferor or the Manager would be
ignored in the event of a bankruptcy of the Originator.
Section 4.02 TRANSFEROR COVENANTS. Each of the Transferors hereby
covenants and agrees with the Originator, the Depositor, the Trust, the Owner
Trustee, the Collateral Agent, the Note Insurer and the Indenture Trustee as
follows:
(a) Transferor Certificate. Prior to each date as of which
Contracts and the [___________] subject to such Contracts are to be reacquired
by the Originator pursuant to the Indenture, the Transferors shall submit to the
Originator a certificate signed by the president, executive vice president, any
vice president or the treasurer of the Manager of each of the Transferors (a
"Transferors Certificate") and completed as to its date and the date of this
Agreement. Each Transferors Certificate shall operate as an assignment, without
recourse, representation, or warranty, to the Originator of all of the
Transferors' respective right, title and interests in and to such Contracts and
[___________], and all security and documents relating thereto, such assignment
being an assignment outright and not for security; and upon payment of the
Reacquisition Amount, the Originator will thereupon own such Contract, such
interest in the related [___________] and all such security and documents, free
of any further obligation to the Transferors with respect thereto. If 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
holder entitled to enforce the Contract, the Transferors shall, at the
Servicer's expense, take such steps as the Servicer deems necessary to enforce
the Contract, including bringing suit in a Transferor's name.
(b) Obligor's Quiet Enjoyment. Transferor II hereby acknowledges
and agrees that its rights in the [___________] are expressly subject to the
rights of the related Obligors in such [___________] pursuant to the applicable
Contracts. Transferor II covenants and agrees that, so long as an Obligor shall
not be in default of any of the provisions of the applicable Contract, neither
Transferor II nor any assignee of Transferor II will disturb the Obligor's quiet
and peaceful possession of such [___________] and the Obligor's use thereof for
its intended purpose.
(c) Operation of Transferor. Each of the Transferors shall be
operated in such a manner that it should not be substantively consolidated in
the trust estate of another Person (that is, such that the separate legal
existence of such Transferor and such Person should be disregarded) and in that
regard, each Transferor shall:
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(i) not engage in any action that would cause the separate legal
identity of such Transferor not to be respected, including, without
limitation, (x) holding itself out as being liable for the debts of any
other party or (y) acting other than through its duly authorized agents;
(ii) not incur, assume or guarantee any indebtedness except for
such indebtedness as may be incurred by such Transferor in connection with
the issuance of the Pledged Notes or as otherwise permitted by the Note
Insurer;
(iii) not commingle its funds with those of any other
entity;
(iv) act solely in its name in the conduct of its business
and shall conduct its business so as not to mislead others as to the
identity of the entity with which they are concerned;
(v) maintain company records and books of account and shall not
commingle its company records and books of account with the records and
books of account of any entity;
(vi) not engage in any business or activity other than in
connection with or relating to the activities allowed by its Certificate
of Formation and/or Limited Liability Company Agreement;
(vii) not form, or cause to be formed, any subsidiaries;
(viii) comply with all restrictions and covenants in, and shall
not fail to comply with the corporate formalities established in, the
Certificate of Formation and/or Limited Liability Company Agreement;
(ix) maintain separate bank accounts, if any;
(x) not act as an agent of the Originator; and
(xi) have as its managing member a limited purpose corporation
who maintains at all times one independent director as required by the
Certificate of Incorporation and/or Bylaws.
Section 4.03 TRANSFER OF CONVEYED ASSETS. The Originator understands
that the Transferors intend to pledge the Conveyed Assets and their respective
rights under this Agreement to the Indenture Trustee, on behalf of the Trust, as
collateral security for its obligations on the Pledged Notes, and that the Trust
intends to pledge the Pledged Property to the Indenture Trustee, on behalf of
the Note Insurer and the Noteholders, pursuant to the Indenture. The Originator
agrees that any such assignee of the Transferors may exercise the rights of the
Transferors hereunder, without any consent or action by either Transferor, and
shall be entitled to all of the benefits of the Transferors hereunder to the
extent provided for in such assignment.
