<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1996
-------------------------------------------------
Commission File Number: 0-22374
---------------------------------------------------------
Fidelity National Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1416811
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
160 Clairemont Avenue, Suite 200, Decatur, GA 30030
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(404) 371-5500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [x] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Shares Outstanding at July 31, 1996
-------------------------- -----------------------------------
Common Stock, no par value 4,608,383
<PAGE> 2
FIDELITY NATIONAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statements of Condition (unaudited)
June 30, 1996 and December 31, 1995 1
Consolidated Statements of Income (unaudited)
Three Months Ended June 30, 1996 and 1995
Six Months Ended June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-8
Part II. Other Information
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
Signature Page 9
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
FIDELITY NATIONAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 31,193,784 $ 27,356,936
Federal funds sold 1,612,912 10,002,754
Investment securities available for sale 66,941,972 53,139,161
Investment securities held to maturity (approximate fair
value of $5,896,000 and $5,320,000 at June 30,
1996 and December 31, 1995, respectively) 6,280,050 5,291,733
Loans held for sale 102,185,855 47,112,535
Loans, net of unearned income 423,019,793 360,176,486
Less: Allowance for loan losses 6,422,163 5,536,504
------------ ------------
Loans, net 416,597,630 354,639,982
Premises and equipment, net 12,808,037 10,588,433
Other real estate 1,379,778 1,339,318
Accrued interest receivable 4,270,699 3,577,862
Other assets 11,571,439 11,773,101
------------ ------------
Total assets $654,842,156 $524,821,815
============ ============
LIABILITIES
Deposits
Noninterest-bearing demand deposits $ 71,660,181 $ 75,120,501
Interest-bearing deposits:
Demand and money market 119,858,048 107,475,974
Savings 22,659,975 14,293,402
Time deposits, $100,000 and over 85,408,040 65,503,961
Other time deposits 279,751,126 204,113,471
------------ ------------
Total deposits 579,337,370 466,507,309
Short-term borrowings 25,475,633 8,245,191
Long-term debt 16,500,000 16,750,000
Accrued interest payable 3,078,119 2,606,802
Other liabilities 3,263,739 2,950,233
------------ ------------
Total liabilities 627,654,861 497,059,535
SHAREHOLDERS' EQUITY
Common stock, no par value. Authorized
50,000,000 and 5,000,000 shares in 1996 and 1995,
respectively, issued 4,619,475 shares; and
outstanding 4,608,383 shares in 1996 and 1995, 11,303,406 11,303,406
Treasury shares, at cost. 11,092 shares in 1996 and 1995 (69,325) (69,325)
Net unrealized holding (losses) gains on investment
securities available for sale (1,147,517) 689,774
Retained earnings 17,100,731 15,838,425
------------ ------------
Total shareholders' equity 27,187,295 27,762,280
------------ ------------
Total liabilities and shareholders' equity $654,842,156 $524,821,815
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE> 4
FIDELITY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $26,175,479 $20,483,759 $13,598,699 $10,516,866
Investment securities:
Taxable 2,365,799 1,915,028 1,265,627 976,945
Tax-exempt - 360 - -
Federal funds sold 135,535 174,477 96,778 155,166
Deposits with other banks 4,515 4,650 2,357 1,174
----------- ----------- ----------- -----------
Total interest income 28,681,328 22,578,274 14,963,461 11,650,151
INTEREST EXPENSE
Deposits 11,453,727 8,166,363 6,191,004 4,472,802
Short-term borrowings 362,784 359,151 183,903 126,653
Long-term debt 796,860 146,179 401,557 82,586
----------- ----------- ----------- -----------
Total interest expense 12,613,371 8,671,693 6,776,464 4,682,041
----------- ----------- ----------- -----------
NET INTEREST INCOME 16,067,957 13,906,581 8,186,997 6,968,110
Provision for loan losses 5,400,000 3,090,000 3,000,000 1,710,000
----------- ----------- ----------- -----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 10,667,957 10,816,581 5,186,997 5,258,110
NONINTEREST INCOME
Service charges on deposit accounts 834,722 717,109 426,938 373,858
Credit card fees 1,357,621 1,044,106 784,318 543,122
Mortgage banking activities 3,504,479 1,262,730 2,264,533 814,455
Securities gains, net 282,530 241,273 195,821 138,866
Other 2,500,818 1,342,376 1,353,338 752,404
----------- ----------- ----------- -----------
Total noninterest income 8,480,170 4,607,594 5,024,948 2,622,705
NONINTEREST EXPENSE
Salaries and employee benefits 8,180,888 5,548,006 4,333,399 2,846,330
Furniture and equipment 753,903 683,148 377,744 356,567
Net occupancy 1,105,384 939,042 562,334 462,096
Credit card processing 1,287,675 884,101 670,307 452,915
Mortgage servicing amortization 1,024,021 314,208 441,926 178,208
Other 4,274,062 3,698,582 2,234,663 1,896,524
----------- ----------- ----------- -----------
Total noninterest expense 16,625,933 12,067,087 8,620,373 6,192,640
----------- ----------- ----------- -----------
Income before income taxes 2,522,194 3,357,088 1,591,572 1,688,175
Income tax expense 914,262 1,194,747 586,748 598,870
----------- ----------- ----------- -----------
NET INCOME $ 1,607,932 $ 2,162,341 $ 1,004,824 $ 1,089,305
=========== =========== =========== ===========
INCOME PER SHARE
Net income $ .35 $ .47 $ .22 $ .24
=========== =========== =========== ===========
Average common shares 4,608,383 4,608,383 4,608,383 4,608,383
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 5
FIDELITY NATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------------
1996 1995
----------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,607,932 $ 2,162,341
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Provision for loan losses 5,400,000 3,090,000
Depreciation and amortization of premises and equipment 636,460 526,340
Amortization of mortgage servicing rights 1,024,021 314,208
Additions of originated mortgage servicing rights (587,004) (326,853)
Other amortization and (accretion), net (9,784) (32,825)
Securities gains, net (282,530) (241,262)
Increase in loans held for sale (55,073,320) (3,749,337)
Net increase in accrued interest receivable (692,837) (100,534)
Net increase in accrued interest payable 471,317 429,192
Net (increase) decrease in other assets (235,355) 1,261,903
Net (decrease) increase in other liabilities 1,439,587 (1,751,921)
------------ ------------
Net cash flows (used in) provided by operating activities (46,301,513) 1,581,252
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities held to maturity (10,359,729) (7,020,330)
Maturities of investment securities held to maturity 12,381,291 4,060,000
Sales of investment securities available for sale 17,982,241 9,980,446
Purchase of investment securities available for sale (42,600,395) (7,283,715)
Maturities of investment securities available for sale 5,134,406 2,645,705
Loan originations, net of repayments (67,451,848) (25,505,309)
Purchases of mortgage servicing rights - (1,570,963)
Purchases of premises and equipment (2,856,064) (850,256)
Proceeds from sale of other real estate 53,740 688,955
------------ ------------
Net cash flows used in investing activities (87,716,358) (24,855,467)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits,
Money market accounts, and savings accounts 17,288,327 2,966,382
Net increase in time deposits 95,541,734 24,842,071
Proceeds from issuance of long-term debt - 1,000,000
Repayment of long-term debt (250,000) (495,000)
Increase (decrease) in short-term borrowings 17,230,442 (5,844,011)
Dividends paid (345,626) (314,214)
------------ ------------
Net cash flows provided by financing activities 129,464,877 22,155,228
------------ ------------
Net decrease in cash and cash equivalents (4,552,994) (1,118,987)
Cash and cash equivalents, beginning of period 37,359,690 21,033,480
------------ ------------
Cash and cash equivalents, end of period $ 32,806,696 $ 19,914,493
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Total interest paid $ 11,998,619 $ 8,242,501
============ ============
Total income taxes paid $ 1,005,556 $ 1,231,800
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 6
FIDELITY NATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1996
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Fidelity
National Corporation and Subsidiaries (the Company) have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and notes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair
presentation of the financial position and results of operations for the interim
periods have been included. All such adjustments are normal recurring accruals.
Operating results for the three-month and six-month periods ended June 30, 1996,
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1996. These statements should be read in conjunction with
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
Effective January 1, 1996, the Company modified its classification of credit
card charge-offs. In prior years, the Company charged off all accrued interest
and principal against the allowance for loan losses. Beginning January 1, 1996,
the Company commenced reversing current period accrued interest-related income
on credit card loans being charged off to interest income. For the three-month
and six-month periods ended June 30, 1996, $418,000 and $716,000, respectively,
of such costs had been reversed. Prior period statements have not been restated
for this change. The change was made to be consistent with industry practice.
Note B - Shareholders' Equity
During the period ended June 30, 1995 and 1996, the Company declared and paid
dividends totaling $314,214 and $345,626, respectively.
4
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis reviews important factors affecting the financial
condition at June 30, 1996, compared to December 31, 1995, and results of
operations for the three month and the six-month periods ended June 30, 1996, of
Fidelity National Corporation and subsidiaries (Company). These comments should
be read in conjunction with the Company's consolidated financial statements and
accompanying notes appearing in this report.
ASSETS
Total assets were $655 million at June 30, 1996, compared to $525 million at
December 31, 1995, a 24.8% increase. Loans, net of unearned income increased $63
million or 17.5% to $423 million and loans held for sale increased $55 million
or 117.0% to $102 million at June 30, 1996. The significant loan growth was
primarily a result of further expansion in the Company's indirect automobile
lending activities.
The following schedule summarizes the Company's total loans at June 30, 1996,
and December 31, 1995 (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
TOTAL LOANS
Loans, net of unearned income $423,020 $360,176
Loans held for sale:
Mortgage loans 9,786 12,113
Consumer installment 92,400 35,000
-------- --------
Total loans held for sale 102,186 47,113
-------- --------
Total loans $525,206 $407,289
======== ========
</TABLE>
ASSET QUALITY
The following schedule summarizes the Company's asset quality position at June
30, 1996, and December 31, 1995 (dollars in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
<S> <C> <C>
Nonperforming assets
Nonaccrual loans $3,442 $3,084
Other real estate owned 1,380 1,339
------ ------
Total nonperforming assets $4,822 $4,423
====== ======
Loans 90 days past due $3,901 $3,077
====== ======
Allowance for possible loan losses $6,422 $5,537
====== ======
Ratio of past due loans to loans .92% .85%
====== ======
Ratio of nonperforming assets to loans
and other real estate owned 1.14% 1.22%
====== ======
Allowance to period-end loans 1.52% 1.54%
====== ======
Allowance to nonperforming loans
(coverage ratio) 1.87% 1.80%
====== ======
</TABLE>
5
<PAGE> 8
Management is not aware of any potential problem loans other than those
disclosed in the table above, which includes all loans recommended for
classification by regulators, which would have a material impact on asset
quality.
DEPOSITS
Total deposits at June 30, 1996 were $579 million compared to $467 million at
December 31, 1995 a 24.0% increase. During this period total liabilities
increased $131 million or 26.4% to $628 million. The increase in deposits
occurred principally in time deposits which increased $96 million or 37.5%.
Included in time deposits at June 30, 1996 were $35 million of brokered
deposits. There were no brokered deposits at December 31, 1995. Demand and money
market deposits increased $9 million or 4.9% and savings deposits increased $9
million or 64.3%.
The balance sheet growth was primarily funded by the increase in total deposits
which was generated by expanding market share in current communities and the
acquisition of $35 million of brokered deposits.
LIQUIDITY AND SOURCES OF CAPITAL
Shareholders' equity was $27.2 million at June 30, 1996, compared to $27.8
million at December 31, 1995. The $1.8 million decrease in net unrealized
holding gains on investment securities available for sale was the primary cause
of the decreases. Shareholders' equity as a percent of total assets was 4.2% at
June 30, 1996 compared to 5.3% at December 31, 1995.
The purpose of liquidity management is to ensure that there is sufficient cash
flow to satisfy demands for credit, deposit withdrawals, and other corporate
needs. Traditional sources of liquidity include asset maturities and growth of
deposits, including brokered deposits. Other sources of funds, such as
securities sold under agreements to repurchase and Federal Home Loan Bank
borrowings, are sources of liquidity which the Company has utilized. The Company
has maintained adequate liquidity through cash flow from operating activities,
core deposit growth and the occasional use of brokered deposits to fund loan
growth and anticipates this will continue as the Company expands. The Company
has unused sources of liquidity in the form of unused federal funds lines
totalling $18.0 million and Federal Home Loan Bank advance lines totalling $35.0
million at June 30, 1996.
There were no known trends, events, regulatory authority recommendations or
uncertainties that the Company was aware of that will have or are likely to have
a material effect on the Company's liquidity, capital resources or operations.
At June 30, 1996, based on the Federal Reserve Board's guidelines, the Company's
tier I capital ratio was 5.00%, the total risk-based capital ratio was 8.65%,
and the leverage ratio was 4.56%. These ratios are in excess of the Federal
Reserve Board's requirements, as indicated in the Capital Adequacy schedule
below (dollars in thousands):
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
--------------------------- -------------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Tier I capital:
Actual $27,915 5.00% $26,606 6.15%
Minimum 22,338 4.00 17,309 4.00
Excess 5,577 1.00 9,297 2.15
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
--------------------------- -------------------------
Amount Percent Amount Percent
------ ------- ------ -------
<S> <C> <C> <C> <C>
Total risk-based capital:
Actual $48,295 8.65% $45,323 10.47%
Minimum 44,676 8.00 34,619 8.00
Excess 3,619 .65 10,704 2.47
Tier I capital leverage ratio:
Actual 4.56% 5.42%
Minimum acceptable 3.00 3.00
Excess 1.56 2.42
</TABLE>
INTEREST RATE SENSITIVITY
The interest rate sensitivity structure within the Company's balance sheet at
June 30, 1996, has a net interest sensitive liability gap of 7.06% when
projecting out one year. In the near term, defined as 90 days, the Company
currently has a net interest sensitivity asset gap of 11.45%. This information
represents a general indication of repricing characteristics over time; however,
the sensitivity of certain deposit products may vary during extreme swings in
the interest rate cycle. Since all interest rates and yields do not adjust at
the same velocity, the interest rate sensitivity gap is only a general indicator
of the potential effects of interest rate changes on net interest income.
EARNINGS
Net income for the second quarter ended June 30, 1996, was $1,005,000 compared
to $1,089,000 for the second quarter of 1995, a 7.7% decrease. Net income per
share was $.22 for the second quarter of 1996, compared to $.24 for the same
period in 1995.
The Company's net income was $1,608,000, or $.35 per share for the six months
ended June 30, 1996. This compared to net income of $2,162,000 for the six
months ended June 30, 1995, a 25.6% decrease.
NET INTEREST INCOME
Net interest income for the second quarter of 1996 was $8.2 million compared to
$7.0 million for 1995. The $142 million increase in average earning assets in
1996 over the comparable period in 1995 more than offset the increase in
interest expense attributable to the $147 million increase in average interest
bearing liabilities and the 23 basis point decline in net interest margin.
For the six months ended June 30, 1996, net interest income increased $2.2
million, or 15.8% over the six months ended June 30, 1995. This increase was
primarily created by a $117 million increase in average earning assets to $526
million. The net interest margin for the second quarter and first half of 1996,
were 5.92% and 6.19%, respectively, compared to 6.67% and 6.88%, respectively
for the same periods of 1995. The decreases in net interest margin were due
primarily to the increase in indirect auto loans held for sale, the increased
cost of deposits and increased volume of long term debt.
7
<PAGE> 10
PROVISION FOR LOAN LOSSES
The allowance for loan losses is established through provisions charged to
operations. Such provisions are based on management's evaluation of the loan
portfolio under current economic conditions, past loan and credit card loss
experience, adequacy of underlying collateral, and such other factors which, in
management's judgment, deserve recognition in estimating loan losses. Management
believes the allowance for loan losses is adequate to provide for potential loan
losses.
The provision for loan losses for the second quarter of 1996 was $3.0 million
compared to $1.7 million for the comparable period of 1995. Year to date, the
1996 provision for loan losses was $5.4 million compared to $3.1 million for the
same period in 1995, an increase of 74.2%. These increases were a result of loan
growth and the increases in net charge-offs, primarily credit card related. Net
charge-offs to average loans on an annualized basis for the six months ended
June 30, 1996, were 2.01% compared to 1.89% for the same period in 1995.
NONINTEREST INCOME
Noninterest income was $5.0 million for the second quarter of 1996 compared to
$2.6 million in 1995, a 92.3% increase. For the six months ended June 30, 1996,
noninterest income increased $3.8 million to $8.5 million or 136.1% over the
same period in 1995. Noninterest income in the second quarter and year to date
1996 benefited from a $1.1 million gain on the sale of mortgage servicing
rights. There were no such sales in 1995. Year to date noninterest income also
benefited from a $905,000 increase in brokerage fee income and a $353,000
increase in mortgage servicing fee income.
NONINTEREST EXPENSE
Noninterest expense for the three months ended June 30, 1996, was $8.6 million
compared to $6.2 million for the comparable period of 1995, a 38.7% increase.
Noninterest expense was $16.6 million for the six months ended June 30, 1996
compared to $12.1 million for the comparable period of 1995, a 37.2% increase.
The increase in salaries and benefits for the second quarter and first half of
1996 accounted for 57.7% and 58.9% of the total increase in noninterest expense
over the comparable periods in 1995.
The number of full time equivalent employees has increased from 289 on June 30,
1995 to 388 at June 30, 1996. This increase was due to general corporate growth
and the Company opening of four bank branches in the greater Atlanta
metropolitan area and three loan production offices in Florida and South
Carolina.
Mortgage servicing rights amortization attributable to mortgage loans serviced
and those which paid off during the second quarter of 1996 and 1995 was $442,000
and $178,000, respectively. Year to date amortization of mortgage servicing
rights was $1,024,000 compared to $314,000 for the first half of 1995.
Amortization due to loans prepaying began to decline in the second quarter as
mortgage interest rates continued to climb.
PROVISION FOR INCOME TAXES
The provision for income taxes for the second quarter and the first half of 1996
was $587,000 and $914,000, respectively, compared to $599,000 and $1,195,000,
respectively, for the same periods in 1995. These changes were due to changes in
taxable income.
8
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Fidelity National Corporation was held on
April 12, 1996. At the annual meeting of shareholders, the Board of Directors
were reelected to serve until the next annual meeting of shareholders. The
holders of not less than 3,243,553 shares of common stock voted for each of the
nominees, and the holders of 2,420 shares of common stock withheld their vote
for each of the nominees. Additionally, shareholders voted 3,230,573 shares in
favor of increasing the number of authorized shares of common stock, no par
value, from 5,000,000 to 50,000,000 shares. Holders of 1,100 shares of common
stock voted against the increase in shares and holders of 5,500 shares
abstained.
