As filed with the Securities and Exchange Commission on December 4, 1996
Registration No. 333-14075
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
Form S-3
REGISTRATION STATEMENT
AND POST-EFFECTIVE AMENDMENT
Under
The Securities Act of 1933
----------------------------
THE MONEY STORE INC.
(Representative of the Trusts Described Herein)
TMS AUTO HOLDINGS, INC.
(Seller)
-----------------------------
New Jersey
Delaware
(State or other jurisdiction of incorporation or organization)
-----------------------------
22-2293022
22-3405381
(I.R.S. Employer Identification Number)
-----------------------------
2840 Morris Avenue
Union, New Jersey 07083
(908) 686-2000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive office)
Eric R. Elwin, Esq.
Vice President and Corporate Counsel
2840 Morris Avenue
Union, New Jersey 07083
(908) 686-2000
(Name, address, including zip code, and telephone number, including area
code,
of agent for service)
Copies to:
Reed D. Auerbach, Esq.
Stroock & Stroock & Lavan
Seven Hanover Square
New York, New York 10004-2696
-----------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Amount Maximum Proposed Amount of
Title of Securities to be Aggregate Maximum Registration
Being Registered Registered(1) Price Aggregate Fee
per Unit(2) Offering Price
<S> <C> <C> <C> <C>
Asset Backed Securities $1,100,000,000 100% $1,100,000,000 $333,333.34(3)
</TABLE>
(1) The amount of Securities being registered represents the maximum aggregate
principal amount of Securities currently expected to be offered for sale.
(2) Estimated solely for purposes of calculating the registration fee.
(3) $303.03 paid upon the initial filing of the Registration Statement on
October 15, 1996.
- -----------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus included
in this Registration Statement is a combined prospectus and relates to
registration statement No. 33-94518 as previously filed by the Registrant on
Form S-3. Such registration statement No. 33-94518 was declared effective on
September 20, 1995. This Registration Statement, which is a new registration
statement, also constitutes Post-Effective Amendment No. 1 to registration
statement No. 33-94518, and such Post-Effective Amendment shall hereafter become
effective concurrently with the effectiveness of this Registration Statement and
in accordance with Section 8(c) of the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Prospectus
THE MONEY STORE AUTO TRUSTS
Asset Backed Certificates
Asset Backed Notes
TMS AUTO HOLDINGS, INC.
Seller
THE MONEY STORE INC.
Representative
The Asset Backed Certificates (the "Certificates") and the
Asset Backed Notes (the "Notes" and, collectively with the Certificates,
the "Securities") described herein may be sold from time to time in
one or more series, in amounts, at prices and on terms to be determined at the
time of sale and to be set forth in a supplement to this Prospectus (a
"Prospectus Supplement"). Each series of Securities will
include either one or more classes of Certificates or, if Notes are issued as
part of a series, one or more classes of Notes and one or more classes of
Certificates, as set forth in the related Prospectus Supplement.
The Certificates and the Notes, if any, of any series of Securities will be
issued by a trust (a "Trust") to be formed with respect to such series by TMS
Auto Holdings, Inc. (the "Seller"), a wholly-owned subsidiary of The Money Store
Inc. (the "Representative"). The assets of each Trust (the "Trust Property")
will include a pool of motor vehicle retail installment sale contracts
("Receivables") purchased by The Money Store Auto Finance Inc. (the "Servicer")
from motor vehicle dealers and secured by new and used automobiles, light trucks
and vans, certain monies received thereunder on or after the Cutoff Date set
forth in the related Prospectus Supplement, security interests in the vehicles
financed thereby and certain other property, all as more fully described herein
and in the related Prospectus Supplement. In addition, if so specified in the
related Prospectus Supplement, the Trust Property will include Receivables
originated directly by The Money Store Auto Finance Inc. or acquired from
third-party lenders, security interests in the vehicles financed thereby, monies
on deposit in one or more trust accounts to be established with an Owner Trustee
or an Indenture Trustee, as the case may be, which may include a Pre-Funding
Account which would be used to purchase additional Receivables (the "Subsequent
Receivables") from the Seller from time to time during the Pre-Funding Period
specified in the related Prospectus Supplement.
Each Trust will be formed pursuant to either (i) a Pooling and Servicing
Agreement (the "Pooling and Servicing Agreement")
to be entered into among the Seller, the Servicer in its individual capacity and
as Servicer, and the trustee (the "Owner Trustee") and any other
party, if any, specified in the related Prospectus Supplement or (ii) a Trust
Agreement (the "Trust Agreement") to be entered into between the
Seller and the Owner Trustee. If the Trust is formed pursuant to a Trust
Agreement, a Sale and Servicing Agreement (the "Sale and Servicing Agreement")
will be entered into among the Seller, the Servicer,
in its individual capacity and as Servicer, the Trust and any other party, if
any, specified in the related Prospectus Supplement. In either case, the Pooling
and Servicing Agreement or the Trust Agreement and the Sale and Servicing
Agreement are collectively referred to herein as the "Trust Documents".
The Notes, if any, of a series will be issued and secured pursuant
to an Indenture (the "Indenture") between the Trust and the Indenture
Trustee specified in the related Prospectus Supplement (the "Indenture
Trustee").
Each class of Securities of any series will represent the right to receive,
or be secured by, a specified amount of payments of principal and/or interest on
the related Receivables in the manner described herein and in the related
Prospectus Supplement. The right of each class of Securities to receive payments
may be senior or subordinate to the rights of one or more of the other classes
of such series. A series may include two or more classes of Certificates or
Notes which differ as to the timing and priority of payment, interest rate or
amount of distributions in respect of principal or interest or both. A series
may include one or more classes of Certificates or Notes entitled to
distributions in respect of principal, with disproportionate, nominal or no
interest distributions, or to interest distributions, with disproportionate,
nominal or no distributions in respect of principal. Distributions on
Certificates of any series will be subordinated to prior payments due on the
related Notes, if any, to the extent described herein and in the related
Prospectus Supplement. The Certificates of each series will represent fractional
undivided ownership interests in the related Trust, but may be treated as debt
secured by the assets of the Trust for federal income tax purposes. Holders of
Securities are referred to herein as "Securityholders." At the time of issuance,
each series of Securities will be rated investment grade by at least one Rating
Agency (as defined herein).
Each class of Securities will represent the right to receive distributions
or payments in the amounts, at the rates, and on the dates set forth in the
related Prospectus Supplement. The rate of distributions in respect of principal
on Certificates and payment in respect of principal on Notes, if any, of any
class will depend on the priority of payment of such class and the rate and
timing of payments (including prepayments, liquidations and repurchases of
Receivables) on the related Receivables. A rate of payment lower or higher than
that anticipated may affect the weighted average life of each class of
Securities in the manner described herein and in the related Prospectus
Supplement.
There currently is no secondary market for the Securities. There can be no
assurance that any such market will develop or, if it does develop, that it will
continue. The Securities will not be listed on any securities exchange.
FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SECURITIES, SEE "RISK FACTORS" AT PAGE 15 HEREIN
AND AS MAY BE SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT.
THE CERTIFICATES REPRESENT INTERESTS IN AND THE NOTES REPRESENT
OBLIGATIONS OF THE RELATED TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE SERVICER, THE SELLER, THE REPRESENTATIVE OR ANY OF THEIR
RESPECTIVE AFFILIATES. NONE OF THE SECURITIES OR ANY OF THE RELATED RECEIVABLES
ARE ISSUED OR GUARANTEED BY ANY GOVERNMENT OR GOVERNMENT AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of securities offered hereby unless accompanied by a
Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS _____ __, 1996
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR THE RELATED
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER, THE SERVICER,
THE REPRESENTATIVE OR ANY UNDERWRITER. THIS PROSPECTUS AND THE RELATED
PROSPECTUS SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES OFFERED THEREBY TO ANYONE IN ANY JURISDICTION IN
WHICH THE PERSON MAKING SUCH OFFER AND SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS AND THE RELATED PROSPECTUS SUPPLEMENT NOR ANY
SALE MADE THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
The Representative, as sponsor of each Trust, has filed with the
Securities and Exchange Commission (the "Commission") a Registration
Statement (together with all amendments and exhibits thereto, referred to herein
as the "Registration Statement") under the Securities Act
of 1933, as amended, with respect to the Securities offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which is available for inspection without charge at the office of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission at Seven World Trade
Center, 13th Floor, New York, New York 10048 and at the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of the Registration Statement may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, the Registration Statement may be accessed
electronically at the Commission's site on the World Wide Web located at
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents filed by the Servicer on behalf of each Trust with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), subsequent to
the date of this Prospectus and prior to the termination of the offering of the
related Securities shall be deemed to be incorporated by reference into this
Prospectus and the related Prospectus Supplement and to be a part hereof and
thereof from the respective dates of filing of such documents. Any statement
contained herein or in a document all or any portion of which is deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus and the related Prospectus Supplement to the
extent that a statement contained herein or in any other subsequently filed
document which also is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the related Prospectus Supplement.
The Servicer will provide without charge to each person to whom this
Prospectus is delivered, on the written or verbal request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits). Requests for such copies should be directed to J. Tom Jones,
President, The Money Store Auto Finance Inc., 1625 West North Market Blvd.,
Suite 210, Sacramento, California 95834 (telephone (916) 928-4400).
<PAGE>
PROSPECTUS SUMMARY
This summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus and by reference to the
information with respect to the Securities contained in the related Prospectus
Supplement to be prepared and delivered in connection with the offering of each
series of Securities. Certain capitalized terms used in this Prospectus Summary
are defined elsewhere herein. A listing of the pages on which some of such terms
are defined is found in the "Index of Terms."
ISSUER.................. With respect to each series of Trust"),
to be formed by the Seller pursuant to a Pooling
and Servicing Agreement among the Seller, the
Servicer and the Owner Trustee and any other
party, if any, specified in the related Prospectus
Supplement, or a Trust Agreement between the
Seller and the Owner Trustee specified in the
related Prospectus Supplement. The term "Owner
Trustee" is used herein solely for purposes of
reference and nothing herein shall characterize
each Trust as an "owner trust" except as specified
in the related Prospectus Supplement.
SELLER.................. TMS Auto Holdings, Inc., a Delaware
corporation. The Seller is a wholly-owned
subsidiary of The Money Store Auto Finance Inc.
SERVICER................ The Money Store Auto Finance Inc., a
Delaware corporation. The Servicer is a
wholly-owned subsidiary of The Money Store Inc., a
New Jersey The Money Store" or the
"Representative"). The Money Store is a financial
services company headquartered in Sacramento,
California and Union, New Jersey.
OWNER TRUSTEE........... The Owner Trustee will be specified in
the related Prospectus Supplement with respect to
any series of Securities.
INDENTURE TRUSTEE....... The Indenture Trustee for any series of
Notes will be specified in the related Prospectus
Supplement.
SECURITIES OFFERED...... The Securities offered from time to time
may include one or more series of Certificates
and/or one or more series of Notes, as described
herein and in the related Prospectus Supplement.
THE CERTIFICATES........ The Certificates may consist of one or
more classes, each of which will be issued
pursuant to a Pooling and Servicing Agreement or
Trust Agreement. Only a certain class or certain
classes of such Certificates, however, may be
offered hereby and by the related Prospectus
Supplement, as specified in the related Prospectus
Supplement. Each Certificate will represent a
fractional undivided ownership interest in the
related Trust. Each offered Certificate may also
represent a fractional undivided interest in
monies on deposit, if any, in a trust account (as
defined below, the "Pre-Funding Account")
to be established with the Owner Trustee
or Indenture Trustee, as specified in the related
Prospectus Supplement, and any other account
established for the benefit of Certificateholders,
as specified in the related Prospectus Supplement.