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ARTICLE V
CONDITIONS PRECEDENT
Section 5.01 CONDITIONS TO TRANSFERORS OBLIGATIONS. The obligations
of the Transferors to accept the transfer of the Initial Conveyed Assets on the
Closing Date shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Originator contained
in this Agreement shall be true and correct on the Closing Date with the same
effect as though such representations and warranties had been made on such date;
(b) All information concerning the Initial Conveyed Assets
provided to the Transferors shall be true and correct as of the Cut-Off Date in
all material respects;
(c) The Originator shall have delivered to the Transferors a List
of Contracts with respect to its respective Contracts as of the Cut-Off Date and
shall have substantially performed all other obligations required to be
performed by the provisions of this Agreement;
(d) The Originator shall have recorded and filed, at its expense,
any financing statement with respect to the Initial Conveyed Assets to be
transferred from time to time to the related Transferor from the Originator
pursuant to this Agreement meeting the requirements of applicable state law in
such manner in such jurisdictions as are necessary to perfect the transfer of
the Initial Conveyed Assets from the Originator to the related Transferor, and
shall deliver a file-stamped copy of such financing statements or other evidence
of such filings to the related Transferor;
(e) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Transferors, and the Transferors shall
have received from the Originator copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Transferors may reasonably have requested; and
(f) All respective conditions necessary to vest in the Originator
good title, free and clear of all Liens (other than Liens permitted in the
proviso contained in Section 4.01(f) hereof), to its respective Contracts and
interests in Equipment shall have been satisfied.
Section 5.02 CONDITIONS TO THE ORIGINATOR'S OBLIGATIONS. The
obligations of the Originator to convey and contribute the Initial Conveyed
Assets to the Transferors on the Closing Date shall be subject to the
satisfaction of the following conditions:
(a) All representations and warranties of the Transferors
contained in this Agreement shall be true and correct with the same effect as
though such representations and warranties had been made on such date; and
(b) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Originator, and the Originator shall
have received from the Transferors copies of all
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documents (including, without limitation, records of corporate proceedings)
relevant to the transactions herein contemplated as the Originator may
reasonably have requested.
ARTICLE VI
TERMINATION; LIABILITIES
Section 6.01 TERMINATION. The respective obligations and
responsibilities of the Originator and the Transferors created by this Agreement
shall terminate upon the latest of (i) the maturity or other liquidation of the
last Contract and the disposition of any amounts received upon disposition of
any Defaulted Contracts and any [____________________]; (ii) the distribution to
the Transferors of all amounts required to be paid thereto pursuant to this
Agreement; (iii) the termination of the Indenture in accordance with the terms
thereof and (iv) the payment in full of all amounts owed to the Note Insurer
under the Transaction Documents; provided, however, that (A) the
indemnifications contained in Section 4.01(i) herein and (B) the covenant
contained in Section 7.13 hereof, shall survive the termination of this
Agreement.
Section 6.02 EFFECT OF TERMINATION. No termination or rejection or
failure to assume the executory obligations of this Agreement in the bankruptcy
of the Originator or the Transferors shall be deemed to impair or affect the
obligations pertaining to any executed contribution or executed obligations,
including, without limitation, pre-termination breaches of representations and
warranties by the Originator or the Transferors. Without limiting the foregoing,
prior to termination, neither the failure of the Transferors to deliver a
Transferors Certificate pursuant to Section 4.02, nor the failure of the
Originator to pay a Reacquisition Amount shall render such transfer or
obligation executory, nor shall the continued duties of the parties pursuant to
Article IV or Section 7.06 of this Agreement render an executed contribution
executory.
Section 6.03 LIABILITIES. By entering into this Agreement, the
Transferors agree to be liable, directly to each of the Issuer, the Indenture
Trustee, the Owner Trustee, the Note Insurer, the Collateral Agent, the
Depositor and each Noteholder, for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Noteholder in the
capacity of an investor in the Notes or those which arise from any action or
omission by any Noteholder) of the Trust (to the extent Trust Assets remaining
after the Noteholders have been paid in full are insufficient to pay such
losses, claims, damages or liabilities).
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01 AMENDMENT. This Agreement may be amended from time to
time by the parties hereto only with (x) the prior written consent of the
Servicer, the Indenture Trustee and the Note Insurer (or, in the event of a Note
Insurer Default, the Majority Holders), (y) satisfaction of the Rating Agency
Condition and (z) prior written notice to the Owner Trustee.