ITEM 5 - OTHER INFORMATION
On July 30, 1995, Fidelity National Bank ("Bank") sold motor vehicle retail
installment sale contracts ("Receivables") secured by new or used automobiles,
light duty trucks, vans and minivans pursuant to the Pooling and Servicing
Agreement between Fidelity National Bank and The Bank of New York as Trustee of
the Fidelity Grantor Trust 1996-1 ("Trust"). The principal amount of the
Receivables sold was $92,406,239.80. The purchase was financed by the Trust by
the issuance of $92,406,239.80 6.85% Asset Back Certificates ("Certificates").
The certificates were initially purchased by Salomon Brothers Inc. and sold by
it to Qualify Institutional Buyers and Institutional Credit Investors.
Pursuant to the Pooling and Servicing Agreement, the Bank will act as servicer
of the Receivables owned by the Trust. The sale price was $92,406,239.80 plus
accrued interest at 6.85% from July 1, 1996, to the date of closing, July 30,
1996.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10 - Pooling and Servicing Agreement dated as of July
1, 1996 between Fidelity National Bank ("Bank") and The Bank
of New York as Trustee of the Fidelity Grantor Trust 1996-1
and letter agreement between the Bank and Salomon Brothers
Inc. dated July 25, 1996.
(b) Reports on Form 8-K
(c) Exhibit 27 - Financial Data Schedule (for SEC use only)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIDELITY NATIONAL CORPORATION
-----------------------------
(Registrant)
Date: August 2, 1996 BY: /s/ James B. Miller, Jr.
----------------------------
James B. Miller, Jr.
Chief Executive Officer
Date: August 2, 1996 /s/ M. Howard Griffith, Jr.
----------------------------
M. Howard Griffith, Jr.
Chief Financial Officer
9
<PAGE> 1
EXHIBIT 10
================================================================================
POOLING AND SERVICING AGREEMENT
between
FIDELITY NATIONAL BANK
as Seller and Servicer,
and
THE BANK OF NEW YORK,
as Trustee
Dated as of July 1, 1996
FIDELITY GRANTOR TRUST 1996-1
6.85% Asset Backed Certificates
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
Definitions
<S> <C> <C>
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE II
Creation of the Trust; Conveyance of Receivables
Section 2.01. Creation of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.02. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.03. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III
The Receivables
Section 3.01. Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.02. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.03. Repurchase upon Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.04. Custody of Receivable Files . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.05. Duties of Servicer as Custodian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.06. Instructions; Authority to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.07. Custodian's Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.08. Effective Period and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV
Administration and Servicing of Receivables
Section 4.01. Duties of the Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 4.02. Collection of Receivable Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 4.03. Realization Upon Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.04. Physical Damage Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.05. Maintenance of Security Interests in
Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.06. Covenants of the Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 4.07. Purchase of Receivables Upon Breach of
Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.08. Servicing Fee; Payment of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.09. Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.10. Annual Statement as to Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 4.11. Annual Independent Accountants' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 4.12. Access to Certain Documentation and
Information Regarding Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
</TABLE>
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<TABLE>
ARTICLE V
Accounts; Application of Funds
<S> <C> <C>
Section 5.01. Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.02. Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.03. Application of Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.04. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.05. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.06. Purchase Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.07. Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.08. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.09. The Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.10. Reserve Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.11. Statements to Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 5.12. Accounting and Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VI
The Certificates
Section 6.01. The Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.02. Authentication of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.03. Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 6.04. Certain Transfer Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.05. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.06. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.07. Access to List of Certificateholders' Names
and Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.08. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.09. Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.10. Notices to Clearing Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE VII
The Seller
Section 7.01. Representations of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 7.02. Liabilities of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.03. Merger or Consolidation of, or Assumption
of the Obligations of, the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 7.04. Limitation on Liability of Certain Persons
of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE VIII
The Servicer
Section 8.01. Representations of Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 8.02. Liability of Servicer; Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 8.03. Merger or Consolidation of, or Assumption
of the Obligations of, the Servicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
</TABLE>
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<TABLE>
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Section 8.04. Limitation on Liability of Servicer and
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.05. Appointment of Subservicer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 8.06. Servicer Not to Resign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
ARTICLE IX
Servicer Termination Events
Section 9.01. Servicer Termination Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 9.02. Consequences of a Servicer Termination
Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 9.03. Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 9.04. Notification to Rating Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.05. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Section 9.06. Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
ARTICLE X
The Trustee
Section 10.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 10.02. Certain Matters Affecting Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 10.03. Trustee Not Liable for Certificates or
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.04. Trustee May Own Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.05. Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 10.06. Eligibility Requirements for Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.07. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 10.08. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.09. Merger or Consolidation of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 10.10. Appointment of Co-Trustee or Separate
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.11. Representations and Warranties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 10.12. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE XI
Termination
Section 11.01. Termination of the Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 11.02. Optional Purchase of All Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 12.02. Protection of Title to Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.03. Separate Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12.04. Limitation on Rights of Certificateholders . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.06. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
</TABLE>
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<TABLE>
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Section 12.07. Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.09. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.10. Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.11. Limitations on Rights of Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.12. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SCHEDULE I -- Schedule of Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT A Form of Class A Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Class B Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Form of Depository Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1
EXHIBIT E Form of Servicer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F Form of Transferor's Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G Form of Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . G-1
</TABLE>
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POOLING AND SERVICING AGREEMENT dated as of July 1, 1996, among FIDELITY
NATIONAL BANK, a national banking association, as seller and as servicer (in
such capacities, the "Seller" or the "Servicer"), and THE BANK OF NEW YORK, a
New York banking corporation, as trustee (the "Trustee").
RECITALS
WHEREAS the Seller has purchased a portfolio of receivables arising in
connection with motor vehicle retail installment sale contracts from retail
motor vehicle dealers in the ordinary course of its business;
WHEREAS the Seller wishes to sell and assign such receivables to the
Trust (as defined herein); and
WHEREAS the Servicer is willing to service such receivables, and the
Trustee is willing to act as Trustee of the Trust;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.01. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, shall have
the following meanings:
"Account Property" means the Collection Account or the Reserve Account
and all amounts and investments from time to time deposited or transferred to
or held in such account for or on behalf of the Trust, including any cash,
checks, money orders, deposit accounts, Physical Property, book-entry
securities, or uncertificated securities, and all proceeds of the foregoing.
"Advance" shall have the meaning specified in Section 5.05.
"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.
"Agreement" means this Pooling and Servicing Agreement.
<PAGE> 7
"Amount Financed" means, with respect to any Receivable, the amount
advanced under the related Contract toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service and warranty contracts, and other
items customarily financed as part of retail automobile installment sale
contracts or promissory notes, but excluding any amount allocable to any
premium for force-placed physical damage insurance covering the Financed
Vehicle.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
rate of finance charges stated in the related Contract.
"Available Funds" means, with respect to any Determination Date or
Distribution Date, (i) all amounts received during the related Collection
Period (other than (a) amounts that are transferred to the Collection Account
during such Collection Period in respect of the immediately preceding
Collection Period, as described in clauses (ii) and (iii) below and (b) the
amount of any Insured Payments for such Distribution Date), from whatever
source, on or in respect of the Receivables, including any Net Liquidation
Proceeds and insurance proceeds, (ii) all Advances made by the Servicer during
or with respect to such Collection Period, (iii) all amounts transferred to the
Collection Account in respect of Purchase Amounts for such Collection Period
for Purchased Receivables, (iv) any Recoveries for such Collection Period and
(v) Investment Income for such Collection Period on amounts on deposit in the
Collection Account.
"Average Pool Balance" means, with respect to any Collection Period,
the average of the Pool Balance at the beginning of business on the first day
of such Collection Period and at the close of business on the last day of such
Collection Period.
"Benefit Plan" shall have the meaning specified in Section 6.04(b).
"Book-Entry Certificates" means beneficial interests in Certificates,
ownership and transfers of which shall be registered through book entries by a
Clearing Agency as described in Section 6.09.
"Business Day" means any day other than a Saturday, a Sunday, a legal
holiday or any other day on which commercial banking institutions in The City
of New York, or the city in which the Corporate Trust Office is located are
authorized or obligated by law, executive order or governmental decree to be
closed.
"Certificate" means a 6.85% Asset Backed Certificate, evidencing a
beneficial interest in the Trust, substantially in the form of Exhibit A.
2
<PAGE> 8
"Certificate Balance" means, initially, $92,406,239.80, and, as of any
date of determination thereafter, such initial Certificate Balance reduced by
all amounts previously distributed to Holders of the Certificates and allocable
to principal.
"Certificateholder" or "Holder" means a Person in whose name a
Certificate is registered in the Certificate Register.
"Certificate Owner" means, with respect to a Book-Entry Certificate,
the Person who is the beneficial owner of such Book-Entry Certificate, as
reflected on the books of the Clearing Agency or on the books of a Person
maintaining an account with the Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of the Clearing Agency).
"Certificate Pool Factor" means, with respect to each class of
Certificates as of the close of business on the last day of each Collection
Period, a seven-digit decimal figure equal to the outstanding principal amount
of such class of Certificates (after giving effect to any reduction thereof to
be made on the immediately following Distribution Date) divided by the original
outstanding principal amount of such class of Certificates. The Certificate
Pool Factor for each class of Certificates will be 1.0000000 as of the Closing
Date and will decline thereafter to reflect reductions in the outstanding
principal amount of such class of Certificates.
"Certificate Register" and "Certificate Registrar" mean the register
maintained and the registrar appointed pursuant to Section 6.03.
"Claim Date" shall have the meaning specified in Section 5.09(b).
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.
"Closing Date" means July 30, 1996.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and Treasury Regulations promulgated thereunder.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.02(b)(i).
3
<PAGE> 9
"Collection Period" means (other than with respect to the first
collection Period) a calendar month. With respect to the first Collection
Period, the period beginning on July 1, 1996 and ending on August 31, 1996. As
used herein, the "related Collection Period" with respect to any Distribution
Date or Determination Date means the calendar month immediately preceding the
calendar month in which such Distribution Date or Determination Date, as
applicable, occurs or, with respect to the Determination Date and Distribution
Date in September 1996, the period beginning on July 1, 1996 and ending on
August 31, 1996.
"Contract" means a motor vehicle retail installment sale contract
between a Dealer and one or more Obligors.
"Controlling Party" means (i) as long as the Policy is in effect and
no Security Insurer Default has occurred and is continuing, the Security
Insurer and (ii) if a Security Insurer Default has occurred and is continuing
or the Policy is otherwise no longer in effect, the Trustee for the benefit of
the Certificateholders.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
at the time of execution of this Agreement is located at The Bank of New York,
101 Barclay Street, New York, New York (facsimile no.: (212) 815-7184),
Attention: Asset Backed Unit, or at such other address as the Trustee may
designate from time to time by notice to the Certificateholders, the Seller,
the Servicer and the Security Insurer, or the principal corporate trust office
of any successor Trustee (of which address such successor Trustee shall notify
the Certificateholders, the Seller, the Servicer and the Security Insurer).
"Cumulative Net Loss Rate" means, with respect to any date of
determination, the amount, expressed as a percentage, which is (A) an amount
equal to (i) the aggregate principal balance of all Receivables that became
Liquidated Receivables through such date of determination plus interest due and
unpaid thereon under the related Contracts, minus (ii) all Net Liquidation
Proceeds received through such date of determination with respect to such
Liquidated Receivables, (B) divided by the Initial Pool Balance.
"Cutoff Date" means July 1, 1996.
"Dealer" means a dealer that sold a Financed Vehicle to an Obligor and
sold and assigned the related Receivable to the Seller pursuant to a Dealer
Agreement.
"Dealer Agreement" means an agreement between the Seller and a Dealer
pursuant to which such Dealer sells Contracts to the Seller.
"Defaulted Receivable" means a Receivable with respect to which any of
the following shall have occurred: (i) a payment
4
<PAGE> 10
under the related Contract is 180 or more days delinquent or (ii) the Servicer
has determined in good faith that payments under the related Contract are not
likely to be resumed.
"Definitive Certificates" shall have the meaning specified in Section
6.09.
"Delivery" when used with respect to Account Property means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-105(1)(i) of the UCC and are
susceptible of physical delivery, transfer thereof to the Trustee or its
nominee or custodian by physical delivery to the Trustee or its nominee or
custodian endorsed to, or registered in the name of, the Trustee or its nominee
or custodian or endorsed in blank, and, with respect to a certificated security
(as defined in Section 8-102 of the UCC) transfer thereof (i) by delivery of
such certificated security endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank to a financial
intermediary (as defined in Section 8-313 of the UCC) and the making by such
financial intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trustee or its nominee or custodian
and the sending by such financial intermediary of a confirmation of the
purchase of such certificated security by the Trustee or its nominee or
custodian, or (ii) by delivery thereof to a "clearing corporation" (as defined
in Section 8-102(3) of the UCC) and the making by such clearing corporation of
appropriate entries on its books reducing the appropriate securities account of
the transferor and increasing the appropriate securities account of a financial
intermediary by the amount of such certificated security, the identification by
the clearing corporation of the certificated securities for the sole and
exclusive account of the financial intermediary, the maintenance of such
certificated securities by such clearing corporation or a "custodian bank" (as
defined in Section 8-102(4) of the UCC) or the nominee of either, subject to
the clearing corporation's exclusive control, the sending of a confirmation by
the financial intermediary of the purchase by the Trustee or its nominee or
custodian of such securities and the making by such financial intermediary of
entries on its books and records identifying such certificated securities as
belonging to the Trustee or its nominee or custodian (all of the foregoing,
"Physical Property"), and, in any event, any such Physical Property in
registered form shall be in the name of the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such
Account Property to the Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S. Treasury,
the Federal Home Loan Mortgage Corporation or by the
5
<PAGE> 11
Federal National Mortgage Association that are book-entry securities held
through the Federal Reserve System pursuant to federal book-entry regulations,
the following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Account Property to an appropriate book-entry account
maintained with a Federal Reserve Bank by a financial intermediary that is also
a "depository" pursuant to applicable federal regulations and issuance by such
financial intermediary of a deposit advice or other written confirmation of
such book-entry registration to the Trustee or its nominee or custodian of the
purchase by the Trustee or its nominee or custodian of such book-entry
securities; the making by such financial intermediary of entries in its books
and records identifying such book-entry securities held through the Federal
Reserve System pursuant to federal book-entry regulations as belonging to the
Trustee or its nominee or custodian and indicating that such custodian holds
such Account Property solely as agent for the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter
become appropriate to effect complete transfer of ownership of any such Account
Property to the Trustee or its nominee or custodian, consistent with changes in
applicable law or regulations or the interpretation thereof; and
(c) with respect to any item of Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof
in the name of a financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trustee or its nominee or
custodian of such uncertificated security, and the making by such financial
intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Trustee or its nominee or
custodian.
"Depository Agreement" means the agreement dated July 30, 1996,
between the Trustee and The Depository Trust Company, as the initial Clearing
Agency, substantially in the form of Exhibit C.
"Determination Date" means, with respect to each Distribution Date,
the earlier of (i) the 10th day of the calendar month in which such
Distribution Date occurs (or if such 10th day is not a Business Day, the next
succeeding Business Day) and (ii) the third Business Day preceding such
Distribution Date.
"Distribution Date" means, with respect to each Collection Period, the
fifteenth day of the following calendar month or, if such fifteenth day is not
a Business Day, the next succeeding Business Day, commencing on September 16,
1996.
"Eligible Deposit Account" means a segregated trust account that is
maintained with a depository institution or trust company (a) the long-term
unsecured debt obligations of which are rated
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<PAGE> 12
"AA" or higher by Standard & Poor's and "Aa2" or higher by Moody's or (b) the
commercial paper or other short-term unsecured debt obligations of which are
rated "A-1+" by Standard & Poor's and "P-1" by Moody's or (c) that has been
specifically approved by the Security Insurer with notice to the Rating
Agencies.
"Eligible Investments" means book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(i) Direct obligations of the United States of America and
securities fully and unconditionally guaranteed as to the timely
payment of principal and interest by the United States of America or
any agency or instrumentality of the United States of America,
provided, that the full faith and credit of the United States of
America must be pledged to any such direct obligation or guarantee
("Direct Obligations");
(ii) Direct Obligations and fully guaranteed certificates of
beneficial interest of the Export-Import Bank of the United States;
consolidated debt obligations and letter of credit-backed issues of
the Federal Home Loan Banks; participation certificates and senior
debt obligations of the Federal Home Loan Mortgage Corporation
("FHLMCs"); debentures of the Federal Housing Administration;
mortgage-backed securities (except stripped mortgage securities which
are valued greater than par on the portion of unpaid principal) and
senior debt obligations of the Federal National Mortgage Association
("FNMAs"); participation certificates of the General Services
Administration; guaranteed mortgage-backed securities and guaranteed
participation certificates of the Government National Mortgage
Association ("GNMAs"); guaranteed participation certificates and
guaranteed pool certificates of the Small Business Administration;
debt obligations and letter of credit-backed issues of the Student
Loan Marketing Association; local authority bonds of the U.S.
Department of Housing & Urban Development; guaranteed Title XI
financings of the U.S. Maritime Administration; guaranteed transit
bonds of the Washington Metropolitan Area Transit Authority; and
Resolution Funding Corporation securities; all of the foregoing rated,
at the time of purchase, "P-1" or "A2" by Moody's and rated "A" by
Standard & Poor's;
(iii) Direct Obligations of any State of the United States of
America or any subdivision or agency thereof whose unsecured,
uninsured and unguaranteed general obligation debt is rated, at the
time of purchase "A2" or better by Moody's and "A" or better by
Standard & Poor's, or any obligation fully and unconditionally
guaranteed by any state, subdivision or agency whose unsecured,
uninsured and unguaranteed general obligation debt is rated, at the
time of purchase, "A2" or better by Moody's and "A" or better by
Standard & Poor's;
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(iv) Commercial paper (having original maturities of not more
than 270 days) rated, at the time of purchase, "P-1" by Moody's and
"A-1" or better by Standard & Poor's;
(v) Federal funds, unsecured certificates of deposit, time
deposits or bankers acceptances (in each case having maturities of not
more than 365 days) of any domestic bank including a branch office of
a foreign bank which branch office is located in the United States,
provided legal opinions are received to the effect that full and
timely payment of such deposit or similar obligation is enforceable
against the principal office or any branch of such bank, which, at the
time of purchase, has a short-term "Bank Deposit" rating of "P-1" by
Moody's and a "Short-Term CD" rating of "A-1" or better by Standard &
Poor's and further provided that the bank is subject to the
supervision and examination of federal and state banking authorities;
(vi) Deposits of any bank or savings and loan association
which has combined capital, surplus and undivided profits of not less
than $3 million, provided such deposits are continuously and fully
insured by the Bank Insurance Fund or the Savings Association
Insurance Fund of the FDIC;
(vii) Investments in money-market funds rated "AAAm" or
"AAAm-G" by Standard & Poor's and "Aaa" by Moody's;
(viii) Repurchase agreements collateralized by Direct
Obligations, GNMAs, FNMAs or FHLMCs with any registered broker/dealer
subject to the Securities Investors' Protection Corporation
jurisdiction or any commercial bank insured by the FDIC, if such
broker/dealer or bank has an uninsured, unsecured and unguaranteed
obligation rated "P-1" or "A2" or better by Moody's, and "A-1" or "A"
or better by Standard & Poor's, provided:
a. a master repurchase agreement or specific written
repurchase agreement governs the transaction; and
b. the securities are held free and clear of any lien
by the Trustee or an independent third party acting solely as
agent ("Agent") for the Trustee, and such third party is (i) a
Federal Reserve Bank, (ii) a bank which is a member of the
FDIC and which has combined capital, surplus and undivided
profits of not less than $50 million or (iii) a bank approved
in writing for such purpose by Financial Guaranty Insurance
Company, and the Trustee shall have received written
confirmation from such third party that it holds such
securities, free and clear of any lien, as agent for the
Trustee; and
c. a perfected first security interest under the
Uniform Commercial Code, or book entry procedures
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<PAGE> 14
prescribed at 31 C.F.R. 306.1 et seq. or 31 C.F.R. 350.0 et
seq. in such securities is created for the benefit of the
Trustee; and
d. the repurchase agreement has a term of 180 days or
less, and the Trustee or the Agent will value the collateral
securities no less frequently than weekly and will liquidate
the collateral securities if any deficiency in the required
collateral percentage is not restored within two business days
of such valuation; and
e. the fair market value of the securities in
relation to the amount of the repurchase obligation, including
principal and interest, is equal to at least 103%; and
f. the securities have a rating, at the time of
purchase of "P-1" or better by Moody's and "A-1" or "A" by
Standard & Poor's.