Unless otherwise specified in the
related Prospectus Supplement, the offered
Certificates shall be issued in fully registered
form in denominations of $1,000 and integral
multiples of $1,000 in excess thereof and will be
available in book-entry form only. Unless the
related Prospectus Supplement specifies that the
Certificates are offered in definitive form,
holders of Certificateholders") will be able to
receive Definitive holders Certificates only in
the limited circumstances described herein or in
the related Prospectus Supplement. See "Certain
Information Regarding the Securities - Book-Entry
Registration."
Each class of offered Certificates
(other than certain Strip Certificates (as defined
below)) will have a stated Certificate Balance (as
defined for each class in the related Prospectus
Supplement) and will accrue interest on such
Certificate Balance at a specified rate (with
respect to each class of Pass-Through Rate"). Each
class of offered Certificates may have a
different Pass-Through Rate, which may be fixed,
variable or adjustable, or any combination of the
foregoing. The related Prospectus Supplement will
specify the Pass-Through Rate for each class of
offered Certificates, or the initial Pass-Through
Rate and the method for determining subsequent
Pass-Through Rates.
A series of Securities may include two
or more classes of Certificates which may differ
as to timing of distributions, sequential order,
priority of payment, seniority, allocation of
loss, Pass-Through Rate or amount of distributions
in respect of principal or interest, or as to
which distributions of principal or interest on
any class may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the
Receivables related to such series. In addition, a
series may include one or more classes of
Certificates entitled to (i) distributions in
respect of principal with disproportionate,
nominal or no interest distributions, or (ii)
interest distributions with disproportionate,
nominal or no distributions in respect of
principal (such Certificates, Strip
Certificates"). "Strip Certificates
With respect to any series of Securities
including one or more classes of Notes,
distributions in respect of the Certificates may
be subordinated in priority of payment to payments
on the Notes of such series, to the extent
specified in the related Prospectus Supplement.
If the Servicer exercises its option to
purchase the Receivables of a Trust (or, if not,
and if and to the extent provided in the related
Prospectus Supplement, satisfactory bids for the
purchase of such Receivables are received in the
manner and on the respective terms and conditions
described herein or in the related Prospectus
Supplement), Certificateholders will receive as a
prepayment an amount in respect of the
Certificates as specified in the related
Prospectus Supplement.
THE NOTES............... Any series of Securities may include one
or more classes of Notes, as specified in the
related Prospectus Supplement, each of which will
be issued pursuant to an Indenture.
Unless otherwise specified in the
related Prospectus Supplement, Notes will be
available for purchase in denominations of $1,000
and integral multiples of $1,000 in book-entry
form only. Unless otherwise specified in the
related Prospectus Supplement, holders of
Noteholders") will be able to receive Definitive
Notes only in the limited circumstances described
herein or in the related Prospectus Supplement.
See "Certain Information Regarding the Securities
- Book-Entry Registration."
Each class of Notes will have a stated
principal amount and will bear interest at a rate
or rates (with respect to each class of Notes, the
Interest Rate"), as specified in the related
Prospectus Supplement, which may be different for
each class of Notes and may be fixed, variable,
adjustable or any combination of the foregoing.
The related Prospectus Supplement will specify the
Interest Rate for each class of Notes or the
method for determining the Interest Rate. Each
Note may also represent a fractional undivided
interest in monies on deposit, if any, in the
Pre-Funding Account to be established with the
Indenture Trustee as specified in the related
Prospectus Supplement and any other account
established for the benefit of Noteholders, as
specified in the related Prospectus Supplement.
A series may include two or more classes
of Notes which differ as to the timing and
priority of payment, seniority, allocations of
loss, Interest Rate or amount of payments of
principal or interest, or as to which payments of
principal or interest may or may not be made upon
the occurrence of specified events or on the basis
collections from designated portions of the
Receivables for such series. In addition, a series
may include one or more classes of Notes entitled
to (i) principal payments with disproportionate,
nominal or no interest payments or (ii) interest
payments with disproportionate, nominal or no
principal payments Strip Notes"). (such Notes,
"Strip Notes
If the Servicer exercises its option to
purchase the Receivables of a Trust (or, if not,
and if and to the extent provided in the related
Prospectus Supplement, satisfactory bids for the
purchase of such Receivables are received in the
manner and on the respective terms and conditions
described herein or in the related Prospectus
Supplement) Noteholders will receive as a
prepayment an amount in respect of the Notes as
specified in the related Prospectus Supplement.
TRUST PROPERTY..........The Trust property will include certain
non-prime motor vehicle retail installment sale
contracts initially transferred to the Trust
Initial Receivables"), as specified in the related
Prospectus Supplement, secured by new or used
automobiles, light trucks and vans Initial
Financed Vehicles"), certain monies received
thereunder on or after a date as specified in the
related Prospectus Supplement Initial Cutoff
Date"), security interests in the Initial Financed
Vehicles securing the Initial Receivables, certain
bank accounts and the proceeds thereof, all
proceeds of the foregoing, any proceeds from
claims on certain insurance policies, and certain
rights under the related Trust Documents. If
specified in the related Prospectus Supplement,
non-prime motor vehicle retail installment sale
contracts to be sold to the Trust after the date
of issuance of the Securities and on or before a
date specified in the related Prospectus
Supplement (the Subsequent Receivables"), secured
by additional new or used automobiles, light
trucks and vans Subsequent Financed Vehicles"),
certain monies received Vehicles thereunder on or
after a date or dates as specified in the related
Prospectus Supplement (the Subsequent Cut-Off
Date"), security interests in the Subsequent
Financed Vehicles securing the Subsequent
Receivables, certain bank accounts and the
proceeds thereof may be purchased by the Trust
from the Seller from funds on deposit in the
related Pre-Funding Account. The Initial
Receivables and any Subsequent Receivables related
to each series of Securities are hereinafter,
collectively, referred to as the Receivables" and
the Initial Financed Vehicles and the Subsequent
Financed Vehicles related to each series of
securities are hereinafter, collectively, referred
Financed Vehicles." to as the "Financed Vehicles
RECEIVABLES............. The Receivables will be purchased by the
Seller from The Money Store Auto Finance Inc. (in
its individual TMS Auto Finance") pursuant to a
Purchase Agreement (the Purchase Agreement")
between the Seller and TMS Auto Finance providing
for such purchase. The Receivables comprising the
property of the Trust consist of non-prime motor
vehicle retail installment sale contracts, with
such characteristics, including their weighted
average annual percentage rate and their weighted
average remaining maturity, as shall be specified
in the related Prospectus Supplement. The
Receivables arise or will arise from loans
originated by motor Dealers") and purchased by TMS
Auto Finance pursuant to agreements with the
Dealers or other third parties for subsequent sale
to the Seller. If so specified in the related
Prospectus Supplement, the Receivables will also
include automobile loans originated directly by
TMS Auto Finance or acquired in bulk and other
purchases from third-party lenders. The
Receivables for any Trust will be selected from
the contracts owned by the Seller based on the
criteria specified in the related Sale and
Servicing Agreement or Pooling and Servicing
Agreement, as applicable, and as described herein
and in the related Prospectus Supplement.
PRE-FUNDING ACCOUNT..... If and to the extent so specified in the
related Prospectus Supplement, all or a portion of
the net proceeds from the offering of the
Securities of a series (such amount, the
Pre-Funded Amount") may be deposited in a
segregated account (the Pre-Funding Account") with
the Owner Trustee or Indenture Trustee, as the
case may be, for the benefit of the
Securityholders. During the period specified in
the related Prospectus Funding Period") the
Pre-Funded Amount will be reduced as it is used to
purchase Subsequent Receivables subject to the
satisfaction of certain conditions specified under
"Description of the Purchase Agreements and Trust
Documents--Eligibility Criteria" herein and
otherwise in accordance with the Trust Documents.
For a Trust that elects to be characterized as a
grantor trust under federal income tax laws, the
maximum length of the Funding Period will not
exceed 90 days from the date of issuance of the
Securities and otherwise the maximum length of the
Funding Period will not exceed the period set
forth in the related Prospectus Supplement. In any
event, the amount of the initial Pre-Funded Amount
and the maximum length of the Funding Period is
intended not to exceed the aggregate principal
balance of Subsequent Receivables satisfying the
eligibility criteria that TMS Auto Finance
anticipates it will be able to acquire and convey
to the Trust during the Funding Period.
Prior to the conveyance of any Subsequent
Receivables to the Trust, TMS Auto Finance will be
required to give notice of the Subsequent
Receivables to be conveyed to the Seller and from
the Seller to the Trust to the Trustee(s), the
Rating Agencies and any third-party credit
enhancement provider. Upon the satisfaction of the
conditions set forth in the Trust Documents,
including the receipt by the Owner Trustee and/or
Indenture Trustee, as applicable, of an executed
assignment, an Officer's Certificate and a legal
opinion, the Owner Trustee and/or Indenture
Trustee, as applicable, will release from the
Pre-Funding Account the necessary funds to
purchase the Subsequent Receivables to be conveyed
to the Trust on such date. In no event will funds
be released from the Pre-Funding Account to
purchase Subsequent Receivables unless the Rating
Agencies rating the Securities of such series
confirm that the ratings on the Securities of such
series have not been withdrawn or reduced as a
result of the conveyance of the Subsequent
Receivables to the Owner Trustee. If any
Pre-Funded Amount remains on deposit in the
Pre-Funding Account at the end of the Funding
Period, such amount, in the amounts and in the
manner specified in the related Prospectus
Supplement, will be used to prepay some or all
classes of the Notes and/or Certificates. In the
event of such prepayment, the Securityholders may
be entitled to receive a prepayment premium in the
amount and to the extent provided in the related
Prospectus Supplement.
REVOLVING PERIOD AND
AMORTIZATION
PERIOD;
RETAINED INTEREST....... If the related Prospectus Supplement so
provides, there may be a period commencing on the
date of issuance of a class or classes of Notes or
Certificates of a series and ending on the date
set forth in the related Prospectus Supplement
(the Revolving Period") during which no principal
payments will be made to one or more classes of
Notes or Certificates of the related series as are
identified in such Prospectus Supplement. All
collections of principal otherwise allocated to
such classes of Notes or Certificates may be (i)
utilized by the Trust during the Revolving Period
to acquire additional Receivables which satisfy
the standards described under "The Receivables -
General" herein and the criteria set forth in the
related Prospectus Supplement, (ii) held in an
account and invested in Eligible Investments for
later distribution to Securityholders, (iii)
applied to those Notes or Certificates, if any,
specified in the related Prospectus Supplement as
then are in amortization, or (iv) otherwise
applied as specified in the related Prospectus
Supplement.
An Amortization Period" is the period
during which an amount of principal is payable to
holders of a series of Securities which, during
the Revolving Period, were not entitled to such
payments. If so specified in the related
Prospectus Supplement, during an Amortization
Period all or a portion of principal collections
on the Receivables may be applied as specified
above for a Revolving Period and, to the extent
not so applied, will be distributed to the classes
of Notes or Certificates specified in the related
Prospectus Supplement as then being entitled to
payments of principal. In addition, if so
specified in the related Prospectus Supplement,
amounts deposited in certain accounts for the
benefit of one or more classes of Notes or
Certificates may be released from time to time or
on a specified date and applied as a payment of
principal on such classes of Notes or
Certificates. The related Prospectus Supplement
will set forth the circumstances which will result
in the commencement of an Amortization Period.
Each Trust which has a Revolving Period
may also issue to the Seller a certificate
evidencing an undivided beneficial interest (the
"Retained Retained Interest") in the Trust not
represented by the other Securities issued by such
Trust. As further described in the related
Prospectus Supplement, the value of such Retained
Interest will fluctuate as the amount of Trust
Property fluctuates and the amount of Notes and
Certificates of the related series of Securities
outstanding is reduced.
YIELD AND PREPAYMENT
CONSIDERATIONS.......... The weighted average life of the
Securities of the related series will be reduced
by full or partial prepayments on the related
Receivables. The Receivables will generally be
prepayable at any time without penalty.