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<PAGE>
Section 7.02 GOVERNING LAW. THIS AGREEMENT AND ANY AMENDMENT HEREOF
PURSUANT TO SECTION 7.01 SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CHOICE OF LAW
PRINCIPLES) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN AND THE
OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 7.03 NOTICES. All demands, notices, and communications under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received (i) when delivered against receipt of registered or certified
mail or upon actual receipt of registered or certified mail, postage prepaid,
return receipt requested; (ii) when delivered by courier with appropriate
evidence of receipt; or (iii) upon transmission via facsimile or telex with
appropriate evidence of receipt (a) in the case of the Originator, at the
following address: [_________________________________________________________],
Attention: [______________], telecopy [_____________], (b) in the case of
the Indenture Trustee, [_______________________________], Attention:
[__________________], telecopy [_____________]; (c) in the case of Transferor
I, [__________________________],
[_____________________________________________________________________________],
Attention: [__________], telecopy [_____________], (d) in the case of
Transferor II, [_______________________________________________________],
Attention: [______________], telecopy [___________], (e) in the case of the
Collateral Agent, at the address set forth in the Servicing Agreement, (f) in
the case of the Depositor, as the address set forth in the Receivables Pledge
Agreement, and (g) in the case of the Note Insurer, the Rating Agencies or the
Owner Trustee at their respective addresses set forth in Section 11.06 of the
Indenture. Either party may alter the address to which communications are to be
sent by giving notice of such change of address in conformity with the
provisions of this Section 7.03 for giving notice and by otherwise complying
with any applicable terms of this Agreement, including, but not limited to,
subsections 4.01(b) and (c).
Section 7.04 SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 7.05 ASSIGNMENT. Notwithstanding anything to the contrary
contained in this Agreement, this Agreement may not be assigned by the
Originator, without the prior written consent of the Transferors, the Note
Insurer (or, in the event of a Note Insurer Default, the Majority Holders) and
the Indenture Trustee (acting upon the written direction of the Controlling
Party) and, except as provided in Section 4.03, this Agreement may not be
assigned by the Transferors without the prior written consent of the Originator,
the Note Insurer (or, in the event of a Note Insurer Default, the Majority
Holders) and the Indenture Trustee. Whether or not expressly stated, all
representations, warranties, covenants and agreements of the Originator and the
Transferors in this Agreement, or in any document delivered by any of them in
connection with this Agreement, shall be for the benefit of, and shall be
exercisable by, the Indenture Trustee for the benefit of the Noteholders and the
Note Insurer.
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<PAGE>
Section 7.06 FURTHER ASSURANCES. Each of the parties hereto agrees
to do such further acts and things and to execute and deliver to the Indenture
Trustee such additional assignments, agreements, powers and instruments as are
required by the Indenture Trustee or the Note Insurer to carry into effect the
purposes of this Agreement or to better assure and confirm unto the Indenture
Trustee or the Note Insurer its rights, powers and remedies hereunder.
Section 7.07 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of either Transferor or the Originator,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.
Section 7.08 COUNTERPARTS. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which shall constitute one and the same
instrument.
Section 7.09 BINDING EFFECT: THIRD-PARTY BENEFICIARIES. This
Agreement will inure to the benefit of and be binding upon the parties hereto.
The Indenture Trustee, the Owner Trustee, the Trust, the Note Insurer, the
Collateral Agent, the Depositor and the Noteholders are intended third party
beneficiaries of this Agreement.
Section 7.10 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 7.11 HEADINGS. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 7.12 SCHEDULES AND EXHIBITS. The schedules and exhibits
attached hereto and referred to herein shall constitute a part of this Agreement
and are incorporated into this Agreement for all purposes.
Section 7.13 NO BANKRUPTCY PETITION AGAINST THE TRANSFERORS, THE
MANAGER OR THE TRUST. Each of the parties hereto agrees that, prior to the date
that is one year and one day after the payment in full of (a) the of the latest
maturing Notes issued by the Trust and (b) all amounts owed to the Note Insurer
under the Transaction Documents, it will not institute against any of the
Transferors, the Manager or the Trust, or join any other Person in instituting
against any of the Transferors, the Manager or the Trust, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings under the laws of the United States or any state of the United
States. This Section 7.13 shall survive the termination of this Agreement.
[Remainder of Page Intentionally Left Blank]
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<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.