(ix) Investment agreements, the issuer, form and substance of
which are specifically approved by the Security Insurer with notice to
Standard & Poor's and Moody's.
Notwithstanding the foregoing, Eligible Investments shall not include (i)
"stripped securities" and investments which contractually may return less than
the purchase price therefor, and (ii) instruments with a purchase price greater
than par if such instrument may be prepaid or called at a price less than its
purchase price prior to its stated maturity.
"Eligible Servicer" means Fidelity National Bank, the Trustee, as
Successor Servicer, or any other Person which at the time of its appointment as
Servicer (i) is servicing a portfolio of motor vehicle retail installment sale
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 retail
installment sale contracts and/or motor vehicle installment loans similar to
the Receivables with reasonable skill and care, (iv) has a minimum net worth of
$100,000,000, and (v) is acceptable to the Security Insurer.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Fidelity" Fidelity National Bank, a national banking association, and
its successors.
"Final Scheduled Distribution Date" means December 16, 2002.
"Final Scheduled Maturity Date" means June 2002.
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"Financed Vehicle" means an automobile, light-duty truck, van or
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under a Receivable.
"Guaranteed Distribution" means, with respect to each Distribution
Date, an amount equal to the Interest Distributable Amount plus the Principal
Distributable Amount.
"Initial Pool Balance" means $92,406,239.80.
"Insolvency Event" means (i) the entry of a decree or order by a court
or agency or supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, or liquidator for the Servicer in any
insolvency, readjustment of debt, marshalling of assets and liabilities, or
similar proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days or (ii) the consent by the Servicer to the appointment
of a conservator or receiver or liquidator in any insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer or of or relating to substantially all of its
property; or (iii) the admission by the Servicer in writing of its inability to
pay its debts generally as they become due, the filing by the Servicer of a
petition to take advantage of any applicable insolvency or reorganization
statute, the making by the Servicer of an assignment for the benefit of its
creditors, or the voluntary suspension by the Servicer of payment of its
obligations.
"Insurance Policies" means the policies set forth in Section
3.01(a)(xiii) hereof.
"Insured Payment" means, as of each Distribution Date, an amount equal
to the Shortfall as of such Distribution Date.
"Interest Carryover Shortfall" means, with respect to any Distribution
Date, the excess of the sum of the Monthly Interest Distributable Amount for
the preceding Distribution Date and any outstanding Interest Carryover
Shortfall on such preceding Distribution Date, over the amount in respect of
interest that Holders of the Certificates actually received on such preceding
Distribution Date.
"Interest Distributable Amount" means, with respect to any
Distribution Date, the sum of the Monthly Interest Distributable Amount and the
Interest Carryover Shortfall.
"Investment Income" means, with respect to any Distribution Date, the
investment earnings (net of related losses and investment expenses) for the
related Collection Period on amounts on deposit in the Collection Account or
the Reserve Account, as applicable.
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"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and other liens
that attach to a Receivable by operation of law as a result of any act or
omission by the related Obligor.
"Liquidated Receivable" means any Receivable with respect to which any
of the following shall have occurred: (i) the related Financed Vehicle has been
repossessed for 180 days or more or (ii) such Receivable is a Defaulted
Receivable with respect to which the Servicer has determined in good faith that
all amounts it expects to recover have been received and do not constitute
Purchased Receivables.
"Monthly Interest Distributable Amount" means, with respect to any
Distribution Date, an amount equal to the product of (i) one-twelfth (or with
respect to the first Distribution Date, two-twelfths), (ii) the Pass-Through
Rate and (iii) the Certificate Balance on the preceding Distribution Date (or,
in the case of the first Distribution Date, on the Closing Date) after giving
effect to any amounts distributed to Holders of the Certificates on such
preceding Distribution Date and allocable to principal.
"Monthly Principal Distributable Amount" means, with respect to any
Distribution Date, (i) that portion of collections on the Receivables (other
than Recoveries) received during the related Collection Period and allocable to
principal, including full and partial principal prepayments; (ii) the principal
balance of all Receivables that became Purchased Receivables during the related
Collection Period to the extent the purchase price therefor has been deposited
into the Collection Account; and (iii) the principal balance of all Receivables
that became Liquidated Receivables during the related Collection Period.
"Monthly Trustee Fee" means, with respect to any Distribution Date,
$__________.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Losses" means, with respect to any Collection Period,
(i) the aggregate Principal Balance of all Receivables that became Liquidated
Receivables during such Collection Period plus interest due and unpaid thereon
under the related Contracts, minus (ii) Net Liquidation Proceeds received
during such Collection Period with respect to such Liquidated Receivables and
any Receivables that became Liquidated Receivables during previous Collection
Periods or paid to other lien creditors.
"Net Liquidation Proceeds" means, with respect to any Liquidated
Receivable, all amounts realized on or with respect to such Liquidated
Receivable, net of (i) reasonable expenses incurred by the Servicer in
connection with the collection of the Receivable
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and the repossession and disposition of the Financed Vehicle and (ii) amounts
that are required by law to be refunded to the Obligor on such Receivable.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person or Persons who are primarily or
secondarily obligated to make payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the president, any executive vice president, any vice president or
the Chief Financial Officer of the Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel,
who may (except in the case of Opinions of Counsel delivered pursuant to
Section 12.02(i)) be an employee of or counsel to the Seller or the Servicer,
which counsel shall be acceptable to the Trustee and, if the Security Insurer
is an addressee of such opinion, the Security Insurer, and which opinion shall
be in form and substance acceptable to the Trustee and, if the Security Insurer
is an addressee of such opinion, the Security Insurer.
"Outstanding Advances" means the sum, as of the close of business on
the last day of a Collection Period, of all unreimbursed Advances, reduced as
provided in Section 5.05.
"Pass-Through Rate" means 6.85% per annum, computed on the basis of a
360-day year consisting of twelve 30-day months.
"Person" means any legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof.
"Physical Property" shall have the meaning assigned to such term in
the definition of "Delivery" above.
"Policy" means the certificate guaranty surety bond number 96010417
issued by the Security Insurer with respect to the Certificates in the form of
Exhibit G.
"Pool Balance" means, with respect to each Determination Date, the
aggregate Principal Balance of the Receivables (excluding Purchased Receivables
and Liquidated Receivables) as of the close of business on the last day of the
related Collection Period, after giving effect to all collections for such
Collection Period.
"Pool Performance Trigger Event" means either (i) (a) if, as of any
date of determination from the Closing Date through and including the
Distribution Date in January 1998, the Cumulative Net Loss Rate is greater than
or equal to 3.8% as of such date or (b)
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<PAGE> 18
if, as of any date of determination following the Distribution Date in January
1998, the Cumulative Net Loss Rate is greater than or equal to 5% as of such
date, or (ii) if, as of any date of determination, the 30 Day+ Delinquency
Percentage is equal to or greater than 8.5%.
"Preference Amount" means, as to any Distribution Date, any amounts
included in previous distributions to Certificateholders of Guaranteed
Distributions (exclusive of Insured Payments) which are recovered from such
Certificateholders as a voidable preference by a trustee in bankruptcy pursuant
to the United States Bankruptcy Code in accordance with a final, nonappealable
order of a court having competent jurisdiction and which have not theretofore
been repaid to such Certificateholders, provided such Certificateholders have
complied with the provisions of Section 5.09(e).
"Preference Order" shall have the meaning set forth in Section
5.09(e).
"Premium Amount" means, as to any Distribution Date, one-twelfth of
the product of (x) the Premium Percentage and (y) the Certificate Balance on
such Distribution Date (after taking into account any distributions of
principal to the Certificateholders to be made on such Distribution Date).
"Premium Percentage" has the meaning set forth in the letter agreement
between the Seller and the Security Insurer.
"Principal Balance" means, with respect to any Receivable on a
Determination Date, the Amount Financed minus an amount equal to the sum, as of
the close of business on the last day of the related Collection Period, of that
portion of all amounts received on or prior to such day with respect to such
Receivable and allocable to principal using the Simple Interest Method, as
applicable.
"Principal Carryover Shortfall" means the amount, if any, as of the
close of business on any Distribution Date, by which (i) the Monthly Principal
Distributable Amount plus any outstanding Principal Carryover Shortfall from
the preceding Distribution Date exceeds (ii) the amount actually distributed to
Holders of the Certificates and allocable to principal on such date.
"Principal Distributable Amount" means, with respect to any
Distribution Date, the sum of the Monthly Principal Distributable Amount for
such Distribution Date and the Principal Carryover Shortfall as of the close of
the preceding Distribution Date; provided, however, that the Principal
Distributable Amount shall not exceed the Certificate Balance. In addition, on
the Final Scheduled Distribution Date, the principal required to be included in
the Principal Distributable Amount shall include the amount that is necessary
(after giving effect to the other amounts to be distributed to Holders of the
Certificates on such Distribution
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<PAGE> 19
Date and allocable to principal) to reduce the Certificate Balance to zero.
"Purchase Amount" means the amount, as of the close of business on the
last day of a Collection Period, required to prepay a Receivable in full under
the terms thereof (but in no event less than the unpaid principal balance
thereof), including interest to the end of the month of purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Seller pursuant to
Section 3.03 or the Servicer pursuant to Section 4.07.
"Rating Agency" means either Moody's or Standard & Poor's or, when
used in the plural form, Moody's and Standard and Poor's. If none of Moody's,
Standard & Poor's or a successor to either of them remains in existence,
"Rating Agency" shall mean any nationally recognized statistical rating
organization or other comparable Person designated by the Seller, notice of
which designation shall be given to the Trustee, the Servicer and the Security
Insurer.
"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 each of the
Rating Agencies shall have notified the Seller, the Servicer, the Trustee and
the Security Insurer in writing that such action will not result in a reduction
or withdrawal of the then current ratings of the Certificates and, if
applicable, will not result in an increased capital charge to the Security
Insurer.
"Receivable" means any Contract transferred to the Trust on the
Closing Date and listed on Schedule I.
"Receivable File" means the documents, electronic entries, instruments
and writings with respect to a Receivable specified in Section 3.04.
"Record Date" means, with respect to each Distribution Date, the close
of business on the last day of the immediately preceding calendar month.
"Recoveries" means, with respect to any Receivable that becomes a
Liquidated Receivable, monies collected in respect thereof, from whatever
source, during any Collection Period following the Collection Period in which
such Receivable became a Liquidated Receivable, net of the sum of any amounts
expended by the Servicer for the account of the Obligor and any amounts
required by law to be remitted to the Obligor.
"Reimbursement Amount" means, as of any Distribution Date, the sum of
(i) all Insured Payments previously paid by the Security
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<PAGE> 20
Insurer and all preference payments (as described in the Policy) previously
paid by the Security Insurer and in each case not previously repaid to the
Security Insurer pursuant to Section 5.09(d) plus (ii) interest accrued on each
such Insured Payment and such preference payments not previously repaid,
calculated at the Pass-Through Rate in each case from the date the Security
Insurer paid the related Insured Payment or the preference payment, as the case
may be. The Security Insurer shall notify in writing the Trustee and the
Seller of the amount of any Reimbursement Amount due in respect of any
Distribution Date at least two days prior to the related Determination Date.
"Reserve Account" means the Reserve Account established pursuant to
Section 5.10.
"Reserve Account Deposit Amount" means, with respect to any
Distribution Date, the lesser of (x) the excess of (i) the Specified Reserve
Balance on such Distribution Date over (ii) the amount on deposit in the
Reserve Account on such Distribution Date, after taking into account the amount
of any Reserve Account Withdrawal Amount on such Distribution Date and (y) the
amount remaining in the Collection Account after taking into account the
distributions therefrom described in clauses (1) through (6) of Section 5.08.
"Reserve Account Withdrawal Amount" means, with respect to any
Distribution Date, the lesser of (x) the excess of (i) the sum of the amounts
described in clauses (1) through (6) of Section 5.08 over (ii) the Available
Funds for such Distribution Date and (y) the amount on deposit in the Reserve
Account on such Distribution Date before taking into account any withdrawal
therefrom on such Distribution Date.
"Reserve Initial Deposit" shall be $1,848,124.80.
"Responsible Officer" means the chairman of the board, the president,
any executive vice president, any vice president, the treasurer, any assistant
treasurer, the secretary, the Chief Financial Officer or any assistant
secretary of the Servicer.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Insurer" means Financial Guaranty Insurance Company, a New
York stock insurance company, or its successor.
"Security Insurer Default" means the Security Insurer shall have
failed to make a required payment when due under the Policy in accordance with
its terms.
"Seller" Fidelity National Bank, a national banking association, and
any successor thereto.
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"Servicer" means Fidelity National Bank, a national banking
association, and each successor Servicer pursuant to Section 8.03(a) or
9.03(a).
"Servicer Termination Event" means any event specified in Section
9.01.
"Servicer's Certificate" means the certificate required to be
delivered by the Servicer pursuant to Section 4.09, substantially in the form
attached hereto as Exhibit E.
"Servicing Fee" means the fee payable to the Servicer for services
rendered during each Collection Period, determined pursuant to Section 4.08.
"Shortfall" shall have the meaning specified in Section 5.09(b).
"Simple Interest Method" means the method of allocating the monthly
payments received with respect to a Receivable to interest in an amount equal
to the product of (i) the applicable APR, (ii) 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 was made
under such Receivable and (iii) the outstanding principal amount of the
Receivable, and allocating the remainder of each such monthly payment to
principal.
"Simple Interest Receivable" means a Receivable with respect to which
the portion of each payment allocable to interest or to principal under the
related Contract is determined in accordance with the Simple Interest Method.
"Specified Reserve Balance" means, on the Closing Date, the Reserve
Initial Deposit. As of any Distribution Date subsequent to the Closing Date,
4.5% of the Pool Balance as of any such Distribution Date; provided, however,
that the Specified Reserve Balance shall never be less than the lesser of (i)
$1,000,000 and (ii) the outstanding Certificate Balance on such Distribution
Date.
"Standard & Poor's" means Standard & Poor's Ratings Service, A
Division of The McGraw-Hill Company, or its successor.
"State" means any one of the 50 States of the United States of America
or the District of Columbia.
"30 Day+ Delinquency Percentage" means, with respect to any date of
determination, the average of the percentage equivalents of the fractions
determined for each of the preceding three Collection Periods the numerator of
which is equal to the aggregate Principal Balance of all Receivables which are
either 30 days or more delinquent or which relate to repossessed Financed
Vehicles and the
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denominator of which is the Pool Balance, in each case at the end of the
related Collection Period.
"Trust" means the trust created by this Agreement.
"Trustee" means The Bank of New York, a New York banking corporation,
its successors in interest and any successor Trustee hereunder.
"Trustee Officer" means any officer within the Corporate Trust Office
of the Trustee, including any vice president, any assistant vice president, any
senior trust officer, any trust officer 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.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
Section 1.02. Other Definitional Provisions. (a) All terms defined
in this Agreement shall have the defined meanings when used in any certificate
or other document made or delivered pursuant hereto or thereto unless otherwise
defined therein.
(b) As used herein and in any certificate or other document made
or delivered pursuant hereto or thereto, accounting terms not defined herein or
in any such certificate or other document, and accounting terms partly defined
herein or in any such certificate or other document to the extent not defined,
shall have the respective meanings given to them under United States generally
accepted accounting principles. To the extent that the definitions of
accounting terms herein or in any such certificate or other document are
inconsistent with the meanings of such terms under United States generally
accepted accounting principles, the definitions contained herein or in any such
certificate or other document shall control.
(c) The words "hereof", "herein", "hereunder" and words of similar
import when used herein shall refer to this Agreement as a whole and not to any
particular provision hereof; Article, Section, Schedule and Exhibit references
contained herein are references to Articles, Sections, Schedules and Exhibits
herein; 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 the feminine and neuter genders of such terms.
(e) Any agreement, instrument or statute defined or referred to
herein or in any instrument or certificate delivered in connec-
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tion 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.
ARTICLE II
Creation of the Trust; Conveyance of Receivables
Section 2.01. Creation of Trust. (a) Upon the execution of this
Agreement by the parties hereto, there is hereby created a separate trust,
which shall be known as Fidelity Grantor Trust 1996-1 (the "Trust"). The Trust
shall be administered pursuant to the provisions of this Agreement.
(b) It is the intention of the Trustee and the Certificateholders,
and the Trustee and the Certificateholders agree, that the Trust will be
treated as a grantor trust for federal income tax purposes, and all
transactions contemplated by this Agreement will be reported, to the extent
applicable, on all applicable tax returns consistently with such treatment.
The provisions of this Agreement shall be construed, and the affairs of the
Trust shall be conducted, so as to achieve treatment of the Trust as a grantor
trust for federal income tax purposes.