Prepayments (or, for this purpose, equivalent
payments to the related Trust) may result from
payments by the retail purchasers obligated under
the Obligor"), liquidations due to default, the
receipt of proceeds from physical damage or credit
insurance, repurchases by (if no other party is
described in the related Prospectus Supplement as
obligated to make such repurchases) TMS Auto
Finance and the Seller as a result of certain
uncured breaches of representations and warranties
made with respect to the Receivables, purchases by
(if no other party is described in the related
Prospectus Supplement as obligated to make such
purchases) the Servicer as a result of certain
uncured breaches of the covenants made by it with
respect to the Receivables, if so specified in the
related Prospectus Supplement, amounts on deposit,
if any, in the Pre-Funding Account at the end of
the Funding Period being applied to the payment of
principal of the Securities, the Servicer
exercising its option to purchase all of the
remaining Receivables of a Trust or, if and to the
extent provided in the related Prospectus
Supplement, the receipt of satisfactory bids for
the purchase of the Receivables of the related
Trust in the manner and on the respective terms
and conditions specified in the related Prospectus
Supplement. In addition, if a Trust is not a
grantor trust and an Insolvency Event with respect
to the entity which serves as such Trust's general
partner (such Affiliated Purchaser") occurs,
subject to certain limitations the Receivables
will be sold and a prepayment in respect of the
related Securities will result.
COLLECTION ACCOUNT...... With respect to each series of
Securities, the Owner Trustee or the Indenture
Trustee will establish and maintain one or more
separate accounts (each, a Collection Account")
for the benefit of the Certificateholders and the
Noteholders, if any, in the manner specified in
each related Prospectus Supplement. On each
Distribution Date (as specified in the related
Prospectus Supplement, Distribution Date"), the
Owner Trustee or the Indenture Trustee, as the
case may be, will be required to pass through and
distribute to the Certificateholders, or pay to
the Noteholders, as the case may be, on the date
specified in the related Prospectus Supplement
from amounts held in the Collection Account, the
amounts of interest, principal or otherwise
distributable with respect to the applicable
classes of Certificates and Notes as specified in
the related Prospectus Supplement.
SUBORDINATION AND
CREDIT ENHANCEMENT...... In the event of defaults and
delinquencies on the Receivables, certain
distributions of interest and/or principal with
respect to one or more classes of Securities may
be subordinated in priority of payment to
distributions due on other classes of Securities
as specified in the related Prospectus Supplement.
In addition, to the extent specified in the
related Prospectus Supplement, one or more classes
of Securities may be entitled to the benefits of a
spread account, a reserve account, accelerated
payments of principal relative to the amortization
of the related Receivables, a policy or policies
of insurance, a letter or letters of credit,
surety bonds, credit or liquidity facilities,
guaranteed investment contracts, swaps or other
interest rate protection agreements, repurchase
obligations, yield supplement agreements, other
agreements with respect to third party payments or
other support, cash deposits or other
arrangements, which may be subject to certain
limitations and exclusions as described in the
related Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF
THE RECEIVABLES......... In connection with the sale of the
Receivables to a Trust, the security interests in
the Financed Vehicles securing the Receivables
have been, or in the case of the Subsequent
Receivables, will be, assigned by the Seller to
such Trust. Due to administrative burden and
expense, the certificates of title to the Financed
Vehicles will not be amended to reflect the
assignment of such security interests to the
Trust. In the absence of such an amendment, the
Trust may not have a perfected security interest
in the Financed Vehicles securing the Receivables
in some states. See "Special
Considerations--Certain Legal Aspects".
REPURCHASES AND
PURCHASES OF CERTAIN
RECEIVABLES............. The Seller will be obligated to
repurchase any Receivable sold to the Trust as to
which a security interest in the Financed Vehicle
securing such Receivable shall not have been
perfected in favor of TMS Auto Finance if the
Owner Trustee or the Indenture Trustee, as the
case may be, determines such breach shall
materially adversely affect the interest of the
Trust in such Receivable and if such failure or
breach shall not have been cured by the second
(or, if the Seller elects, the first) month
following the discovery by or notice of such
breach. The Seller also will be obligated to
repurchase any Receivable if the Indenture Trustee
or the Owner Trustee, as the case may be,
determines the interest of the Trust therein is
materially adversely affected by a breach of any
other representation or warranty made by the
Seller with respect to the Receivable, and if the
breach has not been cured by the last day of the
second (or, if the Seller elects, the first) month
following the discovery by or notice to the Seller
of the breach.
The Servicer will be obligated to
purchase any Receivable if a perfected security
interest in the related Financed Vehicle in favor
of the Servicer is not maintained. If the Seller
or the Servicer fails to repurchase or purchase,
as the case may be, a Receivable for any of the
foregoing reasons, the Representative will be
obligated to purchase such Receivable on the date
such Receivable was to be so purchased or
repurchased. See "Certain Legal Aspects of the
Receivables."
SERVICING............... The Servicer will be required to remit
collections (net of the Servicing Fee, the
Supplemental Servicing Fee and reimbursement for
Advances, if any (each as defined herein) included
in such collections) to one or more Collection
Accounts established with the Owner Trustee or the
Indenture Trustee as specified in the related
Prospectus Supplement. As specified in the related
Prospectus Supplement, the Servicer will receive
from the Trust or retain each month a fee for
servicing the Receivables in an amount specified
in the related Prospectus Supplement out of the
collections on the Receivables. See "The
Certificates - Servicing Compensation."
ADVANCES................ If and to the extent specified in the
related Prospectus Supplement, the Servicer may be
required to advance Advance") monthly payments of
interest in respect of a delinquent Receivable
that the Servicer, in its sole discretion, expects
to recoup from subsequent payments on or with
respect to such Receivable or from other
Receivables. The Servicer shall be entitled to
reimbursement of Advances from subsequent payments
on or with respect to the Receivables to the
extent described in the related Prospectus
Supplement.
OPTIONAL PURCHASE....... With respect to each series of
Securities, the Servicer may purchase all of the
Receivables held by the related Trust as of the
last day of any month in which the Pool Balance of
such Trust at the close of business on the
Distribution Date in that month is 10% or less (or
such other percentage specified in the related
Prospectus Supplement) of the Original Pool
Balance (calculated after giving effect to the
principal balance of any Subsequent Receivables as
of their respective Subsequent Cutoff Dates). See
"The Certificates - Termination."
TAX STATUS.............. If the Prospectus Supplement specifies
that the related Trust will be treated as a
partnership upon the issuance of the related
series of Securities, Stroock & Stroock & Lavan,
federal tax counsel Federal Tax Counsel") to the
Seller, will deliver an opinion to the effect
that, for federal income tax purposes: (i) any
Notes of such series will be characterized as debt
and (ii) such Trust will not be characterized as
an association (or a publicly traded partnership)
taxable as a corporation. In respect of any such
series, each Noteholder, if any, by the acceptance
of a Note of such series, will agree to treat such
Note as indebtedness, and each Certificateholder,
by the acceptance of a Certificate of such series,
will agree to treat such Trust as a partnership in
which such Certificateholder is a partner for
federal income tax purposes. Alternative
characterizations of such Trust and such
Certificates are possible, but would not result in
materially adverse tax consequences to
Certificateholders.
If the Prospectus Supplement specifies
that the related Trust will be treated as a
grantor trust, upon the issuance of the related
series of Certificates, Federal Tax Counsel to
such Trust will deliver an opinion to the effect
that such Trust will be treated as a grantor trust
for federal income tax purposes and will not be
subject to federal income tax.
If the Prospectus Supplement specifies that a
Trust issuing Certificates will not be treated
as a partnership, but rather will be regarded as
a security device for the issuance of debt,
Federal Tax Counsel to such Trust will deliver
an opinion to the effect that the Certificates
of the related series will be treated as
indebtedness for federal income tax purposes
and that the Trust will not be characterized
as an association (or publicly traded
partnership) taxable as a corporation. In respect
of any such series, the Seller agrees and each
Certificateholder, by acquiring an interest in a
Certificate, agrees or will be deemed to agree to
treat the Certificates as indebtedness for
federal, state and local income or franchise tax
purposes. Alternative characterizations of such
Trust and such Certificates are possible and
potential investors should consult their tax
advisors before purchasing such Certificates.
See "Federal Income Tax Consequences"
for additional information concerning the
application of federal tax laws.
ERISA
CONSIDERATIONS.......... Subject to the considerations discussed
under "ERISA Considerations" herein and in the
related Prospectus Supplement, and to the extent
specified in the related Prospectus Supplement,
any Notes included in the offered Securities will
be eligible for purchase by employee benefit plans
or other retirement arrangements that are subject
to either Title I of the Employee Retirement
Income Security Act of ERISA") or Section 4975 of
the Internal Revenue Code of 1986, as amended
(such plans or Plans"). Certain Certificates may
be eligible for purchase by Plans as specified in
the related Prospectus Supplement. See "ERISA
Considerations" herein and in the related
Prospectus Supplement.
RATINGS................. As a condition of issuance, the offered
Securities of each series will be rated an
investment grade, that is, in one of the four
highest rating categories, by at least one
nationally recognized rating agency Rating
Agency"), as specified in the related Prospectus
Supplement. The ratings will be based on the
Receivables related to each series, the terms of
the Securities, and the subordination and any
credit enhancement provided therefor. There is no
assurance that the ratings initially assigned to
such Securities will not be subsequently lowered
or withdrawn by the Rating Agencies. In the event
the rating initially assigned to any Securities is
subsequently lowered for any reason, no person or
entity will be obligated to provide any credit
enhancement unless otherwise specified in the
related Prospectus Supplement. The ratings of any
Securities with respect to which a prepayment
premium may be payable do not evaluate such
prepayment premium payable to such Securityholders
or the likelihood that such prepayment premium
will be paid.
<PAGE>
RISK FACTORS
LIMITED LIQUIDITY
There is currently no market for the Securities of any series. There can
be no assurance that a secondary market for the Securities will develop or, if
such a market does develop, that it will provide Securityholders with liquidity
of investment or that it will continue for the life of the Securities. See "Plan
of Distribution."
NATURE OF RECEIVABLES; UNDERWRITING PROCESS; SUBJECTIVE CREDIT
STANDARDS AND SUFFICIENCY OF INTEREST RATES TO COVER LOSSES
The underwriting standards applied by TMS Auto Finance may not be as
stringent as those of other financial institutions or the finance companies of
motor vehicle manufacturers, since TMS Auto Finance actively solicits dealers to
purchase and purchases, and intends to originate directly, primarily non-prime
motor vehicle retail installment sale contracts which may not meet the credit
standards of prime lenders. Although TMS Auto Finance believes that it carefully
reviews and evaluates each credit before acceptance, no assurance can be given
that the standards employed by TMS Auto Finance will be sufficient to protect
the Securityholders from loss due to default by the Obligors.
Because of the greater credit risk associated with non-prime motor vehicle
retail installment contracts, the interest rates charged on such contracts are
generally higher than those rates charged on prime motor vehicle retail
installment sale contracts. The range of APRs of the Receivables will be set
forth in the related Prospectus Supplement. There can be no assurance, however,
that the interest rates on the Receivables in a particular pool will be
sufficient to cover losses on other Receivables in such pool. See "TMS Auto
Finance -- General."