[NAME OF ORIGINATOR], as Originator
By: ___________________________________
Name:
Title:
[NAME OF TRANSFEROR], as Transferor I
By:
By: ___________________________________
Name:
Title:
[NAME OF TRANSFEROR], as Transferor II
By: ABFS Special Purpose Management,
Inc.,
as Managing Member
By: ___________________________________
Name:
Title:
[Signature Page for Receivables Sale Agreement]
<PAGE>
SCHEDULE I
LIST OF INITIAL CONTRACTS
Schedule I-1
<PAGE>
EXHIBIT A
FORM OF SUBSEQUENT
RECEIVABLES SALE AGREEMENT
This SUBSEQUENT RECEIVABLES SALE AGREEMENT, dated as of ____________ (the
"Subsequent Funding Date"), by and among ___________________________, a
___________________ (the "Originator"), __________________, a
____________________ ("Transferor I"), and _________________________, a
_____________________ ("Transferor II", and, together with Transferor I, the
"Transferors").
WITNESSETH:
Reference is hereby made to that certain Receivables Sale Agreement,
dated as of _____ 1, 1999 (the "Receivables Sale Agreement"), by and among the
Originator and the Transferors. Pursuant to the Receivables Sale Agreement, the
Originator agreed to sell, convey and contribute, and the Transferors agreed to
accept, from time to time, Subsequent Conveyed Assets. The Receivables Sale
Agreement provides that each such sale, conveyance and contribution of
Subsequent Conveyed Assets be evidenced by the execution and delivery of a
Subsequent Receivables Sale Agreement such as this Subsequent Receivables Sale
Agreement (this "Agreement").
The "Subsequent Contracts" are those listed on the List of
Subsequent Contracts attached hereto.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. For the purposes of this Agreement,
capitalized terms used herein but not otherwise defined shall have the
respective meanings assigned to such terms in the Receivables Sale Agreement or
in Annex A to the Indenture.
Section 2. Direction; Acquisition; Capital Contribution. (a) Subject
to the terms and conditions of this Agreement, the Originator hereby agrees to
sell, convey and contribute, on the Subsequent Funding Date, all of the
Subsequent Conveyed Assets to the Transferors, as set forth in subsection (b)
below. Upon receipt of the consideration specified in subsection (c) below, the
Originator hereby releases all of its right, title and interest in, to and under
the Subsequent Conveyed Assets, such receipt being hereby acknowledged by the
execution of this Agreement by the Originator.
(b) The transfers occurring on the Subsequent Funding Date shall
be consummated such that those Conveyed Assets which are considered "financial
assets" within the meaning of the Statement of Financial Accounting Standards
No. 125 ("FAS 125") (such Conveyed Assets include, without limitation, the
Contracts, other than any Contract which is a "true" or "operating" lease) are
acquired by Transferor I, and such that those Conveyed Assets
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<PAGE>
which are not considered "financial assets" within the meaning of FAS 125 (such
Conveyed Assets include, without limitation, any Contract which is a "true" or
"operating" lease, the ownership or security interest of the Originator in each
item of Equipment and any Residual Receipts) are acquired by Transferor II.
(c) In consideration for (x) the receipt by the Originator of
$__________ from the Transferors and (y) other good and valuable consideration,
the Originator hereby conveys to the applicable Transferor all of its right,
title and interest in, to and under the Subsequent Conveyed Assets, whether now
existing or hereinafter arising, without recourse, except as may be set forth
herein. In connection with the transfers on Subsequent Funding Date, the
Originator hereby makes a capital contribution to the related Transferor in the
amount by which the fair market value of the Subsequent Conveyed Assets exceeds
the cash consideration received by the Originator in connection therewith.
(d) In connection with the sale, contribution and conveyance of
the Subsequent Conveyed Assets, the Originator shall, at its own expense, on or
prior to the Subsequent Funding Date (i) cause the Contract Management System to
be marked with a specified code (the "Contract Management Code") to show that
such Subsequent Conveyed Assets have been transferred and contributed to the
Transferors in accordance with this Agreement, subsequently pledged to the
Trust, as collateral security for the Pledged Notes in accordance with the
related Subsequent Receivables Pledge Agreement, and such security interest was
assigned to the Indenture Trustee, on behalf of the Noteholders and the Note
Insurer, pursuant to the related Assignment, and (ii) cause the Servicer to
prepare and hold on behalf of the Transferors and the Indenture Trustee the List
of Contracts as supplemented by the List of Subsequent Contracts on or prior to
the Subsequent Funding Date.