Section 2.02. Conveyance of Receivables. In consideration of the
Trustee's delivery on the Closing Date to or upon the order of the Seller of
Certificates in an initial aggregate principal amount of $92,406,239.80, the
Seller does hereby sell, transfer, assign, set over, and otherwise convey to
the Trustee in trust for the benefit of the Certificateholders, without
recourse (subject to the obligations set forth herein):
(a) all right, title and interest of the Seller in and to the
Receivables and all payments due before and not received prior to the
Cutoff Date or received with respect thereto on and after the Cutoff
Date;
(b) all right, title and interest of the Seller in and to the
security interests in the related Financed Vehicles and any accessions
thereto granted by Obligors pursuant to the Receivables and any other
interest of the Seller in such Financed Vehicles;
(c) all right, title and interest of the Seller in and to any
Net Liquidation Proceeds and any other proceeds with respect to the
Receivables from claims on any physical damage, credit life or
disability or other insurance policies covering Financed Vehicles or
Obligors, including any vendor's single interest or other collateral
protection insurance policy;
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(d) all right, title and interest of the Seller in and to any
property that shall have secured a Receivable and that shall have been
acquired by or on behalf of the Seller, the Servicer or the Trustee;
(e) all right, title and interest of the Seller in and to all
documents and other items contained in the Receivable Files;
(f) all right, title and interest of the Seller in and to the
Account Property;
(g) the right to receive payments as set forth herein from
the Reserve Account;
(h) the right to receive payments as set forth herein from
the Policy;
(i) the interest of the Seller in any proceeds from recourse
to any dealers relating to the Receivables; and
(j) the proceeds of any and all of the foregoing.
In addition, on or prior to the Closing Date, the Seller shall cause the
Security Insurer to deliver the Policy to the Trustee for the benefit of the
Holders of the Certificates.
Although the Seller and the Trustee agree that the transfer of assets
to the Trust pursuant to this Agreement is intended to be a sale of such assets
to the Trust, rather than the granting of a security interest to secure a
borrowing, and that such assets shall not be property of the Seller, in the
event such transfer is deemed not to be a sale and to be of a mere security
interest to secure a borrowing, the Seller shall be deemed to have granted to
the Trustee for the benefit of the Trust a perfected first priority security
interest in all such assets, and this Agreement shall constitute a security
agreement under applicable law and the Trustee shall have all of the rights and
remedies of a secured party and creditor under the UCC and other applicable law
as in force in the relevant jurisdictions.
The Seller hereby pledges, grants, assigns and otherwise sets over to
the Trustee, in trust, the Reserve Account and all amounts on deposit therein
and all Eligible Investments held therein from time to time and all proceeds
thereof as security for the Seller's obligations hereunder as hereinafter
provided, and hereby grants to the Trustee for the benefit of the
Certificateholders and the Security Insurer a perfected first priority security
interest in the Reserve Account, amounts and Eligible Investments. It is the
intention of the Seller that, with respect to the Reserve Account and such
amounts and Eligible Investments, this Agreement shall constitute a security
agreement under applicable law and the Trust shall have all of the rights and
remedies of a secured party and
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creditor under the UCC and other applicable law as in force in the relevant
jurisdictions.
Section 2.03. Acceptance by Trustee. The Trustee hereby acknowledges
the sale, transfer and assignment by the Seller pursuant to this Article II and
declares that the Trustee holds and will hold the Receivables and the other
assets of the Trust in trust, upon the terms herein set forth, for the use and
benefit of all present and future Certificateholders and, to the extent
provided herein, the Security Insurer.
ARTICLE III
The Receivables
Section 3.01. Representations and Warranties of the Seller. (a) The
Seller makes the following representations and warranties as to the Receivables
on which the Trustee relies in accepting the Receivables in trust and executing
and authenticating the Certificates and upon which the Security Insurer relies
in executing and delivering the Policy. Such representations and warranties
speak as of the Closing Date, but shall survive the sale, transfer, and
assignment of the Receivables to the Trust.
(i) Characteristics of Receivables. Each Receivable (a)
shall have been originated or purchased by the Seller, (b) shall have
been fully and properly executed by the parties thereto, (c) is a
fully-amortizing simple interest installment contract or installment
loan which provides for level monthly payments over its original term,
provided that some Receivables may include a payment in the last month
in the life of the Receivable which due to delinquencies or partial
prepayments may be different from the level monthly payment, (d) 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 shall be assignable and
shall have been validly assigned by the Seller to the Trustee, and (e)
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.
(ii) Schedule of Receivables. The information set forth in
the Schedule of Receivables attached hereto as Exhibit B shall be true
and correct in all material respects as of the opening of business on
the Cutoff Date. The Seller shall have caused its electronic ledger
relating to each related Receivable to be clearly and unambiguously
marked to show that such Receivable has been sold to the Trust for the
benefit of the Certificateholders pursuant to this Agreement.
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(iii) Compliance with Law. Each Receivable and each sale of
the related Financed Vehicle shall have complied at the time it was
originated or made and at the execution of this Agreement shall 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 Billing Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, and State adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code, and
other applicable consumer credit laws and equal credit opportunity and
disclosure laws.
(iv) Binding Obligation. Each Receivable represents the
genuine, legal, valid, and binding payment obligation in writing of
the related Obligor, enforceable by the holder thereof in accordance
with its terms. All parties to such Receivable have full legal
capacity to execute and deliver such Receivable and all other
documents related thereto and to grant the security interest granted
thereby and the terms of such Receivable have not been waived or
modified in any respect (other than extensions of payments granted in
the ordinary course of the Servicer's collection procedures and the
term of which does not extend beyond the last day of the Collection
Period immediately preceding the Final Scheduled Distribution Date).
(v) No Government Obligor. None of the Receivables shall be
due from the United States of America or any State or local government
or from any agency, department, or instrumentality of the United
States of America or any State or local government.
(vi) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof to the Trustee, each
Receivable shall be secured by a validly perfected first priority
security interest in the Financed Vehicle in favor of the Seller as
secured party and all necessary and appropriate actions with respect
to such Receivable shall have been taken to perfect a first priority
security interest in the Financed Vehicle in favor of the Seller as
secured party, which security interest is assignable and has been so
assigned to the Trust.
(vii) Receivables in Force. No Receivable shall have been
satisfied, subordinated, or rescinded, nor shall any Financed Vehicle
have been released from the lien granted by the related Receivable, in
whole or in part, except for any prepayments in full made after the
Cutoff Date and prior to the Closing Date.
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(viii) No Waiver. No provision of a Receivable shall have been
waived (other than extensions of payments granted in the ordinary
course of the collection procedures of the Servicer and the term of
which does not extend beyond the last day of the Collection Period
immediately preceding the Final Scheduled Distribution Date).
(ix) No Amendments. No Receivable shall have been amended
such that the number of the Obligor's scheduled payments shall have
been increased, except for any such increase granted in the ordinary
course of the collection procedures for the Servicer since the Cutoff
Date.
(x) No Defenses. No facts exist which would give rise to any
right of rescission, setoff, counterclaim or defense nor shall have
any right of rescission, setoff, counterclaim, or defense been
asserted or threatened with respect to any Receivable.
(xi) No Liens. No liens or claims shall have been filed,
including liens for work, labor, materials or taxes relating to a
Financed Vehicle, that shall be liens prior to, or equal or coordinate
with, the security interest in the Financed Vehicle granted by the
Obligor pursuant to the Receivable.
(xii) No Default. Except for payment defaults continuing for a
period of not more than 31 days as of the Cutoff Date, no default,
breach, violation or event permitting acceleration under the terms of
any Receivable shall exist; no continuing condition that with notice
or lapse of time would constitute a default, breach, violation or
event permitting acceleration under the terms of any Receivable shall
exist; and the Seller shall not have waived any of the foregoing.
(xiii) Insurance. The Servicer, in accordance with its
customary procedures, shall have (i) required that the Obligor obtain
physical damage and theft insurance covering the Financed Vehicle as
of the date of the related contract and (ii) obtained vendor's single
interest insurance covering the Financed Vehicle.
(xiv) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated, taken as a whole,
constitute a sale of the Receivables and such other property of the
Seller from the Seller to the Trust and that the beneficial interest
in and title to the Receivables and other Trust property not be part
of the Seller's receivership or conservatorship estate in the event of
the appointment of a receiver or conservator for the Seller. No
Receivable has been sold, transferred, assigned, or pledged by the
Seller to any Person other than the Trust or the Trustee. Immediately
prior to the transfer and assignment herein contemplated, the
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Seller had good and marketable title to each Receivable free and clear
of all Liens, and, immediately upon the transfer thereof, the Trustee
for the benefit of the Certificateholders and the Security Insurer
shall have good and marketable title to each Receivable, free and
clear of all Liens and rights of others, except for the rights of the
Certificateholders and the Security Insurer; and the transfer of the
Receivables to the Trust has been perfected under the UCC.
(xv) Lawful Assignment. No Receivable shall have been
originated in, or shall be subject to the laws of, any jurisdiction
under which the sale, transfer, and assignment of such Receivable
under this Agreement would be unlawful, void, or voidable.
(xvi) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Trustee a first priority perfected ownership interest in the
Receivables shall have been made, and no other actions need to be
taken to give the Trustee a first priority perfected ownership
interest in the Receivables. A complete and correct list of all such
filings is attached as Schedule I.
(xvii) One Original. There shall be only one original executed
copy of each Receivable, and immediately prior to the constructive
delivery thereof to the Trustee pursuant to Section 3.04, such copy
shall have been in the custody and possession of the Seller.
(xviii) No Bankrupt Obligor. None of the Receivables shall be
due from an Obligor who has commenced a voluntary case under the
United States Bankruptcy Code or consented to the entry of or failed
to have stayed within 60 days of entry an order for relief against it
in an involuntary case under the United States Bankruptcy Code.
(xix) Chattel Paper. The Receivables constitute "chattel
paper" within the meaning of the UCC as in effect in the State of
Georgia.
(xx) Maximum Amount Financed. No Obligor shall be the Obligor
on Receivables on which the sum of the Principal Balances of such
Receivables is greater than $59,789.00.
(xxi) No Assignment. The Seller has not taken any action to
convey any right to any Person that would result in such Person having
a right to payments due under the Receivable that is senior to or
equal with that of the Trust.
(xxii) Composition of Receivables. Each Receivable is secured
by a Financed Vehicle which is a new or used automobile, light duty
truck, van or minivan.
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(xxiii) Maturity of Receivables. Each Receivable shall have an
original term to stated maturity of at least 12 months and not more
than 72 months.
(xxiv) Minimum and Maximum Annual Percentage Rate. Each
Receivable shall have an Annual Percentage Rate no less than 9.01% and
no more than 28.98%.
(xxv) Minimum and Maximum Principal Balance. Each Receivable
shall have a principal balance no less than $236.65 and no more than
$47,201.51.
(xxvi) States of Obligor Residence. Except with respect to
Receivables with an aggregate principal representing 6.40% of the Pool
Balance, the Obligor under each Receivable resides in the States of
Georgia or Florida.
(xxvii) Location of Receivable Files. The Receivable Files shall
be kept by the Servicer as custodian for the Trustee in the County of
Fulton in the State of Georgia, or at such other location or locations
as may be designated from time to time by notice to the Trustee.
(xxviii) Advance Payments. No Receivables has been paid more
than six months in advance.
(xxix) No Adverse Selection. The Receivables were selected from
retail installment sales contracts and motor vehicle installment loans
in the Seller's portfolio that had met the applicable conditions
specified in this Section 3.01 utilizing no selection procedures
adverse to the Certificateholders or the Security Insurer relative to
similar retail installment sales contracts and motor vehicle
installment loans in the Seller's portfolio.
Section 3.02. Reserved.
Section 3.03. Repurchase upon Breach. The Seller, the Security
Insurer and the Servicer shall inform the other parties to this Agreement and
the Security Insurer promptly, in writing, upon the discovery of any breach of
the Seller's representations and warranties made pursuant to Section 3.01 of
this Agreement. Unless any such breach shall have been cured by the last day
of the first Collection Period following the discovery or notice thereof by or
to the Seller or the Servicer, the Seller shall be obligated to repurchase as
of such last day any Receivable materially and adversely affected by any such
breach. In consideration of the repurchase of any such Receivable, the Seller
shall remit the Purchase Amount to the Collection Account, in the manner
specified in Section 5.06. The sole remedy of the Trustee or the
Certificateholders with respect to a breach of representations and warranties
pursuant to Section 3.01 and the agreement contained in this Section shall be
to require the Seller to repurchase Receivables
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pursuant to this Section, subject to the conditions contained herein. The
Seller shall notify the Security Insurer of any repurchase of any Receivable
pursuant to this Section.
Section 3.04. Custody of Receivable Files. To assure uniform
quality in servicing the Receivables and to reduce administrative costs, the
Trustee hereby revocably appoints the Servicer, and the Servicer hereby accepts
such appointment, to act as the agent of the Trustee as custodian of the
following documents or instruments, which are hereby constructively delivered
to the Trustee with respect to the Receivables:
(a) the fully executed original of the Receivable (together
with any agreements modifying the Receivable, including any extension
agreement);
(b) the original credit application, or a true and correct
copy thereof, fully executed by each Obligor thereon;
(c) the original certificate of title or such other documents
that the Servicer shall keep on file in accordance with its customary
procedures evidencing the security interest of the Seller in the
Financed Vehicle; 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 3.05. Duties of Servicer as Custodian. (a) Safekeeping.
The Servicer shall hold the Receivable Files as custodian on behalf of the
Trustee for the benefit of all present and future Certificateholders and, to
the extent provided herein, the Security Insurer, and shall maintain such
accurate and complete accounts, records and computer systems pertaining to each
Receivable File as shall enable the Trustee to comply with this Agreement. In
performing its duties as custodian, the Servicer shall act with reasonable
care, using that degree of skill and attention that the Servicer exercises with
respect to the receivable files relating to all comparable automotive
receivables that the Servicer services for itself or others. The Servicer
shall conduct, or cause to be conducted, periodic audits of the Receivable
Files held by it under this Agreement and of the related accounts, records and
computer systems, in such a manner as shall enable the Trustee to verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report
to the Trustee and the Security Insurer any failure on its part to hold the
Receivable Files and maintain its accounts, records and computer systems as
herein provided and shall promptly take appropriate action to remedy any such
failure. Nothing herein shall be deemed to require an initial review or any
periodic review by the Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Receivable File at one of its offices specified
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in Schedule II to this Agreement or at such other office as shall be specified
to the Trustee and the Security Insurer by prior written notice. The Servicer
shall make available to the Trustee and the Security Insurer or their
respective duly authorized representatives, attorneys or auditors a list of
locations of the Receivable Files and the related accounts, records and
computer systems maintained by the Servicer at such times during normal
business hours as the Trustee or the Security Insurer shall instruct.
(c) Release of Documents. Upon instruction from the Trustee, the
Servicer shall release any Receivable File to the Trustee, the Trustee's agent
or the Trustee's designee, as the case may be, at such place or places as the
Trustee may designate, as soon as practicable, and upon the release and
delivery of any such document in accordance with the instructions of the
Trustee, the Servicer shall be released from any further liability and
responsibility under this Section 3.05 with respect to such documents, unless
and until such time as such documents shall be returned to the Servicer. In no
event shall the Servicer be responsible for any loss occasioned by the
Trustee's failure to return any Receivable File or any portion thereof in a
timely manner.
Section 3.06. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by a Trustee Officer.
Section 3.07. Custodian's Indemnification. The Servicer, as
custodian, shall indemnify the Trustee, the Security Insurer and their
respective officers, directors, employees and agents for any and all
liabilities, obligations, losses, compensatory damages, payments, costs, or
expenses of any kind whatsoever that may be imposed on, incurred by or asserted
against the Trustee, the Security Insurer or any of their respective officers,
directors, employees or agents as the result of any improper act or omission in
any way relating to the maintenance and custody by the Servicer as custodian of
the Receivable Files; provided, however, that the Servicer shall not be liable
to the Trustee, the Security Insurer or any such officer, director, employee or
agent of the Trustee for any portion of any such amount resulting from the
willful misfeasance, bad faith or negligence of the Trustee or the Security
Insurer or any such officer, director, employee or agent of the Trustee or the
Security Insurer.
Indemnification under this Section shall survive the resignation or
removal of the Trustee, payment of the Certificates and expiration of the
Policy and the termination of this Agreement and shall include reasonable fees
and expenses of counsel and expenses of litigation. If the Custodian shall
have made any indemnity payments pursuant to this Section and the Person to or
on behalf of whom such payments are made thereafter collects any of such
amounts
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from others, such Person shall promptly repay such amounts to the Custodian,
without interest.
Section 3.08. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section
3.08. If Fidelity or any successor Servicer shall resign as Servicer in
accordance with the provisions of this Agreement or if all of the rights and
obligations of Fidelity or any successor Servicer shall have been terminated
under Section 9.02, the appointment of such Servicer as custodian may be
terminated by the Security Insurer, the Trustee or by the Holders of
Certificates evidencing not less than a majority of the Certificate Balance, in
the same manner as the Security Insurer, the Trustee or such Holders may
terminate the rights and obligations of the Servicer under Section 9.02. The
Trustee, with the consent or at the direction of the Security Insurer, may
terminate the Servicer's appointment as custodian, with cause, at any time upon
written notification to the Servicer and without cause, only by written
notification to the Servicer pursuant to Section 9.02. As soon as practicable
after any termination of such appointment (but in no event more than 10
Business Days after any such termination of appointment), the Servicer shall
deliver the Receivable Files to the Trustee or the Trustee's agent at such
place or places as the Trustee may reasonably designate.
ARTICLE IV
Administration and Servicing of Receivables
Section 4.01. Duties of the Servicer. The Servicer, for the benefit
of the Trust, 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 service the Receivables in accordance with its
customary and usual procedures and consistent with the procedures employed by
institutions that service motor vehicle retail installment sale contracts,
using that degree of skill and attention that the Servicer exercises with
comparable receivables it services for itself or others. The Servicer's duties
shall include the collection and posting of all payments, responding to
inquiries of Obligors, investigating delinquencies, sending payment coupons to
Obligors, reporting any required tax information to Obligors, monitoring the
collateral, accounting for collections, furnishing monthly and annual
statements to the Trustee and the Security Insurer with respect to
distributions, monitoring the compliance by Obligors with the insurance
requirements contained in the related Contracts, and performing the other
duties specified herein. The Servicer also shall administer and enforce all
rights of the holder of the Receivables under the Contracts and the Dealer
Agreements. 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 the managing,
servicing, administration and collection of the Receivables 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 Trustee, 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. The Servicer is hereby authorized to commence, in its own
name or in the name of the Trustee, a legal proceeding to enforce a Receivable
pursuant to Section 4.03 or to commence or participate in any other legal
proceeding (including a bankruptcy proceeding) relating to or involving a
Receivable, an Obligor or a Financed Vehicle. If the Servicer commences or
participates in any such legal proceeding in its own name, the Trustee shall
thereupon be deemed to have automatically assigned the applicable Receivable to
the Servicer solely for purposes of commencing or participating in such
proceeding as a party or claimant, and the Servicer is authorized and empowered
by the Trustee to execute and deliver in the Trustee'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 and which the Servicer deems necessary or appropriate
and shall 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 4.02. Collection of Receivable Payments. 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 automotive receivables that it services for itself or others and
otherwise act with respect to the Receivables in such manner as will, in the
reasonable judgment of the Servicer, maximize the amount to be received by the
Trust with respect thereto. If payments are extended in the ordinary course of
the Servicer's collection procedures, and, as a result, any Receivable would be
outstanding on the first day after the end of the Collection Period immediately
preceding the Stated Final Distribution Date, then the Servicer shall be
obligated to purchase such Receivable in the manner set forth in Section 4.07
(unless such Receivable is otherwise being purchased pursuant to Section 11.02)
as of the last day of the Collection Period following the Collection Period in
which the extension was made (or, at the Servicer's option, as of the last day
of the Collection Period in which the extension was made); provided, however,
that the purchase obligation with respect to a Receivable shall be the
obligation of the Servicer which granted the extension, and not of any
successor Servicer; and provided,
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further, that the purchase obligation of any Servicer shall survive the
termination of such Servicer as Servicer. 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.