RISK OF LOSS
No Trust will have any significant assets or sources of funds other than
the Receivables and, to the extent provided in the related Prospectus
Supplement, a Pre-Funding Account and/or any credit enhancement specified in the
related Prospectus Supplement. The Notes, if any, of any series will represent
obligations solely of, and the Certificates of any series will represent
interests solely in, the related Trust, and neither the Notes nor the
Certificates of any series will be insured or guaranteed by the Seller, the
Servicer, the Representative, the applicable Owner Trustee, the applicable
Indenture Trustee or, except as specified in the related Prospectus Supplement,
any other person or entity. Consequently, Securityholders must rely for payment
upon payments on the related Receivables and, if and to the extent available,
amounts on deposit in the Pre-Funding Account, if any, and any credit
enhancement, if any, specified in the related Prospectus Supplement. To the
extent specified in the related Prospectus Supplement, distributions with
respect to some or all classes of Certificates may be subordinated in priority
of payment to distributions on the Notes, if any, of such series and
distributions on other classes of Certificates of such series. Any such
subordination or credit enhancement will not cover all contingencies, and losses
in excess of such coverage will be required to be borne directly by the affected
Securityholders. In addition, holders of certain classes of Securities of a
series may have the right to take actions that are detrimental to the interests
of the Securityholders of certain other classes of Securities of such series, as
specified in the related Prospectus Supplement. See "Description of the Purchase
Agreements and Trust Documents -- Credit Enhancement" and "-- Amendment."
RISK OF UNPERFECTED SECURITY INTERESTS IN FINANCED VEHICLES
As part of the sale and assignment of Receivables to a Trust, security
interests in the related Financed Vehicles will be assigned by the Seller to
such Trust. In most states, such an assignment is an effective conveyance of a
security interest without amendment of any such security interest noted on a
vehicle's certificate of title, and the assignee succeeds thereby to the
assignor's rights as secured party. Such notation of a secured party's security
interest is generally effected in such states by depositing with the applicable
state motor vehicle registrar or similar state authority, the vehicle's
certificate of title, an application containing the name and address of such
secured party, and the necessary registration fees.
Because of the administrative burden and expense that would be entailed in
doing so, the certificates of title for the Financed Vehicles related to any
Trust will not be endorsed to identify the Trustee as the secured party, and
will not be deposited with the motor vehicle registrar or other state
authorities in any state. In the absence of such action, the Owner Trustee or
the Indenture Trustee, as the case may be, may not have a perfected security
interest in the Financed Vehicles related to such Trust in certain states and,
in the event that another person obtains a perfected security interest in such a
Financed Vehicle subsequent to the transfer of the Receivables to the related
Trust, such person might acquire rights in such Financed Vehicle prior to the
rights of the Trust. The Seller and/or another party, if any, designated in the
related Prospectus Supplement will covenant to repurchase any Receivable if, on
the date of transfer of a Receivable to a Trust, a valid, subsisting and
enforceable first priority security interest shall not have been perfected in
favor of TMS Auto Finance, which shall have been assigned to the Trust, in the
related Financed Vehicle. The Servicer and/or another party, if any, designated
in the related Prospectus Supplement will covenant to repurchase any Receivable
if, after the transfer of such Receivable to a Trust, a valid, subsisting and
enforceable first priority interest in the name of the Servicer is not
maintained on behalf of the Trust in the related Financed Vehicle. If such Trust
does not have a perfected security interest in a Financed Vehicle, its ability
to realize on such Financed Vehicle in the event of a default may be adversely
affected. To the extent the security interest is perfected, such Trust will have
a prior claim over subsequent purchasers of such Financed Vehicles and holders
of subsequently perfected security interests. However, as against liens for
repairs of Financed Vehicles or for taxes unpaid by an Obligor under a
Receivable, or through fraud or negligence, such Trust could lose the priority
of its security interest or its security interest in a Financed Vehicle. Neither
the Seller nor TMS Auto Finance will have any obligation to repurchase a
Receivable as to which any of the aforementioned occurrences result in such
Trust's losing the priority of its security interest or its security interest in
such Financed Vehicle after the date such security interest was conveyed to such
Trust. Federal and state consumer protection laws impose requirements upon
creditors in connection with extensions of credit and collections of retail
installment loans and certain of these laws make an assignee of such a loan
(such as such Trust) liable to the related borrower for any violation by the
lender. The Seller will be obligated to repurchase any Receivable which fails to
comply with such requirements. See "Certain Legal Aspects of the Receivables --
Security Interests in Vehicles."
INSOLVENCY RISKS
TMS Auto Finance will intend that any transfer of Receivables to the
Seller will constitute a sale, rather than a pledge of the Receivables to secure
indebtedness of TMS Auto Finance. However, if TMS Auto Finance were to become a
debtor under the federal bankruptcy code or similar applicable state laws
(collectively, the "Insolvency Laws"), a creditor or trustee in
bankruptcy thereof, or TMS Auto Finance as debtor-in-possession, might argue
that such sale of Receivables was a pledge of Receivables rather than a sale
and/or that the assets and liabilities of the Seller should be consolidated with
the assets and liabilities of TMS Auto Finance. This position, if presented to
or accepted by a court, could result in a delay in or reduction of distributions
to Securityholders. In addition, a delay in or reduction of distributions to
Securityholders could result if the Seller were to become a debtor under any
Insolvency Law and a creditor or trustee-in-bankruptcy of such debtor or such
debtor itself were to take the position that the sale of Receivables to such
Trust should instead be treated as a pledge of such Receivables to secure a
borrowing of such debtor. In addition, if the transfer of any Receivables is
recharacterized as a pledge, a tax lien, other governmental lien, or other lien
created by operation of law on the property of the Servicer, the holder of such
lien may have priority over the Trust's interest in such Receivables.
In addition, in a case recently decided by the United States Court of
Appeals for the Tenth Circuit, OCTAGON GAS SYSTEM, INC. V. RIMMER, such Circuit
Court found that "accounts", a defined term under the Uniform Commercial Code,
sold prior to a bankruptcy should be treated as part of the bankruptcy estate of
the seller of such accounts. If TMS Auto Finance or the Seller were to become a
debtor in a bankruptcy proceeding and a court applied the reasoning of the
Circuit Court reflected in the case described above, delays in payments to
Securityholders could occur or reductions in the amounts of such payments could
result.
With respect to each Trust that is not a grantor trust, if an Insolvency
Event with respect to the Affiliated Purchaser occurs, the related Receivables
will be sold, disposed of or otherwise liquidated, except under certain limited
circumstances. If the proceeds from the liquidation of the Receivables and any
amounts on deposit in the Collection Account or other accounts available for
Securityholders with respect to any such Trust and any amounts available from
any credit enhancement are not sufficient to pay any Notes and the Certificates
of the related series in full, the amount of principal returned to any
Noteholders or Certificateholders will be reduced and such Noteholders and
Certificateholders will incur a loss. See "Certain Legal Aspects -- Insolvency
Matters" herein.
SOCIAL, ECONOMIC AND OTHER FACTORS AFFECTING THE RECEIVABLES
Economic conditions in states where Obligors reside may affect the
delinquency, loan loss and repossession experience of a Trust with respect to
the related Receivables. The related Prospectus Supplement will set forth any
restrictions imposed by any Trust on concentrations of Receivables thereunder.
The ability of the Trust to invest in Receivables is largely dependent upon
whether the Obligors thereunder perform the payment and other obligations
required by such Receivables in order that such Receivables meet the
requirements for transfer to a Trust. The performance by such Obligors may be
affected by a variety of social and economic factors. Economic factors include,
but are not limited to, interest rates, unemployment levels, the rate of
inflation and consumer perception of economic conditions, generally. However,
the Seller is unable to determine and has no basis to predict whether or to what
extent economic or social factors will affect the performance by any Obligors,
or the availability of Subsequent Receivables in cases where Subsequent
Receivables are to be transferred to a Trust as specified in the related
Prospectus Supplement. See "TMS Auto Finance."
PREPAYMENTS ON RECEIVABLES AFFECT ON YIELD OF SECURITIES
The weighted average life of the Securities of the related series will be
reduced by full or partial prepayments on the related Receivables. The
Receivables will generally be prepayable at any time without penalty.
Prepayments (or, for this purpose, equivalent payments to the related Trust) may
result from payments by Obligors, liquidations due to default, the receipt of
proceeds from physical damage or credit insurance, repurchases by (if no other
party is described in the related Prospectus Supplement as obligated to make
such repurchases) TMS Auto Finance and the Seller as a result of certain uncured
breaches of representations and warranties made with respect to the Receivables,
purchases by (if no other party is described in the related Prospectus
Supplement as obligated to make such repurchases) the Servicer as a result of
certain uncured breaches of the covenants made by it with respect to the
Receivables, if so specified in the related Prospectus Supplement, amounts on
deposit in the Pre-Funding Account at the end of the Funding Period being
applied to the payment of principal of the Securities, the Servicer exercising
its option to purchase all of the remaining Receivables of a Trust or, if and to
the extent provided in the related Prospectus Supplement, the receipt of
satisfactory bids for the purchase of the Receivables of the related Trust in
the manner and on the respective terms and conditions specified in the related
Prospectus Supplement. In addition, if a Trust is not a grantor trust and an
Insolvency Event occurs with respect to the Affiliated Purchaser, subject to
certain limitations the Receivables will be sold and a prepayment in respect of
the related Securities will result.
TMS Auto Finance commenced operations in January 1995. Consequently, it
has limited historical experience with respect to prepayments, and has not as of
the date of this Prospectus prepared data on prepayment rates. TMS Auto Finance
can make no prediction as to the actual prepayment rates that will be
experienced on the Receivables. TMS Auto Finance, however, believes that the
actual rate of prepayments will result in a substantially shorter weighted
average life than the scheduled weighted average life of the Receivables.
Generally, the amounts paid to Securityholders will include all prepayments
(which are not amounts representing Payaheads) on the Receivables. The
Securityholders will bear all reinvestment risk resulting from the timing of
payments on the Securities. See "Yield and Prepayment Considerations."
RISK OF SERVICER COMMINGLING FUNDS
With respect to each Trust, unless otherwise provided in the related
Prospectus Supplement, the Servicer will deposit all payments (net of certain
fees) on the related Receivables (from whatever source) and all proceeds of such
Receivables collected during each Monthly Period into the Collection Account of
such Trust within two business days of receipt thereof. However, in the event
that TMS Auto Finance satisfies certain requirements for monthly or less
frequent remittances and the Rating Agencies (as such term is defined in the
related Prospectus Supplement, the "Rating Agencies") affirm
their ratings of the related Securities at the initial level, then for so long
as TMS Auto Finance is the Servicer and provided that (i) there exists no
Servicer Default, (ii) the credit enhancement provider, if any, consents, and
(iii) each other condition to making such monthly or less frequent deposits as
may be specified by the Rating Agencies and described in the related Prospectus
Supplement is satisfied, the Servicer will not be required to deposit such
amounts into the Collection Account of such Trust until on or before the
business day preceding each Distribution Date. If such requirements are
satisfied, TMS Auto Finance will deposit the aggregate Purchase Amount of
Receivables purchased by it into the applicable Collection Account on or before
the business day preceding each Distribution Date. Pending deposit into such
Collection Account, collections may be invested by the Servicer at its own risk
and for its own benefit and will not be segregated from funds of the Servicer.
If TMS Auto Finance were unable to remit such funds, the applicable
Securityholders might incur a loss. To the extent set forth in the related
Prospectus Supplement, TMS Auto Finance may, in order to satisfy the
requirements described above, obtain a letter of credit or other security for
the benefit of the related Trust to secure timely remittances of collections on
the related Receivables and payment of the aggregate Purchase Amount with
respect to Receivables purchased by TMS Auto Finance. See "Description of the
Purchase Agreements and Trust Documents -- Collections."
RISKS OF SECURITYHOLDERS UPON SERVICER DEFAULT
Unless otherwise provided in the related Prospectus Supplement with
respect to a series of Securities that includes Notes, in the event a Servicer
Default occurs, the Indenture Trustee or the Noteholders with respect to such
series may remove the Servicer without the consent of the Owner Trustee or any
of the Certificateholders with respect to such series. The Owner Trustee or the
Certificateholders with respect to such series will not have the ability to
remove the Servicer if a Servicer Default occurs. In addition, the Noteholders
of such series have the ability, with certain specified exceptions, to waive
defaults by the Servicer, including defaults that could materially adversely
affect the Certificateholders of such series. See "The Notes -- The Indenture."