(e) Except for the obligations of the Originator pursuant to
Section 3 hereof, Section 3.03 of the Receivables Sale Agreement and Article IV
of the Indenture with respect to any breach of a representation, warranty or
covenant made herein, the sale and contribution of the Subsequent Contracts will
be without recourse to the Originator.
Section 3. Representations and Warranties of the Originator. (a)
With respect to each Subsequent Contract, the Originator hereby remakes to the
Transferors the representations, warranties and covenants set forth in Section
2.02 of the Servicing Agreement.
(b) Upon the discovery by the Originator, either Transferor, the
Depositor, the Collateral Agent, the Indenture Trustee or the Note Insurer of a
breach of any of the representations or warranties set forth in Section 2.02 of
the Servicing Agreement that materially and adversely affects any Contract, the
related Equipment or the related Contract File, as the case may be, or if the
Servicer fails to cause delivery of evidence of filing or copies of any UCC
financing statement in accordance with the Servicing Agreement (any such event,
a "Warranty Event"), the party discovering such breach shall give prompt written
notice to the other parties hereto, the Indenture Trustee, the Trust and the
Note Insurer, the Depositor, the Collateral Agent and the Originator shall be
required to reacquire or replace such Contract in accordance with Article IV of
the Indenture.
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<PAGE>
(c) The Originator understands that the Transferors intend to
pledge the Subsequent Conveyed Assets and their respective rights under this
Agreement to the Trust, as collateral security for its obligations on the
Pledged Notes, and that the Trust intends to pledge the Pledged Property to the
Indenture Trustee, on behalf of the Note Insurer and the Noteholders, pursuant
to the Indenture. The Originator agrees that any such assignee of the
Transferors may exercise the rights of the Transferors hereunder, without any
consent or action by either Transferor, and shall be entitled to all of the
benefits of the Transferors hereunder to the extent provided for in such
assignment.
Section 4. Amendment. This Agreement may be amended from time to
time by the parties hereto only with (x) the prior written consent of the
Servicer, the Indenture Trustee and the Note Insurer (or, in the event of a Note
Insurer Default, the Majority Holders) and (y) satisfaction of the Rating Agency
Condition.
Section 5. GOVERNING LAW. THIS AGREEMENT AND ANY AMENDMENT HEREOF
PURSUANT TO SECTION 4 SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
SUBSTANTIVE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CHOICE OF LAW
PRINCIPLES) APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN AND THE
OBLIGATIONS, RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 6. Counterparts. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which shall constitute one and the same
instrument.
Section 7. Binding Effect; Third-Party Beneficiaries. This Agreement
will inure to the benefit of and be binding upon the parties hereto. The
Indenture Trustee, the Owner Trustee, the Trust, the Depositor, the Collateral
Agent, the Note Insurer and the Noteholders are intended third party
beneficiaries of this Agreement.
Section 8. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 9. Exhibits. The schedules and exhibits attached hereto and
referred to herein shall constitute a part of this Agreement and are
incorporated into this Agreement for all purposes.
Section 10. Intent of Parties; Security Agreement. It is the
intention of the parties hereto that the transfer of the Subsequent Conveyed
Assets to be made pursuant to the terms hereof shall constitute a sale or
capital contribution of (x) the Contracts by the Originator to Transferor I, and
(y) the ownership interest or security interest of the Originator in each item
of Equipment and any Residual Receipts by the Originator to Transferor II, and,
in either case, not a loan. In the event, however, that a court of competent
jurisdiction were to hold that any such transfer constitutes a loan and not a
sale or capital contribution, it is the intention of the parties hereto that
this Agreement is deemed to be a security agreement and that the Originator
shall be deemed to have granted to the related Transferor as of the date hereof
a first priority perfected
A-4
<PAGE>
security interest in all of the Originator's right, title and interest in, to
and under the related Subsequent Conveyed Asset, and all income and proceeds
thereof.
[Remainder of Page Intentionally Left Blank]
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.
____________________________, as
Originator
By: ___________________________________
Name:
Title:
_______________________, as Transferor
I By:
By: ___________________________________
Name:
Title:
__________________________, as
Transferor II
By:
By: ___________________________________
Name:
Title:
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