Section 4.03. Realization Upon Receivables. Consistent with the
standards, policies and procedures required by this Agreement, the Servicer
shall use commercially reasonable efforts to repossess or otherwise convert the
ownership of and liquidate any Financed Vehicle securing a Receivable with
respect to which the Servicer shall have determined that eventual payment in
full is unlikely. The Servicer shall begin such repossession and conversion
procedures as soon as practicable after default on such Receivable; provided,
however, that the Servicer may elect not to repossess a Financed Vehicle within
such time period if in its good faith judgment it determines that the proceeds
ultimately recoverable with respect to such Receivable would be increased by
forbearance. In repossessing or otherwise converting the ownership of a
Financed Vehicle and liquidating a Receivable, the Servicer is authorized to
follow such customary practices and procedures as it shall deem necessary or
advisable, consistent with the standard of care required by Section 4.01, which
practices and procedures may include reasonable efforts to realize upon any
recourse to Dealers, the sale of 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 on a Receivable; provided, however,
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 expense for
such repair or repossession. The Servicer shall be entitled to recover all
reasonable expenses incurred by it in the course of repossessing and
liquidating a Financed Vehicle into cash proceeds, but only out of the cash
proceeds of the sale of such Financed Vehicle, any deficiency obtained from the
Obligor or any amounts received from recourse to the related Dealer.
Section 4.04. Physical Damage Insurance. (a) 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 to enforce such Insurance Policy, including bringing
suit
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in its name or the name of the Trustee for the benefit of the
Certificateholders.
(b) The Servicer shall maintain a vendor's single interest or other
collateral protection insurance policy with respect to all Financed Vehicles
("Collateral Insurance") which policy by its terms insures against physical
damage in the event any Obligor fails to maintain physical damage insurance
with respect to the related Financed Vehicles. The Seller and the Trust will
be the named insured under all policies of Collateral Insurance. The Servicer
shall maintain Collateral Insurance at all times unless the Security Insurer
otherwise consents in writing.
(c) Costs incurred by the Servicer in maintaining Collateral
Insurance shall be paid by the Servicer.
Section 4.05. Maintenance of Security Interests in Vehicles.
Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the security interest created by each Receivable in the
related Financed Vehicle. The Servicer is hereby authorized to take such steps
as are necessary to reperfect such security interest on behalf of the Trust in
the event of the relocation of a Financed Vehicle or for any other reason. In
the event that the assignment of a Receivable to 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 Servicer
hereby agrees that the designation of Fidelity as the secured party on the
certificate of title is in its capacity as agent of the Trust.
Section 4.06. Covenants of the Servicer. By its execution and
delivery of this Agreement, the Servicer hereby covenants as follows (on which
covenants the Trustee relies in accepting the Receivables and delivering the
Certificates and on which the Security Insurer relies in issuing the Policy):
(a) Liens in Force. No Financed Vehicle securing a Receivable shall
be released in whole or in part from the security interest granted by the
Receivable, except upon payment in full of the Receivable or as otherwise
contemplated herein;
(b) No Impairment. The Servicer shall do nothing to impair the
rights of the Trust in the Receivables;
(c) No Amendments. The Servicer shall not extend or otherwise amend
the terms of any Receivable, except in accordance with Sections 4.01 and 4.02;
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(d) Restrictions on Liens. The Servicer shall not (A) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or consent to
or permit in the future (upon the occurrence of a contingency or otherwise) the
creation, incurrence or existence of any Lien on or restriction on
transferability of any Receivable except for the Lien in favor of the Trust and
the restrictions on transferability imposed by this Agreement or (B) sign or
file any UCC financing statements in any jurisdiction that names the Servicer
or the Seller as a debtor, and any Person other than the Seller or the Trust as
a secured party, or sign any security agreement authorizing any secured party
thereunder to file any such financing statement with respect to the
Receivables; and
(e) Insurance. The Servicer shall not fail to comply with the
provisions of any Insurance Policy, if the failure to so comply would
materially impair the protection or benefits to be afforded by such Insurance
Policy.
Section 4.07. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Seller, the Trustee or the Security
Insurer of a breach of any of the covenants set forth in Section 4.05 or 4.06,
the party discovering such breach shall give prompt written notice to the other
parties; provided, however, that the failure to give any such notice shall not
affect any obligation of the Servicer under this Section 4.07. On or before
the last day of the first Collection Period following its discovery or receipt
of notice of any breach of any covenant set forth in Section 4.05 or 4.06 that
materially and adversely affects any Receivable or the interests of the Trust
or the Security Insurer in any Receivable, the Servicer shall, unless such
breach shall have been cured in all material respects by such date, purchase
from the Trust the Receivable affected by such breach. In consideration of the
purchase of any such Receivable, the Servicer shall remit the related Purchase
Amount into the Collection Account in the manner specified in Section 5.06.
For purposes of this Section, the Purchase Amount shall, whenever applicable,
consist in part of a release by the Servicer of all rights of reimbursement of
Outstanding Advances with respect to the related Receivable. It is understood
and agreed that the obligation of the Servicer to purchase any Receivable with
respect to which such a breach has occurred and is continuing shall, if such
obligation is fulfilled, constitute the sole remedy against the Servicer for
such breach available to the Trustee.
Section 4.08. Servicing Fee; Payment of Expenses. The Servicing Fee
payable to the Servicer on each Distribution Date shall equal the product of
(i) one-twelfth, (ii) 1.00% and (iii) the Pool Balance as of the first day of
the related Collection Period. The Servicing Fee shall be calculated on the
basis of a 360-day year comprised of twelve 30-day months. The Servicer also
shall be entitled to all late fees, prepayment charges, and other
administrative fees or similar charges allowed by applicable law
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with respect to the Receivables, collected (from whatever source) on the
Receivables.
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 and expenses incurred in connection with distributions and reports
made by the Servicer to the Trustee).
Section 4.09. Servicer's Certificate. No later than 10:00 a.m. New
York City time on each Determination Date, the Servicer shall deliver to the
Trustee, the Security Insurer and each Rating Agency, a Servicer's Certificate
executed by a Responsible Officer of the Servicer containing among other
things, all information necessary to enable the Trustee to make payments on the
Certificates and to perform its related obligations pursuant to this Agreement.
Receivables purchased by the Servicer or the Seller during the related
Collection Period and each Receivable that became a Liquidated Receivable or
was paid in full during the related Collection Period shall be identified by
account number in the Servicer's Certificate.
Section 4.10. Annual Statement as to Compliance. (a) The Servicer
shall deliver to the Trustee, the Security Insurer and each Rating Agency,
within 120 days after the end of the Servicer's fiscal year (with the first
such certificate being delivered no later than April 30, 1997), an Officer's
Certificate signed by a Responsible Officer of the Servicer, stating that (i) a
review of the activities of the Servicer during the preceding 12-month period
(or such shorter period as shall have elapsed from the Closing Date to the end
of the first such fiscal year) and of the performance of its obligations 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, each Rating Agency
and the Security Insurer, promptly after having obtained knowledge thereof, but
in no event later than one Business Day thereafter, written notice in an
Officers' Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Servicer Termination Event under clause (a) of
Section 9.01. The Seller shall deliver to the Trustee and the Security
Insurer, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under any other clause of
Section 9.01.
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Section 4.11. Annual Independent Accountants' Report. The Servicer
shall cause a firm of independent certified public accountants, which may also
render other services to the Servicer or its Affiliates, to deliver to the
Trustee, the Security Insurer and each Rating Agency, within 120 days after the
end of each fiscal year (with the first such report being delivered no later
than April 30, 1997), a report addressed to the Board of Directors of the
Servicer, the Trustee, and the Security Insurer, to the effect that such firm
has audited the books and records of the Servicer and issued its report thereon
and that (1) such audit 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) the firm is independent of the Seller and the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants; and (3) a review in accordance with agreed
upon procedures was made of the Servicer's Certificates, including the
delinquency, default and loss statistics required to be specified therein and,
except as disclosed in the accountants' report, no exceptions or errors in the
Servicer's Certificates were found.
Section 4.12. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to representatives of the
Trustee, the Certificateholders and the Security Insurer reasonable access to
the documentation regarding the Receivables. In each case, such access shall
be afforded without charge, but only upon reasonable request and during normal
business hours. Nothing in this Section 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 as a result of such obligation shall not
constitute a breach of this Section.
ARTICLE V
Accounts; Application of Funds
Section 5.01. Reserved.
Section 5.02. Accounts. (a) (i) On or prior to the Closing Date,
the Servicer shall establish, or cause to be established, an account in the name
of the Trustee (the "Collection Account"), which shall be maintained as an
Eligible Deposit Account and shall bear a designation clearly indicating that
the amounts deposited thereto are held for the benefit of the Trust. The
Servicer shall deposit all amounts received by it on or with respect to the
Receivables into the Collection Account as promptly as possible, but in no event
later than the second Business Day following receipt thereof by the Servicer. On
or prior to the Closing Date, the Servicer shall establish, or cause to be
established, an account in the name of the Trustee (the "Reserve Account") which
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shall be maintained as an Eligible Deposit Account and shall bear a designation
clearly indicating that the amounts deposited thereto are held for the benefit
of the Trust. The Trustee shall deposit amounts therein as set forth in
Section 5.08.
(ii) Funds on deposit in the Collection Account shall be
invested by the Trustee in Eligible Investments selected in writing by
the Servicer. All Investment Income received during each Collection
Period with respect to Eligible Investments on deposit in the
Collection Account shall be included in the interest portion of
Available Funds for such Collection Period and distributed by the
Trustee on the related Distribution Date pursuant to Section 5.08.
Funds on deposit in the Reserve Account shall be invested by the
Trustee in Eligible Investments selected in writing by the Seller.
All Investment Income received during each Collection Period with
respect to Eligible Investments on deposit in the Reserve Account
shall be payable to the Seller. Except as otherwise permitted by the
Rating Agencies and consented to by the Security Insurer, funds on
deposit in the Collection Account and the Reserve Account shall be
invested in Eligible Investments that will mature not later than the
Business Day immediately preceding the next Distribution Date. Funds
deposited in the Collection Account on a day immediately preceding a
Distribution Date upon the maturity of an Eligible Investment are not
required to be invested overnight.
(iii) The Trustee shall not be held liable in any way by reason
of any insufficiency in the Collection Account resulting from any loss
on an Eligible Investment included therein, except for losses
attributable to the Trustee's failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity
as principal obligor and not as Trustee, in accordance with their
terms.
(b) (i) The Trustee, for the benefit of the Certificateholders
and, to the extent provided herein, the Security Insurer, shall possess all
right, title and interest in and to all funds received on or in respect of the
Receivables from time to time in the Collection Account and the Reserve Account
and in all proceeds thereof (including all income thereon). The Collection
Account and the Reserve Account shall be under the sole dominion and control of
the Trustee for the benefit of the Certificateholders and, to the extent
provided herein, the Security Insurer. If, at any time, the Collection Account
or the Reserve Account ceases to be an Eligible Deposit Account, the Trustee
(or the Servicer on its behalf) shall establish, within 10 Business Days (or
such longer period, not to exceed 30 calendar days, as to which each Rating
Agency and the Security Insurer may consent), a new Collection Account or
Reserve Account, as appropriate, as an Eligible Deposit Account and shall
transfer all amounts from the account that is no longer an Eligible Deposit
Account to the new Collection Account or Reserve Account, as applicable.
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(ii) With respect to the Account Property, the Trustee agrees,
by its acceptance hereof, that:
(A) any Account Property that is held in deposit
accounts shall be held solely in Eligible Deposit Accounts,
subject to the last sentence of Section 5.02(c)(i); and each
such Eligible Deposit Account shall be subject to the exclusive
custody and control of the Trustee, and the Trustee shall have
sole signature authority with respect thereto;
(B) any Account Property that constitutes Physical
Property shall be delivered to the Trustee in accordance with
paragraph (a) of the definition of "Delivery" and shall be held,
pending maturity or disposition, solely by the Trustee or a
financial intermediary (as such term is defined in Section 8-
313(4) of the UCC) acting solely for the Trustee;
(C) any Account Property that is a book-entry security
held through the Federal Reserve System pursuant to federal
book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be
maintained by the Trustee, pending maturity or disposition,
through continued book-entry registration of such Account
Property as described in such paragraph;
(D) any Account Property that is an "uncertificated
security" under Article VIII of the UCC and that is not governed
by clause (C) above shall be delivered to the Trustee in
accordance with paragraph (c) of the definition of "Delivery"
and shall be maintained by the Trustee, pending maturity or
disposition, through continued registration of the Trustee's (or
its nominee's) ownership of such security; and
(E) in the event of any change of law regarding matters
relating to the perfection of security interests in any Account
Property, the Servicer shall cause to be furnished to the
Trustee, the Security Insurer and each Rating Agency, an Opinion
of Counsel addressing such matters and if necessary, the Seller
and Servicer shall cooperate with the Trustee in taking all
actions necessary to comply with the change in law.
Section 5.03. Application of Collections. All amounts received with
respect to the Receivables during each Collection Period shall be applied by
the Servicer as follows:
With respect to each Simple Interest Receivable (other than a
Purchased Receivable), payments by or on behalf of the Obligor shall be
applied, first, to reduce Outstanding Advances to the
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extent described in Section 5.05, with any excess amounts being applied to
interest and principal in accordance with the Simple Interest Method.
Section 5.04. Reserved.
Section 5.05. Advances. On or prior to the Business Day preceding
each Distribution Date and only with respect to Receivables for which a payment
was received during the related Collection Period, the Servicer shall deposit
into the Collection Account an amount equal to the amount of interest that
would have been due on the Receivables at their respective APR's for the
related Collection Period (assuming the Simple Interest Receivables were paid
on their respective due dates) minus the sum of (A) the amount of interest
actually received on the Receivables during the related Collection Period and
(B) Investment Income on the Collection Account received during such Collection
Period (such amount, an "Advance"). If the calculation described in the
preceding sentence results in a negative number, an amount equal to the
absolute value of such negative number shall be paid to the Servicer to the
extent and as reimbursement of any Outstanding Advances. In addition, in the
event that a Receivable becomes a Liquidated Receivable, all Net Liquidation
Proceeds attributable to accrued and unpaid interest thereon (but not including
interest for the Collection Period to which such Distribution Date relates)
shall be paid to the Servicer to the extent and as reimbursement of any
Outstanding Advances in respect of such Receivable. The Servicer shall not
make any advance with respect to principal of Simple Interest Receivables. Any
Advances payable by the Servicer with respect to a Collection Period may be
paid net of any amounts due to the Servicer from the Trust assets with respect
to such Collection Period.
Section 5.06. Purchase Amounts. The Servicer and/or the Seller shall
deposit or cause to be deposited in the Collection Account, on or prior to each
Determination Date, the aggregate Purchase Amount with respect to Purchased
Receivables.
Section 5.07. Reserved.
Section 5.08. Distributions. On each Distribution Date, the Trustee
shall apply all Available Funds, plus all amounts transferred to the Collection
Account in respect of the Reserve Account Withdrawal Amount, plus any Insured
Payments pursuant to Section 5.09, to make required payments and distributions
on such date pursuant to clauses (1) through (8) below, in the order and
priority indicated:
(1) To the Servicer, from that portion of the Available Funds
allocable to interest (but excluding any Advances), the Servicing Fee
and all unpaid Servicing Fees from prior Collection Periods.
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(2) To the Trustee, from that portion of the Available Funds
allocable to interest (but excluding any Advances) and remaining after
distribution by the Trustee of the amounts required pursuant to clause
(1) above, the Monthly Trustee Fee and any accrued and unpaid Monthly
Trustee Fees from previous Distribution Dates, but only to the extent
not previously paid by the Servicer.
(3) To the Security Insurer, from that portion of the
Available Funds allocable to interest and the Reserve Account
Withdrawal Amount, the Premium Amount for such Distribution Date,
including any overdue Premium Amount.
(4) To the Certificateholders, the Interest Distributable
Amount. The Interest Distributable Amount shall be paid from
Available Funds allocable to interest remaining after distribution by
the Trustee of the amounts required pursuant to clauses (1), (2) and
(3) above and, if such amount is less than the Interest Distributable
Amount, from the following sources in the following order of priority:
(A) from such Reserve Account Withdrawal Amount and (B) from such
Insured Payments.
(5) To Certificateholders, the Principal Distributable
Amount. The Principal Distributable Amount shall be paid from that
portion of the Available Funds allocable to principal and, to the
extent any shortfall exists in the Principal Distributable Amount
after the application of such amounts, from the following sources in
the following order of priority: (A) from such Reserve Account
Withdrawal Amount, if any, after application pursuant to clause (4)
above and (B) from such Insured Payments.
(6) To the Security Insurer, from any Available Funds
remaining after distribution by the Trustee of the amounts required
pursuant to clauses (1) through (5) above and the Reserve Account
Withdrawal Amount, the Reimbursement Amount.
(7) To the Reserve Account, from any Available Funds
remaining after distribution by the Trustee of the amounts required
pursuant to clauses (1) through (6) above, for deposit to the Reserve
Account, an amount equal to the discrepancy, if any, between the
amount then on deposit in the Reserve Account (after giving effect to
any withdrawals from the Reserve Account pursuant to clauses (1)
through (7) above) and the Reserve Account Deposit Amount.
(8) To the Seller, any Available Funds, remaining after the
distribution by the Trustee of the amounts required pursuant to
clauses (1) through (7) above.
Section 5.09. The Policy. (a) By 12:00 noon New York city time on
each Determination Date the Trustee shall, based solely on
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the information set forth in the related Servicer's Certificate, determine the
Available Funds with respect to the immediately following Distribution Date.
(b) If the Guaranteed Distribution for any Distribution Date exceeds
the Available Funds plus the amount on deposit in the Reserve Account, less the
amount required to be distributed under clauses 5.08 (1), (2) and (3) above for
such Distribution Date (such event being a "Shortfall") and the Security
Insurer does not otherwise fund such shortfall by 12:00 p.m. New York City time
on the second Business Day preceding the related Distribution Date (the "Claim
Date"), the Trustee shall complete a Notice in the form of Exhibit A attached
to the Policy and submit such notice to the Security Insurer no later than
12:00 p.m. New York City time on the Claim Date as a claim for an Insured
Payment in an amount equal to such Shortfall. The Notice shall specify the
amount of the Insured Payment and shall constitute a claim for an Insured
Payment pursuant to the Policy.