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, each
class of Securities of a given series will be initially represented by one or
more certificates registered in the name of Cede & Co. ("Cede"), or any
other nominee for The Depository Trust Company ("DTC") set forth in the
related Prospectus Supplement, and will not be registered in the names of the
holders of the Securities of such series or their nominees. Unless otherwise
specified in the related Prospectus Supplement, persons acquiring beneficial
ownership interests in any Series of Securities may hold their interests through
DTC in the United States or, in the case of any series of Notes, Cedel Bank,
societe anonyme ("Cedel") or the Euroclear System ("Euroclear") in
Europe. Because of this, unless and until Definitive Securities for such series
are issued, holders of such Securities will not be recognized by the Trustee or
any applicable Indenture Trustee as "Certificateholders",
"Noteholders" or "Securityholders", as the case may be
(as such terms are used herein or in the related Pooling and Servicing Agreement
or related Indenture and Trust Agreement, as applicable). Hence, until
Definitive Securities are issued, holders of such Securities will only be able
to exercise the rights of Securityholders indirectly through DTC and its
participating organizations. See "Certain Information Regarding the Securities -
Book-Entry Registration."
THE TRUSTS
The Seller will establish a Trust with respect to each series of
Securities by selling and assigning the Trust property, as described below, to
the Owner Trustee pursuant to the Trust Documents. Prior to the sale and
assignment of the related Receivables pursuant to the related Trust Documents,
such Trust will have no assets or obligations. Each Trust will not engage in any
business activity other than acquiring, holding and, if so specified in the
related Prospectus Supplement, selling the Trust Property, issuing Certificates
and Notes, if any, of such series and distributing payments thereon.
Each Certificate will represent a fractional undivided ownership interest
in, and each Note, if any, will represent an obligation of, the related Trust.
The property of the Trust will include, among other things, (a) motor vehicle
retail installment sale contracts, as specified in the related Prospectus
Supplement, between Dealers and retail purchasers (the "Obligors") of
new or used automobiles, light trucks and vans and (b) all payments received
thereunder on or after the Initial Cutoff Date or Subsequent Cutoff Date, as the
case may be, as specified in the related Prospectus Supplement. The Receivables
were or will be originated by Dealers in accordance with TMS Auto Finance's
requirements under agreements with Dealers for assignment to TMS Auto Finance,
have been or will be so assigned, and evidence or will evidence the indirect
financing made available to the Obligors. If specified in the related Prospectus
Supplement, the Receivables may be originated directly by TMS Auto Finance or
acquired by TMS Auto Finance in bulk and other purchases from third-party
lenders. On or before the closing date specified in the related Prospectus
Supplement, TMS Auto Finance will sell the Initial Receivables to the Seller for
sale to the Trust. Subsequent Receivables, if any, will be conveyed to the Trust
during the applicable Funding Period, as provided in the related Prospectus
Supplement. Any such Subsequent Receivables will constitute property of the
Trust.
The property of each Trust also will include, to the extent set forth in
the Prospectus Supplement, (i) such amounts as from time to time may be held in
separate trust accounts (such as the "Collection Account," the
"Certificate Account" and the "Payahead Account,"
as may be specified in the related Prospectus Supplement) established
and maintained pursuant to the Trust Documents, and the proceeds of such
accounts; (ii) security interests in the related Financed Vehicles and any
accessions thereto; (iii) amounts payable to the Servicer under all Dealer
Recourse Obligations (in the event of breach of the warranties of such Dealer);
(iv) the right to proceeds of credit life, credit disability, and physical
damage insurance policies covering the related Financed Vehicles; (v) the rights
of the Seller under the Trust Documents; (vi) certain rebates of premiums and
other amounts relating to certain insurance policies and other items financed
under the Receivables, and (viii) any and all proceeds of the foregoing. To the
extent specified in the related Prospectus Supplement, a Payahead Account, a
Pre-Funding Account, a reserve account or other form of credit enhancement may
be a part of the property of any given Trust or may be held by the Owner Trustee
or an Indenture Trustee for the benefit of holders of the related Securities.
The Servicer will service the Receivables held by each Trust, and will be
compensated for acting as the Servicer. See "Description of the Purchase
Agreement and the Trust Documents Servicing Compensation." To facilitate
servicing and to minimize administrative burden and expense, the Servicer will
retain physical possession of the Receivables and documents relating thereto as
custodian for the Owner Trustee or the Indenture Trustee, as the case may be.
Due to the administrative burden and expense, the certificates of title to the
Financed Vehicles will not be amended to reflect the assignment of the security
interest in the Financed Vehicles to any Owner Trustee or Indenture Trustee. In
the absence of such amendment, an Owner Trustee or Indenture Trustee may not
have a perfected security interest in the related Financed Vehicles in certain
states. See "Certain Legal Aspects of the Receivables - Security Interest in
Vehicles." The Owner Trustee and any Indenture Trustee will not be responsible
for the legality, validity or enforceability of any security interest in any
Financed Vehicle.
If the protection provided to the holders of any Securities by the
subordination of any Securities or by any credit enhancement is insufficient,
such Securityholders would have to look for payment on their Securities to the
Obligors on the related Receivables, the proceeds from the repossession and sale
of the related Financed Vehicles which secure such Receivables, and the
proceeds, if any, from Dealer Recourse Obligations. In such event, certain
factors, such as the Owner Trustee's or the Indenture Trustee's not having
perfected security interests in the related Financed Vehicles in certain states,
may affect such Trust's ability to repossess and sell the collateral securing
the Receivables, and thus may reduce the proceeds to be distributed to
Securityholders. See "Certain Legal Aspects of the Receivables."
THE OWNER TRUSTEE
The Owner Trustee for each Trust will be specified in the related
Prospectus Supplement. The Owner Trustee's liability in connection with the
issuance and sale of the Securities of such series will be limited solely to the
express obligations of such Owner Trustee set forth in the related Trust
Documents. An Owner Trustee may resign at any time, in which event the Seller or
its successor will be obligated to appoint a successor trustee which is eligible
under the related Trust Documents. The Seller also may remove the Owner Trustee
if the Owner Trustee ceases to be eligible to continue as Owner Trustee under
the related Trust Documents or if the Owner Trustee becomes insolvent. In such
circumstances, the Seller will be obligated to appoint a successor trustee
eligible under the related Trust Documents. Any resignation or removal of an
Owner Trustee and appointment of a successor trustee will be subject to any
conditions or approvals specified in the related Prospectus Supplement and will
not become effective until acceptance of the appointment by the successor
trustee.
THE RECEIVABLES
GENERAL
Unless the related Prospectus Supplement specifies that some or all of the
Receivables were or will be originated directly by TMS Auto Finance or are to be
acquired in bulk and other purchases from third-party lenders, the Receivables
held by each Trust will be purchased by TMS Auto Finance in its ordinary course
of business pursuant to its Contract Acquisition Program. The underwriting
standards of TMS Auto Finance's Contract Acquisition Program emphasize a review
of the borrower's creditworthiness and ability to repay his or her obligations
underlying the related motor vehicle retail installment sale contract, as well
as the asset value of the related vehicle. Unless the related Prospectus
Supplement specifies otherwise, similar underwriting standards will be applied
to Receivables originated by TMS Auto Finance or any third-party lender from
which Receivables are acquired. Each of the Receivables to be held by Trust (i)
will be originated in the United States, (ii) will be secured by new or used
automobiles, light trucks or vans, (iii) will provide for level monthly payments
which fully amortize the amount financed over its original term to maturity
(except for the last payment which may be minimally different), (vi) will be
either a Precomputed Receivable or Simple Interest Receivable (each as defined
below), and (v) will satisfy the other criteria, if any, set forth in the
related Prospectus Supplement. No selection procedures believed to be adverse to
the Securityholders of any series will be utilized in selecting the Receivables
from qualifying non-prime motor vehicle retail installment sale contracts owned
by TMS Auto Finance. Any obligation of a Trust to purchase Subsequent
Receivables shall be subject to such additional conditions as may be specified
in the related Prospectus Supplement.
"Precomputed Receivables" consist of either (i)
monthly actuarial receivables ("Actuarial Receivables") or
(ii) receivables that provide for allocation of payments according to the "sum
of periodic balances" or "sum of monthly payments" method, similar to the "Rule
of 78's" ("Rule of 78's Receivables"). An Actuarial
Receivable provides for amortization of the loan over a series of fixed,
level-payment monthly installments. Each monthly installment, including the
monthly installment representing the final payment on the Receivable, consists
of an amount of interest equal to 1/12 of the Annual Percentage Rate ("APR")
of the loan multiplied by the unpaid principal balance of the loan, and an
amount of principal equal to the remainder of the monthly payment. A Rule of
78's Receivable provides for the payment by the borrower of a specified total
amount of payments, payable in equal monthly installments on each due date,
which total represents the principal amount financed and add-on interest in an
amount calculated on the stated APR for the term of the receivable. The rate at
which such amount of add-on interest is earned and, correspondingly, the amount
of each fixed monthly payment allocated to reduction of the outstanding
principal are calculated in accordance with the "Rule of 78's".
"Simple Interest Receivables" are receivables
that provide for the amortization of the amount financed under each receivable
over a series of fixed level monthly payments. However, unlike the monthly
payment under an Actuarial Receivable, each monthly payment consists of an
installment of interest which is calculated on the basis of the outstanding
principal balance of the receivable multiplied by the stated APR and further
multiplied by the period elapsed (as a fraction of a calendar year) since the
preceding payment of interest was made. As payments are received under a Simple
Interest Receivable, the amount received is applied first to interest accrued to
the date of payment and the balance is applied to reduce the unpaid principal
balance. Accordingly, if a borrower pays a fixed monthly installment before its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be less than it would have been
had the payment been made as scheduled, and the portion of the payment applied
to reduce the unpaid principal balance will be correspondingly greater.
Conversely, if a borrower pays a fixed monthly installment after its scheduled
due date, the portion of the payment allocable to interest for the period since
the preceding payment was made will be greater than it would have been had the
payment been made as scheduled, and the portion of the payment applied to reduce
the unpaid principal balance will be correspondingly less. In either case, the
borrower pays a fixed monthly installment until the final scheduled payment
date, at which time the amount of the final installment is increased or
decreased as necessary to repay the then outstanding principal balance.
In the event of the prepayment in full (voluntarily or by acceleration) of
a Rule of 78's Receivable, under the terms of the motor vehicle retail
installment sale contract, a "refund" or "rebate" will be made to the borrower
of the portion of the total amount of payments then due and payable under such
motor vehicle retail installment sale contract allocable to "unearned" add-on
interest, calculated in accordance with a method equivalent to the Rule of 78's
unless otherwise provided by law. If a Simple Interest Receivable is prepaid,
rather than receive a rebate, the borrower is required to pay interest only to
the date of prepayment. The amount of a rebate under a Rule of 78's Receivable
generally will be less than the amount of a rebate on an Actuarial Receivable
and generally will be less than the remaining scheduled payments of interest
that would have been due under a Simple Interest Receivable for which all
payments were made on schedule.
Each Trust will account for the Rule of 78's Receivables as if such
Receivables were Actuarial Receivables. Amounts received upon prepayment in full
of a Rule of 78's Receivable in excess of the then outstanding Principal Balance
of such Receivable and accrued interest thereon (calculated pursuant to the
actuarial method) will not be paid to Noteholders or passed through to
Certificateholders but will be paid to the Servicer as additional servicing
compensations.
Information with respect to the Receivables held by each Trust will be set
forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition, distribution by APR, states of origination and
portion secured by new and used automobiles, light trucks and vans.