(c) The Trustee shall report to the Seller and the Security Insurer
with respect to the amounts then held in each Account held by the Trustee and
the identity of the investments included therein, as the Seller or the Security
Insurer may from time to time request. Without limiting the generality of the
foregoing, the Trustee shall, at the request of the Seller or the Security
Insurer, transmit promptly to the Security Insurer and the Seller copies of all
accountings of receipts in respect of the Receivables furnished to it by the
Servicer.
(d) The Trustee shall (i) receive as attorney-in-fact of the
Certificateholders any Insured Payment from the Security Insurer and (ii)
disburse the same to such Certificateholders as set forth in Section 5.08.
Insured Payments disbursed by the Trustee from proceeds of the Policy shall not
be considered payment by the Trust with respect to the Certificates, and the
Security Insurer shall become the owner of such unpaid amounts due from the
Trust in respect of Insured Payments as the deemed assignee of such
Certificateholders, as hereinafter provided. The Trust and the Trustee hereby
agree on behalf of each Certificateholder for the benefit of the Security
Insurer that the extent the Security Insurer pays Insured Payments, either
directly or indirectly (as by paying through the Trustee), to the
Certificateholders, the Security Insurer shall be subrogated to the rights of
the Certificateholders with respect to such Insured Payments, shall be deemed
to the extent of the Insured Payments so made to be a Certificateholder and
shall receive future distributions until all such Insured Payments by the
Security Insurer have been fully reimbursed, as described in the following
paragraph. To evidence such subrogation, the Trustee shall note the Security
Insurer's rights as subrogee on the Certificate Register upon receipt form the
Security Insurer of proof of the payment of any Insured Payment, after making
the distribution on any such future Distribution Date to the Certificateholders
other than to the Security Insurer.
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The Security Insurer shall be entitled to receive the related
Reimbursement Amount pursuant to clause (6) of Section 5.08 with respect to
each Insured Payment made by the Security Insurer. The Trustee hereby agrees
on behalf of each Certificateholder and the Trust for the benefit of the
Security Insurer that it recognizes that to the extent the Security Insurer
makes Insured Payments, either directly or indirectly (as by paying through the
Trustee), to the Certificateholders, the Security Insurer shall be entitled to
receive the related Reimbursement Amount pursuant to clause (6) of Section
5.08.
It is understood and agreed that the intention of the parties is that
the Security Insurer shall not be entitled to reimbursement on any Distribution
Date for amounts previously paid by it unless on such Distribution Date the
Certificateholders shall also have received the full amount of the Guaranteed
Distributions for such Distribution Date.
(e) Each Certificateholder which pays any Preference Amounts
theretofore received by such Certificateholder on account of such Certificate
will be entitled to receive reimbursement for such amounts from the Security
Insurer in accordance with the terms of the Policy, but only after (i)
delivering to the Security Insurer a copy of a final, nonappealable order (a
"Preference Order") of a court having competent jurisdiction under the United
States Bankruptcy Code demanding payment of such amount to the bankruptcy court
and (ii) irrevocably assigning such Certificateholder's claim with respect to
such Preference Order to the Security in such form as is required by the
Security Insurer. In no event shall the Security Insurer pay more than one
Insured Payment in respect of any Preference Amount. Consequently, neither the
Trustee nor any Certificateholder shall be entitled to reimbursement with
respect to any Preference Order relating to the Certificateholder's receipt of
funds representing Insured Payments made by the Security Insurer in respect of
such Distribution Date.
The Trustee, for itself and on behalf of the Certificateholders,
agrees that the Security Insurer may at any time during the continuation of any
proceeding relating to a Preference Order direct all matters relating to such
Preference Order including, without limitation, the direction of any appeal of
any order relating to such Preference Order and the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Security Insurer shall be subrogated,
to the extent of Insured Payments, to the rights of the Seller, the Servicer,
the Trustee and each Certificateholder in the conduct of any such preference
claim, including, without limitation, all rights of any party to any
adversarial proceeding or action with respect to any court order issued in
connection with any such preference claim.
(f) The Trustee shall keep a complete and accurate record of the
amount of interest and principal paid in respect of any
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Certificate from moneys received under the Policy. The Security Insurer shall
have the right to inspect such records at reasonable times during normal
business hours upon one Business Day's prior notice to the Trustee.
Section 5.10. Reserve Account. (a) On the Closing Date, the Seller
shall deposit the Reserve Initial Deposit into the Reserve Account. Amounts
held from time to time in the Reserve Account shall be held by the Trustee for
the benefit of Seller, subject to the first priority security interest granted
under Section 2.02 hereof to the Trustee for the benefit of the
Certificateholders and the Security Insurer, but the Reserve Account shall not
be an asset of the Trust.
The Security Insurer may, by written notice to the Trustee, direct the
Trustee to reduce the amount of the Specified Reserve Balance; provided,
however, that no such notice given to the Trustee shall be effective unless
accompanied by written evidence from each Rating Agency that such reduction in
the Specified Reserve Balance will not result in the reduction or withdrawal of
any rating then assigned to the Certificates.
On each Distribution Date (i) if the amount on deposit in the Reserve
Account is less than the Specified Reserve Balance, the Trustee shall, after
payment of any amounts required to be distributed pursuant to clauses (1)
through (6) of Section 5.05(a) deposit in the Reserve Account the Reserve
Account Deposit Amount and (ii) if the amount on deposit in the Reserve Account
on any Distribution Date (after giving effect to all other deposits thereto and
withdrawals therefrom to be made on such Distribution Date) is greater than the
Specified Reserve Balance, the Trustee shall distribute the amount of such
excess to the Seller on such Distribution Date.
(b) On each Distribution Date, the Servicer shall instruct the
Trustee (based on the information contained in the Servicer's Certificate
delivered on the related Determination Date) to withdraw the Reserve Account
Withdrawal Amount from the Reserve Account and deposit such amount in the
Collection Account.
(c) Amounts properly received by the Seller pursuant to this
Agreement shall not be available to the Trustee or the Trust for the purpose of
making deposits to the Reserve Account, or making payments to the
Certificateholders, nor shall the Seller be required to refund any amount
properly received by it.
Section 5.11. Statements to Certificateholders. On each
Distribution Date, the Trustee shall provide to each Holder of record of a
Certificate and the Rating Agencies as of the most recent Record Date a copy of
the statement provided by the Servicer to the Trustee on the related
Determination Date, which shall be substantially in the form of Exhibit E.
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Section 5.12. Accounting and Tax Returns. The Trustee shall (a)
maintain (or cause to be maintained) the books of the Trust on a calendar year
basis and the accrual method of accounting (or on such other basis or method as
may be required by the Code and applicable Treasury Regulations), (b) file or
cause to be filed, for each of its taxable years, an Internal Revenue Service
Form 1041 and any other federal and state income tax returns and information
statements required to be filed by a grantor trust, and (c) deliver to each
Holder an Internal Revenue Service Schedule K-1 (Form 1041) or any successor
schedule and supplemental or other information, if any, required or permitted
by law to enable each Holder to prepare its federal and state income tax
returns.
ARTICLE VI
The Certificates
Section 6.01. The Certificates. The Certificates shall be
substantially in the form of Exhibit A. The Certificates shall be issued in
fully registered form in minimum denominations of $250,000 and integral
multiples of $1,000 in excess thereof, except that one Certificate may be
issued in a denomination representing the remainder of the Certificate Balance.
The Certificates shall be executed on behalf of the Trust by manual or
facsimile signature of an authorized officer of the Trustee. Certificates
bearing the manual or facsimile signatures of individuals who were, at the time
when such signatures were affixed, authorized to sign on behalf of the Trustee
shall be validly issued and entitled to the benefit of this Agreement,
notwithstanding the fact 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 authentication and delivery of such
Certificates.
Section 6.02. Authentication of Certificates. Concurrently with the
conveyance of the Receivables to the Trust, the Trustee shall cause the
Certificates to be executed on behalf of the Trust by an authorized Trust
officer, and authenticated and delivered to or upon the written order of the
Seller, without further corporate action by the Seller, in authorized
denominations. No Certificate shall entitle its Holder to any benefit under
this Agreement or be valid for any purpose unless there shall appear on such
Certificate a certificate of authentication, executed by the Trustee by manual
signature. Such authentication shall constitute conclusive evidence that such
Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
Section 6.03. Registration of Transfer and Exchange. (a) The
Trustee shall cause to be kept a register (the "Certificate Register") in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of
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Certificates and the registration of transfers of Certificates. The Trustee
shall be the initial "Certificate Registrar" for the purpose of registering
Certificates and transfers of Certificates as herein provided. Upon the
resignation of any Certificate Registrar, the Trustee shall promptly appoint a
successor or, if it elects not to make such an appointment, assume the duties
of Certificate Registrar.
If a Person other than the Trustee is appointed as Certificate
Registrar, the Trustee shall give prompt written notice of the appointment of
such Certificate Registrar and of the location, and any change in the location,
of the Certificate Register, and the Trustee shall have the right to inspect
the Certificate Register at all reasonable times, to obtain copies thereof and
to rely conclusively upon a certificate executed on behalf of the Certificate
Registrar by an authorized officer thereof as to the names and addresses of the
Certificateholders and the principal amounts and number of the Certificates.
Upon surrender for registration of transfer of any Certificate at the
office or agency of the Trustee to be maintained as provided in Section 6.08,
the Trustee shall execute, authenticate and deliver to the designated
transferee or transferees, one or more new Certificates in any authorized
denominations of a like aggregate principal amount.
At the option of the Holder, Certificates may be exchanged for other
Certificates in any authorized denominations of a like aggregate principal
amount. Whenever any Certificates are so surrendered for exchange, the Trustee
shall execute, authenticate and deliver to the Holder the Certificates that the
Certificateholder making the exchange is entitled to receive.
All Certificates issued upon any registration of transfer or exchange
of Certificates shall be the valid obligations of the Trust, evidencing the
same interest in the Trust and entitled to the same benefits under this
Agreement as the Certificates surrendered upon such registration of transfer or
exchange.
(b) Every Certificate presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by,
the Holder thereof or such Holder's attorney duly authorized in writing, with
such signature guaranteed by a commercial bank or trust company located or
having a correspondent located in The City of New York or the city in which the
Corporate Trust Office is located or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
(c) No service charge shall be made to a Holder for any registration
of transfer or exchange of Certificates, but the Trustee may require payment of
a sum sufficient to cover any tax or
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other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Certificates.
Section 6.04. Certain Transfer Restrictions. (a) The Certificates
have not been and will not be registered under the Securities Act and will not
be listed on any exchange. No transfer of a Certificate shall be made unless
(i) such transfer is made pursuant to an effective registration statement under
the Securities Act and any applicable state securities laws or (ii) (A) such
transfer is exempt from the registration requirements under the Securities Act
and such state securities laws and (B) the Certificate Registrar either (x) is
notified by such transferee that such Certificate shall be registered in the
name of the Clearing Agency or its nominee and shall be held by such transferee
in book-entry form through the Clearing Agency or (y) receives written
certification from such Holder and such Holder's prospective transferee,
substantially in the form of Exhibit F, setting forth the basis of the
exemption from such registration requirements. The Seller and the Servicer
hereby agree to provide to any Holder of a Certificate and any prospective
transferee designated by any such Holder information regarding the Certificates
and the Receivables and such other information as shall be necessary to satisfy
the condition to eligibility set forth in Rule 144A(d)(4) for transfer of any
such Certificate without registration thereof under the Securities Act pursuant
to the registration exemption provided by Rule 144A.
(b) The Trustee shall cause each Certificate to contain a legend
setting forth the applicable restrictions on transfer set forth herein and
referring prospective purchasers of the Certificates to this Section 6.04 with
respect to such restrictions.
Section 6.05. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate shall be surrendered to the Certificate Registrar
or if the Certificate Registrar shall receive evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (b) there shall be
delivered to the Certificate Registrar 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 that such Certificate has been acquired by a bona fide
purchaser, the Trustee on behalf of the Trust shall execute, and the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section, the Trustee and 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 Certificate issued
pursuant to this Section shall constitute conclusive evidence of ownership of a
beneficial interest in the Trust, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
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Section 6.06. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate is registered in
the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to Section 5.08 and for all other purposes
whatsoever, and neither the Trustee nor the Certificate Registrar shall be
bound by any notice to the contrary.
Section 6.07. Access to List of Certificateholders' Names and
Addresses. The Certificate Registrar shall furnish or cause to be furnished to
the Trustee, the Servicer or the Security Insurer, within 15 days after receipt
by the Certificate Registrar of a request therefor from the Trustee, the
Servicer or the Security Insurer, as applicable, in writing, a list, in such
form as the Trustee, the Servicer or the Security Insurer may reasonably
require, of the names and addresses of the Certificateholders as of the most
recent Record Date. If three or more Certificateholders, or one or more
Holders of Certificates evidencing not less than 25% of the Certificate Balance
apply in writing to the Trustee, and such application states that the
applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates and such
application is accompanied by a copy of the communication that such applicants
propose to transmit, then the Trustee shall, within five Business Days after
the receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Certificate, shall be deemed to have agreed to hold
neither the Servicer, the Trustee nor the Security Insurer accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
Section 6.08. Maintenance of Office or Agency. The Trustee shall
maintain in the Borough of Manhattan, The City of New York, an office or
offices or agency or agencies where Certificates may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Trustee in respect of the Certificates and this Agreement may be served.
The Trustee initially designates its office located at 101 Barclay Street, New
York, New York, for such purposes. The Trustee shall give prompt written
notice to the Servicer, the Security Insurer and the Certificateholders of any
change in the location of the Certificate Register or any such office or
agency.
Section 6.09. Book-Entry Certificates. Unless the Holder thereof
requests that Certificates be delivered in definitive, fully registered form
("Definitive Certificates"), the Certificates, upon original issuance, will be
issued in the form of one or more typewritten Certificates representing
Book-Entry Certificates, to be delivered to the Depository Trust Company, the
initial Clearing Agency, by or on behalf of the Trust. The Book-Entry
Certificates shall be registered initially on the Certificate Register in
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the name of Cede & Co., the nominee of the initial Clearing Agency. With
respect to the Book-Entry Certificates:
(a) the provisions of this Section shall be in full force and
effect;
(b) the Seller, the Servicer, the Certificate Registrar and
the Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on the Book-Entry Certificates)
as the sole Holder of such Book-Entry Certificates and shall have no
obligation to the related Certificate Owners;
(c) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions
of this Section shall control;
(d) the rights of such Certificate Owners shall be exercised
only through the Clearing Agency and shall be limited to those
established by law and agreements between such Certificate Owners and
the Clearing Agency and/or the Clearing Agency Participants pursuant
to the Depository Agreement. The initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and
receive and transmit distributions of principal and interest on the
Book-Entry Certificates to such Clearing Agency Participants; and
(e) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Certificate Balance, the
Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from
Certificate Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Book-Entry Certificates and has delivered such
instructions in writing to the Trustee.
Neither the Trustee nor the Certificate Registrar shall have any responsibility
to monitor or restrict the transfer of beneficial ownership in any Certificate
an interest in which is transferable through the facilities of the Depository.
Section 6.10. Notices to Clearing Agency. Whenever a notice or other
communication to Holders of the Book- Entry Certificates is required under this
Agreement, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of Certificates to the
Clearing Agency.
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ARTICLE VII
The Seller
Section 7.01. Representations of Seller. The Seller makes the
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates and upon
which the Security Insurer relies in executing and delivering the Policy. The
representations speak as of the Closing Date and shall survive the sale of the
Receivables to the Trustees.
(i) Due Organization and Good Standing. The Seller shall
have been duly organized and shall be validly existing as a national
banking association in good standing under the laws of the United
States of America, with the corporate power and authority to own its
properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and had at
all relevant times, and shall have, the corporate power and authority
and legal right to acquire and own the Receivables.
(ii) Due Qualification. The Seller shall be duly qualified to
do business as a foreign corporation in good standing, and shall have
obtained all necessary licenses and approvals in all jurisdictions in
which the ownership or lease of property or the conduct of its
business shall require such qualifications, except where the failure
to be so qualified or to have obtained such licenses or approvals
would not have a material adverse effect on the transactions
contemplated by this Agreement.
(iii) Power and Authority. The Seller shall have the corporate
power and authority to execute and deliver this Agreement and to carry
out its terms, the Seller shall have full power and authority to sell
and assign the property to be sold and assigned to and deposited with
the Trustee as part of the Trust and shall have duly authorized such
sale and assignment to the Trustee by all necessary corporate action;
and the execution, delivery, and performance of this Agreement shall
have been duly authorized by the Seller by all necessary corporate
action.
(iv) Valid Sale; Binding Obligations. This Agreement shall
evidence a valid sale, transfer, and assignment of the Receivables,
enforceable against creditors of and purchasers from the Seller; and
shall evidence a legal, valid, and binding obligation of the Seller
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, or other similar
laws affecting the enforcement of creditors' rights or other obligees'
rights in general or the rights of creditors or obligees of federally
chartered stock savings banks, the
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deposits of which are insured by the FDIC, and by general principles
of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
shall not conflict with, result in any breach of any of the terms and
provisions or, nor constitute (with or without notice or lapse of
time) a default under, the charter or by-laws of the Seller, or any
indenture, agreement, or other instrument to which the Seller is a
party or by which it shall be bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, agreement, or other instrument (other
than this Agreement); nor violate any law or, to the best of the
Seller's knowledge, any order, rule, or regulation applicable to the
Seller of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending against the Seller or, to the Seller's best
knowledge, threatened before any court, regulatory body,
administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or its properties (A) asserting the
invalidity of this Agreement or the Certificates, (B) seeking to
prevent the issuance of the Certificates or the consummation of any of
the transactions contemplated by this Agreement, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement or the Certificates, or (D) which
might adversely affect the federal income tax attributes of the
Certificates.
(vii) No Consent Required. The Seller is not required to
obtain the consent of any other Person or any consent, license,
approval or authorization of, or make any registration or declaration
with, any governmental authority or agency in connection with the
execution, delivery and performance of this Agreement (except as have
been obtained), other than as may be required under the Blue Sky laws
of any state or the Securities Act.
(viii) No Insolvency. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
were not made in contemplation of the insolvency of the Seller or
after the commission of any act of insolvency by the Seller.
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(ix) Reserve Account. This Agreement creates a valid and
fully perfected first priority security interest in favor of the
Trustee for the benefit of the Certificateholders and the Security
Insurer and the Reserve Account and the investments therein.
Section 7.02. Liabilities of Seller. The Seller shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken and the representations made by the Seller under this Agreement.