DELINQUENCIES, CHARGE-OFF POLICIES AND NET LOSSES
Certain information concerning TMS Auto Finance's delinquency and loss
experience with respect to its portfolio of retail installment sale contracts
for new and used automobiles, light trucks and vans acquired pursuant to its
Contract Acquisition Program (which may include receivables previously sold
which are serviced by TMS Store Auto Finance) will be set forth in the related
Prospectus Supplement.
TMS Auto Finance measures delinquency on a contractual basis which
classifies the accounts into 30, 60, 90 and 120+ categories based on monthly
payment cycles elapsed from the date a payment is due under the motor vehicle
retail installment sale contract (the "due date"). Installment payments
must equal or exceed 90% of the scheduled payment due, after application of any
portion of such installment payment necessary to satisfy any prior shortfalls,
for a contract to be considered current.
Collection activities with respect to delinquent motor vehicle retail
installment sale contracts generally begin five (5) days after the due date for
first payment defaults, and ten (10) days after the due date for all subsequent
delinquencies if the payment has not been received. TMS Auto Finance uses an
automated system of monitoring delinquencies, which management utilizes to
categorize delinquent accounts into different priorities of collection activity,
based on the level of delinquency of each account.
TMS Auto Finance's collectors are assigned to specific delinquent accounts
and attempt to contact the delinquent borrower by telephone, letter, or field
contact based on the duration of the delinquency and history of the account.
Repossession procedures typically begin when a motor vehicle retail installment
sale contract becomes forty-five (45) days delinquent. Repossession is carried
out by independent contractors in conformity with specific procedures adopted by
TMS Auto Finance.
TMS Auto Finance's current policy is generally to charge-off a contract on
the date on which the contract becomes 150 days delinquent or, if the motor
vehicle securing the delinquent contract is repossessed, to charge-off the
contract on the earlier of the date on which the contract becomes 150 days
delinquent or the date on which the motor vehicle is sold and the deficiency, if
any, is determined (in which case the amount of the deficiency is charged-off).
Monies subsequently received, if any, on charged-off accounts are recognized as
recoveries.
TMS Auto Finance follows specific procedures with respect to extensions of
the contract maturity date. Generally, an extension requires the demonstration
of financial difficulties based on extraordinary circumstances and the approval
of management. In addition, contracts are not rewritten unless TMS Auto Finance
is mandated to do so in accordance with state or federal law.
Each applicant for a motor vehicle retail installment sale contract is
required to obtain insurance with respect to the motor vehicle being financed.
The continued maintenance of insurance is tracked, but TMS Auto Finance does not
currently force place insurance. TMS Auto Finance does, however, currently have
lender's comprehensive single interest insurance coverage which generally covers
losses due to physical damage, nonfiling and skips in the event that the
insurance coverage maintained by a motor-vehicle owner is terminated. If so
specified in the related Prospectus Supplement, TMS Auto Finance or any
subsequent servicer may force place insurance. In such event, certain amounts in
respect of a Receivable as to which insurance has been forced placed after the
applicable Cutoff Date or Subsequent Cutoff Date, as applicable, may not be
property of the Trust and may be payable to TMS Auto Finance to the extent
specified in the related Prospectus Supplement.
YIELD AND PREPAYMENT CONSIDERATIONS
Interest paid on the Receivables will be passed through or paid, as the
case may be as specified in the related Prospectus Supplement, to
Securityholders on each Distribution Date set forth in the related Prospectus
Supplement, in an amount equal to one-twelfth of the applicable annual
Pass-Through Rate applied to the applicable Certificate Balance or the
applicable annual Interest Rate on the applicable Note Balance as of the date
specified in the Prospectus Supplement. In the event of prepayments on
Receivables, Securityholders will nonetheless be entitled to receive interest
for the full month in which such prepayment occurs.
All the Receivables are generally prepayable at any time. If prepayments
are received on the Receivables, the actual weighted average life of the
Receivables may be shorter than the scheduled weighted average life (i.e., the
weighted average life assuming that payments will be made as scheduled, and that
no prepayments will be made). (For this purpose, the term "prepayments" also
includes liquidations due to default, as well as receipt of proceeds from credit
life, credit disability, and casualty insurance policies.) Weighted average life
means the average amount of time during which each dollar of principal on a
Receivable is outstanding. The payment characteristics of the Receivables held
by a Trust will be specified in the related Prospectus Supplement.
The rate of prepayments on the Receivables may be influenced by a variety
of economic, social, and other factors, including the fact that an Obligor may
not sell or transfer a Financed Vehicle without the consent of the Servicer. TMS
Auto Finance commenced operations in January 1995. Consequently, TMS Auto
Finance has limited historical experience with respect to prepayments, and has
not as of the date of this Prospectus prepared data on prepayment rates. TMS
Auto Finance can make no prediction as to the actual prepayment rates that will
be experienced on the Receivables. TMS Auto Finance, however, believes that the
actual rate of prepayments will result in a substantially shorter weighted
average life than the scheduled weighted average life of the Receivables. Any
reinvestment risks resulting from a faster or slower incidence of prepayment of
Receivables will be borne by the Securityholders of the related Trust. See
"Description of the Purchase Agreements and the Trust Documents - Termination"
regarding (i) the Servicer's option to purchase all of the Receivables of a
Trust as of the last day of any month in which the Pool Balance of such Trust at
the close of business on the last day of any Monthly Period is 10% (or such
other percentage specified in the related Prospectus Supplement) or less of the
Original Pool Balance (calculated after giving effect to the principal balance
of any Subsequent Receivables as of their respective Subsequent Cutoff Dates)
and (ii) the sale of the Receivables if so specified in the related Prospectus
Supplement if satisfactory bids for the purchase of the Receivables are
received. See "Description of the Purchase Agreements and Trust Documents -
Insolvency Event" if the Trust is not a grantor trust, for the sale of the
Receivables upon the occurrence of an Insolvency Event with respect to the
Affiliated Purchaser.
Since the rate of payment of principal on the Receivables will depend on
future events and a variety of other factors, no assurance can be given as to
such rate or the rate of principal prepayments. The extent to which the yield to
maturity of a class of Securities may vary from the anticipated yield may depend
upon the degree to which it is purchased at a discount or premium, and the
degree to which the timing of payments thereon is sensitive to prepayments,
liquidations and purchases of the Receivables. Further, an investor should
consider the risk that, in the case of any class of Securities purchased at a
discount, a slower than anticipated rate of principal payments (including
prepayments) on the Receivables could result in an actual yield to such investor
that is lower than the anticipated yield and, in the case of a class of
Securities purchased at a premium, a faster than anticipated rate of principal
payments on the Receivables could result in an actual yield to such investor
that is lower than the anticipated yield.
CERTIFICATE AND NOTE FACTORS AND TRADING INFORMATION
The "Certificate Factor" for each class of Certificates
will be a seven-digit decimal which the Servicer will compute each month
indicating the Certificate Balance, as of the close of business on the
Distribution Date as specified in the related Prospectus Supplement in that
month as a fraction of the respective original outstanding principal balances of
all of the Certificates of such series. The Certificate Factor will not change
as a result of the addition of Subsequent Receivables. The "Note Factor"
for each class of Notes, if any, will be a seven-digit decimal which the
Servicer will compute each month indicating the remaining outstanding principal
balance with respect to such Notes as of each Payment Date as specified in the
related Prospectus Supplement as a fraction of the original outstanding
principal balance of such class of Notes. Each Certificate Factor and each Note
Factor will be 1.0000000 as of the Initial Cutoff Date for such series;
thereafter, the Certificate Factor and the Note Factor will decline to reflect
reductions in the Certificate Balance of the applicable class of Certificates
and the Note Factor will decline to reflect reductions in the outstanding
principal balance of the applicable class of Notes, as the case may be, as a
result of scheduled payments collected, prepayments and liquidations of the
Receivables (and also as a result of a prepayment arising from application of
amounts on deposit in the Pre-Funding Account). The amount of a
Certificateholder's pro rata share of the Certificate Balance for the related
class of Certificates can be determined on any date by multiplying the original
denomination of the holder's Certificate by the applicable Certificate Factor as
of the close of business on the most recent Distribution Date. The amount of a
Noteholder's pro rata share of the aggregate outstanding principal balance of
the applicable class of Notes can be determined by multiplying the original
denomination of such Noteholder's Note by the then applicable Note Factor.
Pursuant to each Trust and pursuant to the related Trust Documents, the
Securityholders thereunder will be entitled to receive monthly reports
concerning the payments received on the Receivables, additions of Subsequent
Receivables, if any, and the reduction in the Pre-Funded Amount, if any, the
Certificate Balance, the Note Balance, the Certificate Factor or Certificate
Factors for each class of Certificates, the Note Factor or Note Factors for each
class of Notes and various other items of information with respect to such
series. Securityholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Certain Information Regarding the Securities Statements to
Securityholders."
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of each series
of Securities will be applied to the purchase of Receivables from TMS Auto
Finance and, if specified in the related Prospectus Supplement, to the deposit
of the Pre-Funded Amount, if any, in the Pre-Funding Account and/or to provide
for other forms of credit enhancement specified in the related Prospectus
Supplement.
THE SELLER
The Seller, a wholly-owned subsidiary of the Representative, was
incorporated in the State of Delaware in July 1995. The Seller was organized for
limited purposes, which include purchasing receivables from TMS Auto Finance and
transferring such receivables to third parties and any activities incidental to
and necessary or convenient for the accomplishment of such purposes. The
principal executive offices of the Seller are located at 1625 West North Market
Blvd., Suite 210, Sacramento, California 95834. The telephone number of such
offices is (916) 928-4400.
The Seller has taken and will take steps in structuring the transactions
contemplated hereby and in the related Prospectus Supplement that are intended
to make it unlikely that the voluntary or involuntary application for relief by
TMS Auto Finance, under any Insolvency Law will result in the consolidation of
the assets and liabilities of the Seller with those of TMS Auto Finance. These
steps include the creation of the Seller as a separate, limited-purpose
subsidiary pursuant to Articles of Incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the unanimous affirmative vote of all of its directors).
The Seller's Articles of Incorporation include a provision that requires the
Seller to have at least one director who qualifies under the Articles of
Incorporation as an "Independent Director."
If, notwithstanding the foregoing measures a court concluded that the
assets and liabilities of the Seller should be consolidated with the assets and
liabilities of TMS Auto Finance in the event of the application of any
Insolvency Law to TMS Auto Finance or a filing were made under any Insolvency
Law by or against the Seller, or if an attempt were made to litigate any of the
foregoing issues, delays in the distributions on the Securities (and possible
reductions in the amount of such distributions) could occur.
The Seller will also take certain steps in structuring the transactions
contemplated hereby and in the related Prospectus Supplement to help ensure that
an Insolvency Event with respect to the Affiliated Purchaser for a Trust will
not occur. These steps include the creation of the Affiliated Purchaser as a
separate, limited purpose corporation pursuant to articles of incorporation
containing certain limitations (including restrictions on the nature of the
Affiliated Purchaser's business and a restriction on the Affiliated Purchaser's
ability to commence a voluntary case or proceeding under any Insolvency Law
without the prior affirmative unanimous vote of its directors). However, there
can be no assurance that the activities of the Affiliated Purchaser would not
result in an Insolvency Event.
TMS AUTO FINANCE
TMS Auto Finance was incorporated in October 1994. Its executive offices
are located at 1625 West North Market Blvd., Suite 210, Sacramento, California
95834, and its telephone number is (916) 928-4400.
GENERAL
TMS Auto Finance is an automotive finance company engaged primarily in the
indirect financing (by the purchase of motor vehicle retail installment sale
contracts from automotive dealers) of automotive purchases by individuals with
non-prime credit. The non-prime market segment is comprised of individuals who
are deemed to be relatively high credit risks due to various factors, including,
among other things, the manner in which they have handled previous credit, the
limited extent of their prior credit history and/or their limited financial
resources. Because of the greater credit risk associated with non-prime motor
vehicle retail installment contracts, the interest rates charged on such
contracts are generally higher than those rates charged on prime motor vehicle
retail installment sale contracts. The range of APRs of the Receivables will be
set forth in the related Prospectus Supplement. There can be no assurance,
however, that the interest rates on the Receivables in a particular pool will be
sufficient to cover losses on other Receivables in such pool.
TMS Auto Finance serves as an alternative source of financing to
automotive dealers by offering them the opportunity for increased sales to
customers who typically do not qualify for financing by the automotive dealers'
traditional financing sources. As of September 30, 1996, TMS Auto Finance does
business with approximately 4,729 franchised new car dealers or independent used
car dealers in the following 39 states: Alabama, Arizona, California, Colorado,
Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky,
Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New
Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,
Texas, Utah, Virginia, Washington, Wisconsin and Wyoming. From time to time, TMS
Auto Finance may determine to commence business in additional jurisdictions or
cease doing business in any state in which it presently does business. The
related Prospectus Supplement will specify the geographic distribution of the
specific Receivables included in the related Trust. In certain cases TMS Auto
Finance may effect purchases of non-prime motor vehicle retail installment sale
contracts, or may hold and effect ownership of contracts by means of a
wholly-owned subsidiary. The related Prospectus Supplement will specify whether
any specific Receivables included in the related Trust have been so acquired or
held and the reasons a subsidiary was used by Servicer.
TMS Auto Finance intends to offer to consumers directly loans for the
purchase of automobiles. The related Prospectus Supplement will disclose whether
any Receivables to be sold to a Trust include loans originated by TMS Auto
Finance. Unless the related Prospectus Supplement provides otherwise, the
underwriting guidelines to be applied by TMS Auto Finance when originating
automobile loans will be the same as those it applies when reviewing credit
applications received from Dealers. Similarly, unless otherwise specified in the
related Prospectus Supplement, with respect to any Receivable originated
directly by TMS Auto Finance or purchased from a third-party lender, TMS Auto
Finance's security interest will be noted on the related vehicle's certificate
of title and such Receivable will be serviced in the same manner as Receivables
originated by Dealers.
TMS Auto Finance has developed certain procedures and controls to
investigate and analyze each credit applicant in an effort to eliminate those
applicants whose credit characteristics indicate too great a probability of
loss. This procedure includes an investigation, verification, and evaluation
process of credit bureau reports as well as the general credit information
provided by both dealer and applicant. In addition, TMS Auto Finance uses
collection procedures and systems that are designed to ensure that the customers
clearly understand their credit obligations. For example, TMS Auto Finance uses
a monthly billing system in order to continually remind borrowers of their
monthly payment obligations and has established a "welcoming" process that
educates each borrower, both verbally and in writing, of its obligations.
CONTRACT ACQUISITION PROGRAM
TMS Auto Finance's Contract Acquisition Program is designed to acquire
automotive contracts through the purchase of such contracts from franchised new
and used car dealers and independent used car dealers.
INDIRECT FINANCING
TMS Auto Finance's operations are currently centered on the indirect
financing of automotive purchases by individuals with non-prime credit. This
program is targeted to franchised new car dealers and independent used car
dealers (collectively, "Dealers") in certain markets within the United
States which are selected based on management's assessment of the size and
growth potential of the non-prime market, the economic vitality of the market,
the presence of an active new and used car market and the availability of
experienced branch managers in such market. These markets currently include
Montgomery, Alabama, Phoenix, Arizona, Anaheim, California, Encino, California,
Fresno, California, Ontario, California, Pleasanton, California, Sacramento,
California, San Diego, California, Santa Clara, California, Ventura, California,
Visalia, California, Denver, Colorado, Orlando, Florida, Pensacola, Florida,
Tampa, Florida, Atlanta, Georgia, Norcross, Georgia, Chicago, Illinois,
Indianapolis, Indiana, Kansas City, Kansas, Louisville, Kentucky, Baltimore,
Maryland, Boston, Massachusetts, Detroit, Michigan, St. Louis, Missouri, Las
Vegas, Nevada, Reno, Nevada, Albuquerque, New Mexico, Charlotte, North Carolina,
Raleigh, North Carolina, Columbus, Ohio, Oklahoma City, Oklahoma, Portland,
Oregon, Pittsburgh, Pennsylvania, Columbia, South Carolina, Nashville,
Tennessee, Dallas/Ft. Worth, Texas, Houston, Texas, San Antonio, Texas, Salt
Lake City, Utah, Seattle, Washington and Milwaukee, Wisconsin. This service
offers Dealers the opportunity for increased vehicle sales to customers who
typically do not qualify for financing by Dealers' traditional financing
sources.
DEALER SOLICITATION
TMS Auto Finance solicits business from Dealers through its marketing
representatives. TMS Auto Finance's marketing representatives identify and
target both franchised new car dealers and independent used car dealers. Once
selected, if a Dealer is interested in TMS Auto Finance's financing program, it
and TMS Auto Finance enter into a non-exclusive written dealer agreement (a
"Dealer Agreement"). TMS Auto Finance's Dealer Agreements
generally provide that contracts are sold by the Dealer to TMS Auto Finance
"without recourse" to the Dealer, except in limited circumstances including,
among others, that (i) the financed vehicle is not properly registered showing
TMS Auto Finance as lienholder; (ii) unless otherwise specified in the related
motor vehicle retail installment sale contract, the full down payment specified
in the contract was not received by the Dealer in cash; (iii) certain
representations and warranties by the Dealer regarding the contract, the
financed vehicle, the contract process and manner of sale are breached or
untrue; and (iv) the Dealer has failed to comply with applicable law.
TMS Auto Finance's representatives train Dealers' personnel in TMS Auto
Finance's finance programs. This training is continuous since dealerships
generally experience a relatively high degree of personnel turnover. The
training provided by TMS Auto Finance is designed to assist Dealers in
identifying consumers who will qualify for financing by TMS Auto Finance and
structuring transactions that meet TMS Auto Finance's requirements. TMS Auto
Finance's representatives generally reside in their assigned market territories
to facilitate the servicing of their respective Dealers.
In the event that an individual elects to finance the purchase through a
Dealer, the Dealer will submit a customer's credit application to TMS Auto
Finance and other financing sources for a review of the customer's credit
worthiness and proposed transaction terms. Such reviews generally take into
account, among other things, the individual's credit history and capacity to
pay, residence and job stability. After reviewing the credit application, each
finance source will notify the Dealer whether it is willing to purchase the
contract and, if so, under what conditions. If more than one finance source has
offered to purchase the contract, the Dealer typically will select the source
based on an analysis of the "buy rate," or the interest rate, discounts, fees,
participation, and other terms and conditions stipulated by the finance source.
CREDIT EVALUATION PROCEDURES
TMS Auto Finance has developed processing procedures and controls
specifically designed to support its evaluation process of non-prime credit
applicants. This process consists of an evaluation of credit bureau reports in
order to eliminate individuals whose credit quality is deteriorating, suggests
too great a probability of default or whose credit experience is too limited for
TMS Auto Finance to assess the probability of performance. TMS Auto Finance will
also require verification of certain applicant and/or Dealer provided
information prior to making its credit decision. This verification process in
many instances requires submission of supporting documentation and is performed
solely by Servicer personnel.
After receiving the applicant's credit application and extracting
information from the credit bureau reports, the application and the proposed
transaction are reviewed on the basis of TMS Auto Finance's credit and
transaction structure criteria and the credit decision is made. This decision
may be to approve the application, approve the application with conditions or
decline the application. The credit analyst documents the decision and the
Dealer is notified by facsimile transmission.
LOSS EXPOSURE MANAGEMENT
TMS Auto Finance believes it has designed its finance programs to limit
the loss exposure on each transaction. The degree of exposure in any transaction
is a function of (i) determining the customer's intent to pay; (ii) determining
the customers ability to pay; (iii) the extent of credit granted compared to the
value of the automobile; and (iv) the possibility of physical damage to the
automobile. TMS Auto Finance seeks to control loss exposure by (i) careful
analysis of the applicant's credit history; (ii) determining whether the
applicant has sufficient disposable income to meet existing obligations,
including the obligation resulting from the proposed transaction; (iii) limiting
the credit it is willing to extend based upon its assessment of the value of the
underlying collateral and the applicant's other credit characteristics; and (iv)
requiring physical damage insurance to be maintained at all times to protect its
financial interest. The continued maintenance of insurance is tracked, but TMS
Auto Finance does not currently force place insurance. TMS Auto Finance
currently maintains a lender's comprehensive single interest insurance policy
which generally covers losses due to physical damage, nonfiling and skips in the
event that insurance coverage maintained by a motor vehicle owner is terminated.
Upon purchase of a motor vehicle retail installment sale contract, TMS
Auto Finance acquires a security interest in the vehicle financed. All contracts
purchased by TMS Auto Finance from Dealers through its Contract Acquisition
Program are fully amortizing and provide for equal payments over the term of the
contract (typically 24 to 72 months) other than the final payment which may be
minimally different. The portions of such payments allocable to principal and
interest are, for payoff and deficiency purposes, determined in accordance with
the law of the state in which the contract was originated. In the event that
state law provides for more than one method of allocating principal and
interest, the terms of the acquired installment contract are applied. Unless the
related Prospectus Supplement provides otherwise, any loans originated by TMS
Auto Finance or acquired from third-party lenders will have comparable payment
terms.
CONTRACT PROCESSING, PURCHASE, SERVICING AND ADMINISTRATION
Upon submission by a Dealer of a motor vehicle retail installment sale
contract and related documentation, TMS Auto Finance completes a series of
processes and procedures which are designed to (i) substantiate the accuracy of
information critical to TMS Auto Finance's original credit decision; (ii) verify
that the contract submitted by the Dealer complies with both the conditions
under which the credit approval was granted and TMS Auto Finance's transaction
structure criteria; and (iii) confirm that the documentation complies with TMS
Auto Finance's loss management requirements. These processes and procedures
include the verification of employment, income, collateral and insurance prior
to the contract being released for purchase. The customer also may be contacted
to confirm delivery of the vehicle and the terms of the transaction.
Upon a contract being released for purchase, TMS Auto Finance prepares and
issues funds to the Dealer in the appropriate amount, and initiates a welcoming
process through which TMS Auto Finance begins to attempt to educate borrower
both verbally and in writing about their financial obligations upon the purchase
of their contract. This process is designed to ensure that borrowers clearly
understand their credit obligations, including their responsibility to maintain
insurance coverage on the financed vehicle. The education process includes an
initial acknowledgment of the contract purchase, which includes the first
monthly billing statement, which thereafter is mailed approximately 15 days
prior to each payment due date. The acknowledgment is followed by a welcome
letter from the insurance tracking vendor that instructs the borrower regarding
the need to maintain insurance as well as the address to send the policy to.
Five days prior to the first payment due date, TMS Auto Finance contacts the
borrower to determine if the first statement was received and to educate the
borrower regarding where to make payments. If the first payment is not received
by approximately the fifth day after the due date, the Collections Department
immediately begins calling the borrower until the payment is received or some
other servicing action is taken.
TMS Auto Finance's servicing and administration activities relate to the
administration and collection of the contracts and have been specifically
tailored to the unique challenges of non-prime credits. Through such services,
TMS Auto Finance (i) collects payments; (ii) accounts for and posts all payments
received; (iii) responds to borrower inquiries; (iv) takes all necessary action
to maintain the security interest granted in the financed vehicle; (v)
investigates delinquencies and communicates with the borrower to obtain timely
payments; (vi) reports tax information to the borrower; (vii) monitors the
contract and its related collateral; and (viii) when necessary, repossesses and
disposes of the financed vehicle.