Section 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, the 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 other document or any further
act by any of the parties to this Agreement; provided, however, that (x) the
Seller shall have delivered to the Trustee and the Security Insurer an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, or succession and such agreement of assumption comply
with this Section 7.03, and (y) all conditions precedent, if any, provided for
in this Agreement relating to such merger, consolidation or succession have
been complied with. Notwithstanding the above, no such transaction shall
result in the Seller becoming subject to the provisions of the United States
Bankruptcy Code or similar laws of any State. The Seller or its successor
hereunder shall provide the Trustee, the Servicer, the Security Insurer and the
Rating Agencies with prompt notice of any such transaction.
Section 7.04. Limitation on Liability of Certain Persons of Seller.
No recourse under or upon any obligation or covenant of this Agreement, or of
any Certificate or for an claim based thereon or otherwise in respect thereof,
shall be had against any incorporator, shareholder, officer or director as
such, of the Seller or of any successor corporation, either directly or through
the Seller, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise. This Agreement
and the obligations created hereunder are solely corporate obligations, and no
personal liability whatever shall attach to, or is or shall be incurred by the
incorporators, shareholder, officers or directors, as such, of the Seller, or
any of them, because of the issuance of the Certificates, or under or by reason
of the obligations, covenants or agreements contained in this Agreement or in
any of the Certificates or implied therefrom. Any and all such personal
liability, either at common law or in equity or by constitution or statute, of,
and any and all such rights and claims against, every such incorporator,
shareholder, officer or director, as such, because of the issuance of the
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Certificates, or under or by reason of the obligations, covenants or agreements
contained in this Agreement or in any of the Certificates or implied therefrom,
are being expressly waived and released as a condition of, and as a
consideration for, the execution of this Agreement and the issuance of the
Certificates. The Seller and any director, officer, employee or agent of the
Seller may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
ARTICLE VIII
The Servicer
Section 8.01. Representations of Servicer. The Servicer makes the
following representations on which the Trustee relies in accepting the
Receivables in trust and executing and authenticating the Certificates and the
Security Insurer relies in issuing the Policy. The representations speak as of
the execution and delivery of this Agreement and as of the Closing Date, but
shall survive the transfer and assignment of the Receivables to the Trust.
(a) Organization and Good Standing. The Servicer shall have been
duly organized and shall be validly existing and in good standing under the
laws of the United States of America or other 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 to acquire, own, sell and service the Receivables, and to hold the
Receivable Files as custodian on behalf of the Trustee;
(b) Due Qualification. The Servicer 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 (including the servicing
of the Receivables as required by this Agreement) require such qualifications
except where the failure to be so qualified or to have obtained such licenses
or approvals would not have a material adverse effect on the transactions
contemplated by this Agreement or on its ability to service the Receivables as
contemplated hereby;
(c) Power and Authority. The Servicer has the power and authority
to execute and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement has been duly authorized
by the Servicer by all necessary corporate action;
(d) Binding Obligation. This Agreement constitutes a legal, valid
and binding obligations of the Servicer, enforceable against the Servicer in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency,
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reorganization or other similar laws affecting the enforcement of creditors'
rights or other obligees' rights in general or the rights of creditors or
obligees of federally chartered stock savings banks, the deposits of which are
insured by the FDIC, and by general principles of equity, regardless of whether
such enforceability shall be considered in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions
contemplated by this Agreement to which it is a party and the fulfillment of
its terms 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 or both)
a default under, the charter 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 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; and
(f) 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: (1) asserting the invalidity of this Agreement; (2) seeking to
prevent the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement; (3) 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 (4) seeking to adversely affect the federal income tax or other
federal, state or local tax attributes of the Trust or the Certificates.
Section 8.02. 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 (including, without
limitation, its obligations as custodian) and the representations made by the
Servicer.
(b) The Servicer shall defend, indemnify and hold harmless the
Trustee, the Security Insurer, their respective officers, directors, agents and
employees, 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.
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(c) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Security Insurer, their respective officers, directors, agents and
employees, and the Certificateholders from and against any taxes that may at
any time be asserted against any of such parties with respect to the
transactions contemplated in this Agreement, including, without limitation, any
sales, gross receipts, general corporation, tangible or intangible personal
property, privilege or license taxes (but not including any federal or other
income taxes, including franchise taxes asserted with respect to, and as of the
date of, the transfer of the Receivables to the Trust or the issuance and
original sale of the Certificates), and costs and expenses in defending against
the same, which indemnification shall include reasonable fees and expenses of
counsel and expenses of litigation.
(d) The Servicer shall indemnify, defend and hold harmless the
Trustee, the Security Insurer, 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 Security Insurer or the Certificateholders by reason of a
breach of this Agreement by the Servicer, the negligence, willful misfeasance
or bad faith of the Servicer in the performance of its duties under this
Agreement or by reason of the Servicer's reckless disregard of its obligations
and duties under this Agreement, which indemnification shall include reasonable
fees and expenses of counsel and expenses of litigation.
(e) Indemnification under this Section shall survive the resignation
or removal of any indemnified party or the termination of this Agreement and
shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer has made any indemnity payments pursuant to this
Section and the recipient thereafter collects any of such amounts from others,
the recipient shall promptly repay the amounts so collected to the Servicer,
without interest. The Servicer shall be given reasonable time to defend
against any claim which would result in liability on its part; provided that
any delay or failure to provide such notice shall relieve the Servicer of its
indemnification obligations under this Section 8.02 only to the extent the
Servicer is prejudiced by the delay.
Section 8.03. Merger or Consolidation of, or Assumption of the
Obligations of, the 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
shall be capable of fulfilling the duties of the Servicer contained in this
Agreement and shall be reasonably acceptable to the Controlling Party. Any
Person (i) into which the
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Servicer may be merged or consolidated, (ii) resulting from any merger or
consolidation to which the Servicer shall be a party, (iii) that acquires by
conveyance, transfer or lease substantially all of the assets of the Servicer
or (iv) succeeding to the business of the Servicer, which Person shall execute
an agreement of assumption to perform every obligation of the Servicer under
this Agreement, shall be the successor to the Servicer under this Agreement
without the execution or filing of any other paper or any further act on the
part of any of the parties to this Agreement. The Servicer shall provide
notice of any merger, consolidation or succession pursuant to this Section
8.03(a) to the Trustee, the Certificateholders, the Security Insurer and each
Rating Agency. Notwithstanding the foregoing, the Servicer shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to the Servicer's business unless (x) immediately after giving effect
to such transaction, no representation or warranty made pursuant to Section
8.01 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 a
Servicer Termination Event shall have occurred and be continuing, (y) the
Servicer shall have delivered to the Trustee and the Security 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 8.03(a) and that all conditions precedent 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 Security Insurer an
Opinion of Counsel stating that 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 Trust and the
Security Insurer in the Receivables and the Reserve Fund and reciting the
details of such filings or (B) no such action shall be necessary to preserve
and protect such interest.
Section 8.04. 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 Trustee 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 or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence in the performance of
duties. The Servicer and any director, officer, employee or agent of the
Servicer may rely in good faith on the written 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.
Section 8.05. Appointment of Subservicer. The Servicer may at any
time, with the Security Insurer's consent, appoint a
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subservicer to perform all or any portion of its obligations as Servicer
hereunder; provided, however, that 10 days' prior notice of such appointment
shall have been given to the Rating Agencies and each Rating Agency shall have
notified the Servicer, and the Trustee in writing that such appointment will
not result in a reduction or withdrawal of the then current rating of the
Certificates or result in an increased capital charge to the Security Insurer;
and, provided, further, that the Servicer shall remain obligated and be liable
to the Trustee, the Security Insurer and the Holders of the Certificates for
the servicing and administering of the Receivables in accordance with the
provisions hereof without diminution of such obligation and liability by virtue
of the appointment of such subservicer and to the same extent and under the
same terms and conditions as if the Servicer alone were servicing and
administering the Receivables. The fees and expenses of any subservicer shall
be as agreed between the Servicer and such subservicer from time to time, and
none of the Trustee, the Trust, the Security Insurer or the Holders of the
Certificates shall have any responsibility therefor.
Section 8.06. Servicer Not to Resign. Subject to the provisions of
Section 8.03, the Servicer shall not resign from the obligations and duties
imposed on it by this Agreement as Servicer, except upon a determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law. Notice of any determination that the
performance by the Servicer of its duties hereunder is no longer permitted
under applicable law shall be communicated to the Trustee and the Security
Insurer at the earliest practicable time (and, if such communication is not in
writing, shall be confirmed in writing at the earliest practicable time) and
any such determination shall be evidenced by an Opinion of Counsel to such
effect delivered by the Servicer to the Trustee and the Security Insurer
concurrently with or promptly after such notice. No resignation of the
Servicer shall become effective until a successor Servicer shall have assumed
the responsibilities and obligations of the Servicer in accordance with Section
9.03.
ARTICLE IX
Servicer Termination Events
Section 9.01. Servicer Termination Events. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) any failure by the Servicer to deposit to the Collection Account
any proceeds or payment required to be so delivered under the terms of this
Agreement that continues unremedied for a period of two Business Days after
written notice is received by the Servicer or after discovery of such failure
by a Responsible Officer of the Servicer;
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(b) failure by the Servicer to deliver to the Trustee, the Seller
and the Security Insurer the Servicer's Certificate by the applicable
Determination Date, or to observe any covenant or agreement set forth in
Section 4.06;
(c) failure on the part of the Servicer duly to observe or perform
any other covenants or agreements of the Servicer set forth in this Agreement,
which failure (i) materially and adversely affects the rights of the
Certificateholders (determined without regard to the availability of funds
under the Policy) or of the Security Insurer (unless the Security Insurer is no
longer the Controlling Party) and (ii) continues unremedied for a period of 30
days after knowledge thereof by the Servicer or 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 Security Insurer (or, if a Security
Insurer Default shall have occurred and be continuing, Holders of Certificates
evidencing 25% of the Certificate Balance);
(d) the occurrence of an Insolvency Event with respect to the
Servicer;
(e) the occurrence of a Pool Performance Trigger Event;
(f) the Servicer is terminated as servicer as a result of a breach
with respect to any other entity that has issued one or more classes of asset
backed securities with respect to which the Security Insurer has issued a
certificate insurance guaranty policy.
Section 9.02. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing, the Security Insurer
or, if the Security Insurer is no longer the Controlling Party, the Trustee or
Holders of Certificates evidencing a majority of the Certificate Balance, by
notice given in writing to the Servicer (and to the Trustee and the Seller if
given by the Security Insurer or such Holders), at their respective option 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, all
authority, power, obligations and responsibilities of the Servicer under this
Agreement automatically shall pass to, be vested in and become obligations and
responsibilities of a successor 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 that was
required to be performed by the terminated 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 terminated Servicer. In the event of a
Servicer Termination Event, the Trustee shall act as the initial successor
Servicer. The successor Servicer is authorized and empowered by this Agreement
to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any
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and all documents and other instruments and to do or accomplish all other acts
or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the
Receivables and related documents to show the Trustee as lienholder or secured
party on the related certificates of title of the Financed Vehicles or
otherwise. The terminated Servicer agrees to cooperate with the successor
Servicer in effecting the termination of the responsibilities and rights of the
terminated Servicer under this Agreement, including the transfer to the
successor Servicer for administration by it of all money and property held by
the Servicer with respect to the Receivables and the delivery to the successor
Servicer of all Receivable Files and other records relating to the Receivables
and a computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to
service the Receivables.
Section 9.03. Appointment of Successor. (a) On and after the
Servicer receives a notice of termination pursuant to Section 9.02, or upon the
resignation of the Servicer pursuant to Section 8.06, 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 Trustee and the Security Insurer of
written notice of such resignation (or written confirmation of such notice) in
accordance with the terms of this Agreement and (y) the date upon which the
predecessor Servicer shall become unable to act as Servicer, as specified in
the notice of resignation and accompanying Opinion of Counsel. In the event of
the Servicer's resignation or termination hereunder, the Trustee shall, with
the consent of the Security Insurer appoint a successor Servicer, and the
successor Servicer shall accept its appointment by a written assumption in form
acceptable to the Trustee. In the event that a successor Servicer has ceased
to act as Servicer in accordance with this Section 9.03, the Trustee without
further action shall automatically be appointed the successor Servicer;
provided, however, that the Trustee shall not be liable for any acts, omissions
or obligations of the Servicer prior to such succession. Notwithstanding the
above, the Trustee shall, if it shall be legally unable so to act, appoint, or
petition a court of competent jurisdiction to appoint, any established
financial institution, having a net worth of not less than $50,000,000, whose
regular business shall include the servicing of automotive receivables and
which shall be reasonably acceptable to the Security Insurer, as the successor
to the Servicer under this Agreement.
(b) The successor Servicer shall be the successor in all respects to
the Servicer in its capacity as Servicer under this Agreement and shall be
subject to all the rights, responsibilities, restrictions, duties, liabilities,
and termination provisions
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relating to the Servicer under this Agreement, except as otherwise stated
herein. The Seller, the Trustee and such successor Servicer shall take such
action, 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 9.02 upon the occurrence of any
Servicer Termination Event applicable to it as Servicer.
(c) The Controlling Party may exercise at any time its right to
appoint as successor to the Servicer a Person, and shall have no liability to
the Trustee, the Servicer, the Seller, any Certificateholders or any other
Person if it does so. Notwithstanding the above, if the successor Servicer
shall be legally unable or unwilling to act as Servicer, and the Security
Insurer is no longer the Controlling Party, the successor Servicer, the Trustee
or Holders of Certificates evidencing a majority of the Certificate Balance may
petition a court of competent jurisdiction to appoint any Eligible Servicer as
the successor to the Servicer. Pending appointment pursuant to the preceding
sentence, the successor 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 has been appointed and accepted such
appointment. Subject to Section 8.06, no provision of this Agreement shall be
construed as relieving the successor Servicer of its obligation to succeed as
successor Servicer upon the termination of the Servicer pursuant to Section
9.02, the resignation of the Servicer pursuant to Section 8.06. If upon the
termination of the Servicer pursuant to Section 9.02 or the resignation of the
Servicer pursuant to Section 8.06, the Controlling Party appoints a successor
Servicer.
(d) Any successor Servicer shall be entitled to receive the
Servicing Fee.
Section 9.04. Notification to Rating Agencies. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article IX
or any event specified in Section 9.01(e), the Seller shall give prompt written
notice thereof to each Rating Agency and the Trustee.
Section 9.05. Waiver of Past Defaults. The Security Insurer or (if
the Security Insurer is no longer the Controlling Party) Holders of
Certificates evidencing a majority of the Certificate Balance may, on behalf of
the Holders of all of the Certificates, 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 9.06. Repayment of Advances. The Servicer, if it resigns or
is removed pursuant to the terms of this Agreement, shall be entitled to
receive reimbursement for Outstanding Advances made by it pursuant to Sections
5.08.
ARTICLE X
The Trustee
Section 10.01. Duties of Trustee. (a) 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, and no
implied covenants or obligations shall be read into this Agreement against the
Trustee.
(b) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement; provided,
however, that the Trustee shall examine such certificates and opinions to
determine whether or not they conform to the requirements of this Agreement.
(c) The Trustee shall take and maintain custody of the Schedule of
Receivables included as Schedule I to this Agreement and shall retain all
Servicer's Certificates identifying Receivables that become Purchased
Receivables or Liquidated Receivables.
(d) The Trustee shall not be liable for any action taken, suffered
or omitted to be taken in good faith in accordance with this Agreement or at
the direction of the Security Insurer or, if a Security Insurer Default shall
have occurred and be continuing, the Holders of Certificates evidencing not
less than 25% of the Certificate Balance relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or the
Trust, or exercising any trust or power conferred upon the Trustee under this
Agreement, or for the acts or omissions of any successor Trustee.
(e) No provision of this Agreement shall be construed to relieve
the Trustee from liability for its own negligent actions, its own negligent
failure to act or its own bad faith or willful misconduct; provided, however,
that the Trustee shall not be liable for any error of judgment made in good
faith by a Trustee Officer unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts.
(f) No provision of this Agreement shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in
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the exercise of any of its rights or powers if the Trustee shall have
reasonable grounds to believe that repayment of such funds or indemnity
reasonably satisfactory to it against such risk or liability is not reasonably
assured to it.
(g) 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 to impair the value of any
Receivable.
(h) The Trustee shall not be charged with knowledge of any failure
by the Servicer to comply with its obligations hereunder unless a Trustee
Officer obtains actual knowledge of such failure or receives written notice of
such failure from the Servicer, the Security Insurer or Holders of Certificates
representing in the aggregate not less than 25% of the Certificate Balance.
(i) 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 the times, if any, when the Trustee shall be the successor to,
and be vested with the rights, duties, powers and privileges of, the Servicer
in accordance with the terms of this Agreement.
Section 10.02. Certain Matters Affecting Trustee. Except as
otherwise provided in Section 10.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in any such document.
(b) The Trustee may consult with counsel, and the written advice
or opinion of counsel with respect to legal matters or relating to this
Agreement or the Certificates shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or omitted
by it under this Agreement in good faith and in accordance with such advice or
opinion of such counsel.
(c) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute, conduct
or defend any litigation under this Agreement at the request, order or
direction of any of the Certificateholders pursuant to the provisions of this
Agreement, unless such Certificateholders shall have offered to the Trustee
security or indemnity reasonably satisfactory to it against the costs, expenses
and liabilities that may be incurred therein or thereby.
(d) The Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith that it believes to be authorized or within its
rights or powers conferred upon it by this
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Agreement; provided, that such conduct does not constitute willful misconduct,
bad faith or negligence on the part of the Trustee.
Section 10.03. Trustee Not Liable for Certificates or Receivables.
The recitals contained herein and in the Certificates (other than the
certificate of authentication on the Certificates) shall be taken as the
statements of the Seller or the Servicer, as the case may be, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representations as to the validity or sufficiency of this Agreement or of the
Certificates (other than the certificate of authentication on the Certificates)
or of any Receivable or related document. The 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 or 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
efficacy of the Trust or its ability to generate the payments to be distributed
to Certificateholders under this Agreement, including: the existence,
condition and ownership of any Financed Vehicle; the existence and
enforceability of any insurance thereon; the existence and contents of any
Receivable or any computer or other record thereof; the validity of the
assignment of any Receivable to the Trust or of any intervening assignment; the
completeness of any Receivable; the performance or enforcement of any
Receivable; the compliance by the Seller or the Servicer with any warranty or
representation made under this Agreement or in any related document or the
accuracy of any such warranty or representation before receipt of notice or
other discovery of any breach thereof; or any action of the Servicer taken in
the name of the Trustee; provided, however, that nothing in this Section 10.03
shall relieve the Trustee of its obligation to perform its duties as provided
by this Agreement.
Section 10.04. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of
Certificates and may deal with the Seller and the Servicer in banking
transactions with the same rights that it would have if it were not Trustee.
Section 10.05. Trustee's Fees and Expenses. The Servicer shall pay
to the Trustee, and the Trustee shall be entitled to receive as compensation
for its services hereunder, such fees as have been separately agreed upon
before the date hereof between the Servicer and the Trustee, and the Trustee
shall be entitled to reimbursement by the Servicer for its reasonable expenses
under this Agreement, including the reasonable compensation, expenses and
disbursements of such agents, representatives, experts and counsel as the
Trustee may employ in connection with the exercise and performance of its
rights and duties under this Agreement, except any such expenses and fees that
may arise from the Trustee's negligence, willful misfeasance or bad faith or
that are the responsibility of Certificateholders under this Agreement. The
Monthly
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Trustee Fee may not be changed without the written consent of the Security
Insurer.
Section 10.06. Eligibility Requirements for Trustee. The Trustee
shall at all times be a corporation having an office in the same state as the
location of the Corporate Trust Office; organized and doing business under the
laws of such state or the United States of America; 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
authorities; and having (or having a parent that has) a rating of at least Baa3
by Moody's and reasonably satisfactory to the Security Insurer. 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. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, the Trustee shall resign immediately in the manner and with the effect
specified in Section 10.07.
Section 10.07. Resignation or Removal of Trustee. The Trustee may
resign at any time and be discharged from the trusts hereby created by giving
written notice thereof to the Servicer and, if the Security Insurer is the
Controlling Party, the Security Insurer. Upon receiving such notice of
resignation, the Servicer or, if the Security Insurer is the Controlling Party,
the Security Insurer 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.
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.06 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 bankrupt or insolvent, or a
receiver of the Trustee or of its property shall be appointed, or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation, then
the Servicer or, if the Security Insurer is the Controlling Party, the Security
Insurer may remove the Trustee. If the Servicer or the Security Insurer shall
remove the Trustee under the authority of the immediately preceding sentence,
the Servicer or the Security Insurer, as applicable, shall promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Trustee so removed and one copy
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to the successor Trustee, and shall pay all fees owed to the outgoing Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to Section 10.08. The Servicer shall provide notice of any
resignation or removal of the Trustee to each of the Rating Agencies.
Section 10.08. Successor Trustee. Any successor Trustee appointed
pursuant to Section 10.07 shall execute, acknowledge and deliver to the
Servicer and to its predecessor Trustee an instrument accepting its appointment
as successor Trustee 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, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Trustee. The
predecessor Trustee shall deliver to the successor Trustee all documents,
statements and moneys held by it under this Agreement; 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 unless at the time of such acceptance such successor Trustee shall be
eligible pursuant to Section 10.06.
Upon acceptance of appointment by a successor Trustee pursuant to this
Section, the Servicer shall mail notice thereof to all Certificateholders, the
Rating Agencies and the Security Insurer. If the Servicer shall fail 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 Servicer.
Section 10.09. Merger or Consolidation of Trustee. Any corporation
into which the Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee shall be the successor of the Trustee hereunder, provided that such
corporation is eligible to serve as Trustee pursuant to Section 10.06, 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. The
Trustee shall mail notice of any such merger or consolidation to the Rating
Agencies and the Security Insurer.
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Section 10.10. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust or any Financed Vehicle may at the time be located, the Servicer
and the Trustee with the consent of the Security Insurer acting jointly shall
have the power and shall execute and deliver all instruments to appoint one or
more Persons approved by the Trustee to act as co-trustee, jointly with the
Trustee, or separate trustee or separate trustees, of all or any part of the
Trust, and to vest in such Person, in such capacity and for the benefit of the
Certificateholders, such title to the Trust or any part thereof and, subject to
the other provisions of this Section, such powers, duties, obligations, rights
and trusts as the Servicer and the Trustee may consider necessary or desirable.
If the Servicer shall not have joined in any such appointment within 15 days
after the receipt by it of a request to do so, the Trustee alone shall have the
power to make such appointment. No co-trustee or separate trustee under this
Agreement shall be required to meet the terms of eligibility as a successor
Trustee pursuant to Section 10.06 and no notice of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.08.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(a) All rights, powers, duties and obligations conferred
or imposed upon any such separate trustee or co-trustee shall be
conferred upon and exercised or performed by the Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee is not authorized to act separately
without the Trustee joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts
are to be performed, the Trustee shall be incompetent or unqualified
to perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the Trust or
any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at
the direction of the Trustee;
(b) No trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under
this Agreement; and
(c) The Servicer, the Trustee and the Security Insurer
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 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
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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 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. Each such instrument shall be
filed with the Trustee and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint 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 co-trustee or separate trustee.
Section 10.11. Representations and Warranties of Trustee. The
Trustee makes the following representations and warranties, on which the Seller
and Certificateholders shall be deemed to rely:
(a) The Trustee is a New York banking corporation, validly
existing and in good standing under the laws of the State of New York.
(b) The Trustee has full corporate power, authority and
legal right to execute and deliver, and to perform its obligations
under, this Agreement and each Basic Document to which it is a party,
and has taken all necessary action to authorize the execution and
delivery of, and the performance of its obligations under, this
Agreement and each Basic Document to which it is a party.
(c) This Agreement and each Basic Document to which it is
a party have been duly executed and delivered by the Trustee and shall
constitute legal, valid and binding obligations of the Trustee,
subject to applicable bankruptcy, insolvency, reorganization and
similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and to general principles of equity
(whether applied in a proceeding at law or in equity).
(d) The execution, delivery and performance by the Trustee
of this Agreement and each Basic Document to which the Trustee is a
party (i) shall not violate any provision of any law governing the
banking and trust powers of the Trustee or, to the best of the
Trustee's knowledge, any order, writ,
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judgment or decree of any court, arbitrator or governmental authority
applicable to the Trustee or any of its assets, (ii) shall not violate
any provision of the corporate charter or bylaws of the Trustee and
(iii) shall not violate any provision of, or constitute, with or
without notice or lapse of time, a default under, or result in the
creation or imposition of any Lien on any properties included in the
Trust pursuant to the provisions of, any mortgage, indenture,
contract, agreement or other undertaking to which the Trustee is a
party, which violation, default or Lien could reasonably be expected
to materially and adversely affect the Trustee's performance or
ability to perform its duties under this Agreement or any Basic
Document to which it is a party or the transactions contemplated in
this Agreement or any such Basic Document.
(e) The execution, delivery and performance by the Trustee
of this Agreement and each Basic Document to which the Trustee is a
party shall not require the authorization, consent, approval of, or
the giving of notice to, or the filing or registration with, or the
taking of any other action in respect of, any governmental authority
or agency regulating the banking and corporate trust activities of the
Trustee.
Section 10.12. Tax Returns. The Servicer shall prepare or shall
cause to be prepared any tax returns required to be filed by the Trust and the
Trustee shall promptly sign and file such returns. In no event shall the
Trustee be liable for any liabilities, costs or expenses of the Trust or the
Certificateholders under any tax law, including without limitation federal,
state or local income or excise taxes or any other tax imposed on or measured
by income (or any interest or penalty with respect thereto or arising from a
failure to comply therewith).
ARTICLE XI
Termination
Section 11.01. Termination of the Trust. (a) The respective
obligations and responsibilities of the Seller, the Servicer, and the Trustee
hereunder and the Trust created hereby shall terminate upon the earlier to
occur of (1) the payment to Certificateholders and to the Security Insurer of
all amounts required to be paid to them pursuant to this Agreement and the
disposition of all property held as part of the Trust and (2) the time provided
in Section 11.02; 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 of Joseph P. Kennedy, the late ambassador
of the United States to the Court of St. James, living on the date of this
Agreement. The Servicer shall promptly notify the Trustee and the Rating
Agencies of any prospective termination pursuant to this Section.
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(b) Except as provided in Section 11.01(a), neither the Seller nor
any Certificateholder or Certificate Owner shall be entitled to revoke or
terminate the Trust.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Trustee and the Security Insurer as soon as practicable after
the Servicer has received notice thereof.
(d) Notice of any termination of the Trust, specifying the
Distribution Date upon which Certificateholders shall surrender their
Certificates to the Trustee for payment of the final distribution and
cancellation of the Certificates, shall be given by the Trustee by letter to
Certificateholders mailed within five Business Days of receipt of notice of
such termination from the Servicer given pursuant to Section 11.01(c), stating
(1) the Distribution Date upon which final payment of the Certificates will be
made upon presentation and surrender of the Certificates at the office of the
Trustee therein designated, (2) the amount of such final payment and (3) that
the Record Date otherwise applicable to such Distribution Date will not be
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 (if other than the Trustee) at
the time such notice is given to Certificateholders. 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 5.08.
In the event that all of the Certificateholders shall not have
surrendered their Certificates for cancellation within six months after the
date specified in the above mentioned written notice, the Trustee shall give a
second written notice to the remaining Certificateholders requesting that such
Certificateholders surrender their Certificates for cancellation and receive
the final distribution with respect thereto. If within one year after such
second notice all of the Certificates shall not have been surrendered for
cancellation, 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 shall remain subject to this Agreement.
Any funds remaining in the Trust after exhaustion of such remedies shall be
distributed by the Trustee to the Seller.
Section 11.02. Optional Purchase of All Receivables. On each
Determination Date as of which the Pool Balance is equal to or less than 5% of
the Initial Pool Balance, the Servicer shall have the option to purchase the
Receivables (with the consent of the Security Insurer, if a claim has
previously been made under the Policy or if such purchase would result in a
claim on the Policy or if such purchase would result in any amount owing and
remaining unpaid under this Agreement to the Security Insurer or any other
Person); provided, however, that the Servicer may not effect any
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such purchase unless the Trustee and the Security Insurer shall have received
an Opinion of Counsel acceptable to them that such purchase does not constitute
a fraudulent conveyance under applicable federal and state laws. To exercise
such option, the Servicer shall deposit to the Collection Account pursuant to
Section 5.06 an amount equal to the aggregate Purchase Amount for the
Receivables (including Defaulted Receivables) and shall succeed to all
interests in and to the Receivables and such deposit shall be allocated and
paid as set forth in Section 5.08.
ARTICLE XII
Miscellaneous Provisions
Section 12.01. Amendment. This Agreement may be amended by the
Seller, the Servicer and the Trustee, with the prior written consent of the
Security Insurer (so long as the Security Insurer is the Controlling Party) but
without the consent of the Certificateholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement or for the purpose of
adding any provisions to, or changing in any manner or eliminating any
provision in, this Agreement or of modifying in any manner the rights of the
Certificateholders; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel delivered to the Trustee, adversely affect in any
material respect the interests of any Certificateholder.
This Agreement may also be amended from time to time by the Seller,
the Servicer and the Trustee with the prior written consent of the Security
Insurer (so long as the Security Insurer is the Controlling Party) and the
consent of the Holders of Certificates evidencing not less than a majority of
the Certificate Balance, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement,
or of modifying in any manner the rights of the 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 the
Receivables or distributions that are required to be made on any Certificate or
(b) reduce the aforesaid percentage of the Certificate Balance required to
consent to any such amendment without the consent of the Holders of all
Certificates then outstanding or adversely affect the Security Insurer without
the Security Insurer's consent.
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 and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be sufficient if
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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 any action by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
Prior to the execution of any amendment to this Agreement, the Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this Agreement
and the Opinion of Counsel referred to in Section 12.02(i). The Trustee may,
but shall not be obligated to, enter into any such amendment that affects the
Trustee's own rights, duties or immunities under this Agreement or otherwise.
Section 12.02. Protection of Title to Trust. (a) The Seller and the
Servicer shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
interest of the Certificateholders, the Security Insurer and the Trustee in the
Receivables, the Reserve Account and investments therein, and in the proceeds
thereof. The Seller and the Servicer shall deliver (or cause to be delivered)
to the Trustee file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would, could or might make
any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of Section
9-402(7) of the UCC, unless the Seller or the Servicer, as the case may be,
shall have given the Trustee and the Security Insurer at least five days' prior
written notice of such change and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements.
(c) The Seller and the Servicer shall have an obligation to give
the Trustee and the Security 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, and shall promptly file any such amendment or new
financing statement within the period of time necessary to fully preserve and
protect the interest of the Trust in the Receivables. The Servicer shall at
all times maintain its principal executive office and each office from which it
shall service Receivables within the United States of America. The Seller and
Servicer shall notify the Trustee and the Security Insurer of any relocation of
its principal executive office and, if no amendments to previously filed
financing statements are necessary, on Opinion of Counsel to such effect.
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(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (1) 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 (2)
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 transfer of the Receivables under this Agreement, the
Servicer's master computer records (including any back-up archives) that refer
to any Receivable shall indicate clearly the interest of the Trust in such
Receivable and that such Receivable is owned by the Trust. Indication of the
Trust's ownership of a Receivables shall be deleted from or modified on the
Servicer's computer systems when, and only when, such Receivable shall have
been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in, or otherwise transfer any interest in
automotive receivables to, any prospective purchaser, lender or other
transferee, the Servicer shall give to such prospective purchaser, lender or
other transferee computer tapes, records or print-outs (including any restored
from back-up archives) that, if they shall refer in any manner whatsoever to
any Receivable, shall indicate clearly that such Receivable has been sold and
is owned by the Trust.
(g) The Servicer shall permit the Trustee and the Security Insurer
and their respective agents to inspect, audit and make copies of and abstracts
from the Servicer's records regarding any Receivable at any time during normal
business hours upon reasonable notice.
(h) Upon request, the Servicer shall furnish to the Trustee or the
Security Insurer, as the case may be, within five Business Days, a list of all
Receivables (by contract number and name of Obligor) then held as part of the
Trust, together with a reconcil-iation of such list to Schedule I hereto and to
each of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Trustee and the Security
Insurer, promptly after the execution and delivery of this Agreement and of
each amendment hereto and at the time of any merger, consolidation or
succession of the Seller or Servicer, an Opinion of Counsel 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 in the Receivables, and
reciting the details of such filings or referring to prior Opinions
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<PAGE> 74
of Counsel in which such details are given, or (B) no such action is necessary
to preserve and protect such interest.
(j) by December 31 of each calendar year beginning December 31,
1996, an Opinion of Counsel, dated as of a date during the 90-day period ending
on such date, 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 first priority perfected
security interest of the Trustee in the Receivables, the Reserve Account and
the investments therein and reciting the details of such filings or referring
to prior Opinions of Counsel in which such details are given, or (b) stating
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interest.
Section 12.03. 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 12.04. Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate
this Agreement or the Trust, or 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, or 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 Section 10.01(d) or 12.01) or in any manner otherwise to control
the operation and management of the Trust or the obligations of the parties to
this Agreement; nor shall any provision in this Agreement or contained in the
Certificates be construed 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
pursuant to any provision of this Agreement.
(c) No Certificateholder shall have any right to institute any
suit, action or proceeding in equity or at law upon or under or with respect to
this Agreement unless: (1) such Holder previously shall have given to the
Trustee written notice of a continuing Servicer Termination Event; (2) the
Holders of Certificates evidencing not less than 25% of the 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 the Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby; (3) the
Trustee, for 60 days after its receipt of such notice, request and offer of
indemnity shall have neglected or refused to institute any such action, suit or
proceed-
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<PAGE> 75
ing; and (4) during such 60-day period no request or waiver inconsistent with
such written request shall have been given to the Trustee by Holders
representing a majority of the Certificate Balance. It is understood and
intended that no one or more Certificateholders shall have any right in any
manner whatever by virtue of, or by availing of, any provisions of this
Agreement to affect, disturb or prejudice the rights of any other
Certificateholder, 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.
Section 12.05. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 12.06. Notices. All demands, notices and communications upon
or to the Seller, the Servicer, the Trustee, the Security Insurer 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, to One Securities
Centre, 3490 Piedmont Road, Atlanta, Georgia 30305, Attention:
__________________; (b) in the case of the Servicer, to One Securities Centre,
3490 Piedmont Road, Atlanta, Georgia 30305, Attention: _______________________;
(c) in the case of the Trustee, to The Bank of New York, 101 Barclay Street,
New York, New York 10286, Attention: _____________; (d) in the case of the
Security Insurer, to Financial Guaranty Insurance Company, 115 Broadway, New
York, New York 10006, Attention: Group Leader, Research and Risk Management,
telephone (212) 312-3000, telecopy (212) 312-3093; (e) in the case of Moody's,
to Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church
Street, New York, New York 10007; and (f) in the case of Standard & Poor's, to
Standard & Poor's Ratings Service, 25 Broadway - 15th Floor, New York, New York
10004, Attention: Asset Backed Surveillance Department. 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. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder shall receive such notice.
Section 12.07. Severability of Provisions. 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 of this
Agreement, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
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<PAGE> 76
Section 12.08. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.03 and 8.03 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Trustee and the Security Insurer.
Section 12.09. Third-Party Beneficiaries. The Security Insurer and
its successors and assigns shall be third- party beneficiaries of the
provisions of this Agreement, and shall be entitled to rely upon and directly
to enforce the provisions of this Agreement so long as the Security Insurer is
the Controlling Party. Nothing in this Agreement, express or implied, shall
give to any Person, other than the parties hereto, the Security Insurer and
their successors hereunder and the Certificateholders any benefit or any legal
or equitable right, remedy or claim under this Agreement.
Section 12.10. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever.
Section 12.11. Limitations on Rights of Others. The provisions of
this Agreement are solely for the benefit of the Seller, the Servicer, the
Trustee, the Security Insurer and the Certificateholders, and nothing in this
Agreement, whether express or implied, shall be construed to give any other
Person any legal or equitable right, remedy or claim in respect of the Trust or
under or in respect of this Agreement or any covenants, conditions or
provisions contained herein.
Section 12.12. 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.
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<PAGE> 77
IN WITNESS WHEREOF, the Seller, the Servicer, and the Trustee have
caused this Pooling and Servicing Agreement to be duly executed by their
respective officers as of the day and year first above written.
FIDELITY NATIONAL BANK,
as Seller and Servicer
By:
-------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:
-------------------------------
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,072,036
<INT-BEARING-DEPOSITS> 121,748
<FED-FUNDS-SOLD> 1,612,912
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 66,941,972
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<ALLOWANCE> 6,422,163
<TOTAL-ASSETS> 654,842,156
<DEPOSITS> 579,337,370
<SHORT-TERM> 25,475,633
<LIABILITIES-OTHER> 6,341,858
<LONG-TERM> 16,500,000
0
0
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<INTEREST-TOTAL> 28,681,328
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<INTEREST-INCOME-NET> 16,067,957
<LOAN-LOSSES> 5,400,000
<SECURITIES-GAINS> 282,530
<EXPENSE-OTHER> 16,625,933
<INCOME-PRETAX> 2,522,194
<INCOME-PRE-EXTRAORDINARY> 914,262
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<NET-INCOME> 1,607,932
<EPS-PRIMARY> .35
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<LOANS-NON> 3,442,000
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