TMS Auto Finance currently utilizes a monthly billing statement system
(rather than payment coupon books) to remind borrowers of their monthly payment
obligations. This system also serves as an early warning mechanism in the event
the borrower has failed to notify TMS Auto Finance of an address change. TMS
Auto Finance also contacts borrowers substantially earlier than is customary in
the industry, for first payment delinquencies commencing five days after the
borrower's due date and ten days after the due date for other payments (as
opposed to the more conventional initial contact between the 17th and the 21st
day) and continuing until payment has been received. TMS Auto Finance believes
that early and frequent contact with the borrower reinforces the individual's
obligation and TMS Auto Finance's expectation for timely payment and serves to
expedite payments.
DELINQUENCY CONTROL AND COLLECTION STRATEGY
TMS Auto Finance's collection personnel generally review any account that
reaches fifteen (15) days delinquent to assess the collection efforts to date
and to refine, if necessary, the collection strategy. TMS Auto Finance's
collection personnel, together with senior management, generally will design a
collection strategy that includes a specific deadline within which the
obligation must be collected. Accounts that have not been collected during such
period are again reviewed, and, unless there are specific circumstances which
warrant further collection efforts, the account is assigned to outside agencies
for repossession of the financed vehicle. Repossessed vehicles are generally
resold by TMS Auto Finance through wholesale auctions, which are attended
principally by Dealers. Regardless of the actions taken or circumstances
surrounding a specific delinquent account, generally any account which reaches
150 days of delinquency is charged-off and the borrower is pursued, subject to
legal limitations, for both the collateral and the deficiency.
Policies for charging-off an account do not differ based upon whether a
receivable is owned by TMS Auto Finance or sold to a Trust. Repossession losses,
if any, are recognized upon the sale of the financed vehicle and receipt of sale
proceeds. The proceeds of resale of repossessed financed vehicles generally will
be applied first to the expenses of repossession and resale and then to the
satisfaction of the indebtedness on the related Receivable.
THE MONEY STORE
The Money Store Inc., a New Jersey corporation ("The Money Store"),
is a financial services company engaged, through its subsidiaries, in
the business of originating, purchasing, selling and servicing consumer and
commercial loans of specified types and offering related services. Loans
originated by The Money Store and its subsidiaries primarily consist of mortgage
loans, loans (the "SBA Loans") guaranteed in part by the United States
Small Business Administration (the "SBA") and government guaranteed student
loans.
Since 1967, The Money Store and its subsidiaries have been active in the
development of the residential home equity lending industry in the United
States. In 1979, The Money Store and its subsidiaries began to originate SBA
Loans and, based upon statistics compiled by the SBA, The Money Store believes
that during each of the last 13 SBA fiscal years it originated a greater
principal amount of SBA Loans than any other originator of such loans in the
United States. In 1984, The Money Store entered into the government guaranteed
student loan origination market.
For the year ended December 31, 1995 and the six months ended June 30,
1996, The Money Store and its subsidiaries originated or purchased approximately
$3.8 billion and $2.5 billion of loans, respectively. Of those loans,
approximately 75% and 76%, respectively, by principal amount were home equity
loans, approximately 12% and 11%, respectively, by principal amount were SBA
Loans, approximately 10% and 6%, respectively, by principal amount were
government guaranteed student loans and approximately 3% and 7%, respectively,
by principal amount were auto loans. The business strategy of The Money Store
has been to identify and pursue niche lending opportunities which management
believes have had widespread unsatisfied demand.
At June 30, 1996, The Money Store and its subsidiaries operated out of 191
branch locations in 50 states, the District of Columbia and the Commonwealth of
Puerto Rico.
The Money Store executive offices are located at 3301 C Street, Suite
100-A, Sacramento, California 95816 and 2840 Morris Avenue, Union, New Jersey
07083. The offices' respective telephone numbers are (916) 446-5000 and (908)
686-2000.
THE CERTIFICATES
GENERAL
With respect to each Trust, one or more classes of Certificates of a given
series will be issued pursuant to Trust Documents to be entered into among the
Seller, the Servicer, the Owner Trustee, the Indenture Trustee, if any, and any
other party identified in the related Prospectus Supplement, forms of which have
been filed as exhibits to the Registration Statement of which this Prospectus
forms a part. The following summary does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all of the
material provisions of such forms of Trust Documents.
Unless otherwise specified in the related Prospectus Supplement, each
class of Certificates will initially be represented by a single Certificate
registered in the name of Cede & Co., the nominee of DTC (together with any
successor depository selected by the Seller, the "Depository"). See
"Certain Information Regarding the Securities - Book-Entry Registration." Unless
higher denominations are specified in the related Prospectus Supplement, the
Certificates evidencing interests in a Trust will be available for purchase in
denominations of $1,000 initial principal amount and integral multiples thereof,
except that one Certificate evidencing an interest in such Trust may be issued
in a denomination that is less than $1,000 initial principal amount.
Certificates may be transferred or exchanged without the payment of any service
charge other than any tax or governmental charge payable in connection with such
transfer or exchange. The Owner Trustee will initially be designated as the
registrar for the Certificates.
DISTRIBUTIONS OF INTEREST AND PRINCIPAL
The timing and priority of distributions, seniority, allocations of loss,
Pass-Through Rate and amount of or method of determining distributions with
respect to principal and interest (or, where applicable, with respect to
principal only or interest only) on the Certificates of any series will be
described in the related Prospectus Supplement. Distributions of interest on the
Certificates will be made on the dates specified in the related Prospectus
Supplement (each, a "Distribution Date") and, except to the
extent specified in the related Prospectus Supplement, will be made prior to
distributions with respect to principal. A series may include one or more
classes of Strip Certificates entitled to (i) distributions in respect of
principal with disproportionate, nominal or no interest distribution, or (ii)
interest distributions, with disproportionate, nominal or no distributions in
respect of principal. Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed, variable or adjustable Pass-Through
Rate (and which may be zero for certain classes of Strip Certificates), or any
combination of the foregoing. The related Prospectus Supplement will specify the
Pass-Through Rate for each class of Certificate, or the initial Pass-Through
Rate and the method for determining the subsequent Pass-Through Rate. Interest
on the Certificates will be calculated on the basis of a 360-day year consisting
of twelve 30-day months. Distributions in respect of the Certificates may be
subordinated to all or certain payments in respect of the Notes, if any, to the
extent described in the related Prospectus Supplement. Distributions in respect
of principal of any class of Certificates will be made on a pro rata basis among
all of the Certificateholders of such class.
In the case of a series of Certificates which includes two or more classes
of Certificates, the timing, sequential order, priority of payment or amount of
distributions in respect of principal, and any schedule or formula or other
provisions applicable to the determination thereof, of each such class shall be
as set forth in the related Prospectus Supplement.
In addition, if the related Prospectus Supplement so provides, payments of
principal on one or more classes of Certificates issued by a Trust may be
delayed during the Revolving Period or an Amortization Period to the extent
described in such Prospectus Supplement.
THE NOTES
GENERAL
A series of Securities may include one or more classes of Notes issued
pursuant to the terms of an Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.
Notes will be issued as a part of any series if and as specified in the related
Prospectus Supplement. The following summary does not purport to be complete and
is subject to, and is qualified in its entirety by reference to, all of the
provisions of the Notes and the Indenture, a form of which has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, and
the following summary may be supplemented by the related Prospectus Supplement.
Each class of Notes will initially be represented by a single Note
registered in the name of Cede & Co., the nominee of DTC. See "Certain
Information Regarding the Securities Book-Entry Registration." Notes will be
available for purchase in denominations of $1,000 and integral multiples
thereof. Notes may be transferred or exchanged without the payment of any
service charge other than any tax or governmental charge payable in connection
with such transfer or exchange. The Indenture Trustee will initially be
designated as the registrar for the Notes of any series.
PRINCIPAL AND INTEREST ON THE NOTES
The timing and priority of payment, seniority, allocations of loss,
Interest Rate and amount of or method of determining payments of principal and
interest on the Notes will be described in the related Prospectus Supplement.
The right of holders of any class of Notes to receive payments of principal and
interest may be senior or subordinate to the rights of holders of any class or
classes of Notes of such series, or any class of Certificates, as described in
the related Prospectus Supplement. Except to the extent provided in the related
Prospectus Supplement, payments of interest on the Notes will be made prior to
payments of principal thereon. A series may include one or more classes of Strip
Notes entitled to (i) principal payments with disproportionate, nominal or no
interest payment, or (ii) interest payments with disproportionate, nominal or no
principal payments. Each class of Notes may have a different Interest Rate,
which may be a fixed, variable or adjustable Interest Rate (and which may be
zero for certain classes of Strip Notes), or any combination of the foregoing.
The related Prospectus Supplement will specify the Interest Rate for each class
of Notes, or the initial Interest Rate and the method for determining the
Interest Rate. One or more classes of Notes of a series may be redeemable under
the circumstances specified in the related Prospectus Supplement.
In the case of a series of Securities which includes two or more classes
of Notes, the sequential order and priority of payments in respect of principal
and interest on any of the dates specified for payments in the related
Prospectus Supplement (each, a "Payment Date"), and any schedule or
formula or other provisions applicable to the determination thereof, of each
such class will be set forth in the related Prospectus Supplement.
In addition, if the related Prospectus Supplement so provides, payments of
principal on one or more classes of Notes issued by a Trust may be delayed
during the Revolving Period or an Amortization Period to the extent described in
such Prospectus Supplement.
THE INDENTURE
A form of Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Seller will provide a copy
of the applicable Indenture (without exhibits) upon request to any holder of
Notes issued thereunder.
Modification of Indenture Without Noteholder Consent. With respect to each
Trust, without the consent of the related Noteholders, and with notice to the
applicable Rating Agencies, the Indenture Trustee and the Owner Trustee (on
behalf of such Trust), and with the consent of the third party credit
enhancement provider, if any (so long as no Insurer Default (as defined in the
related Prospectus Supplement) has occurred and is continuing) unless the
related Prospectus Supplement provides otherwise, may enter into one or more
supplemental indentures for any of the following purposes: (i) to correct or
amplify the description of the collateral or add additional collateral; (ii) to
evidence and provide for the assumption of the Note and the Indenture
obligations by a permitted successor to the Trust; (iii) to add additional
covenants for the benefit of the related Noteholders, or to surrender any rights
or power conferred upon the Trust: (iv) to convey, transfer, assign, mortgage or
pledge any property to or with the Indenture Trustee; (v) to cure any ambiguity
or correct or supplement any provision in the Indenture or in any supplemental
indenture; (vi) to evidence and provide for the acceptance of the appointment of
a successor Indenture Trustee or to add to or change any of the provisions of
the Indenture as shall be necessary and permitted to facilitate the
administration by more than one trustee; (vii) to modify, eliminate or add to
the provisions of the Indenture in order to comply with the Trust Indenture Act
of 1939, as amended; and (viii) to add any provisions to, change in any manner,
or eliminate any of the provisions of, the Indenture or modify in any manner the
rights of Noteholders under such Indenture; provided that any action specified
in this clause (viii) shall not, as evidenced by an opinion of counsel,
adversely affect in any material respect the interests of any related
Noteholder.
Modifications of Indenture With Noteholder Consent. With respect to each
Trust, with the consent of the holders representing a majority of the aggregate
principal balance of the outstanding related Notes (a "Note Majority"),
with the consent of the third party credit enhancement provider, if
any (so long as no Insurer Default (as defined in the related Prospectus
Supplement) has occurred and is continuing) unless the related Prospectus
Supplement provides otherwise, and with notice to the applicable Rating
Agencies, the Indenture Trustee may execute a supplemental indenture to add
provisions to change in any manner or eliminate any provisions of, the related
Indenture, or modify in any manner the rights of the related Noteholders.
Without the consent of the third party credit enhancement provider, if any
(so long as no Insurer Default (as defined in the related Prospectus Supplement)
has occurred and is continuing) unless the related Prospectus Supplement
provides otherwise, and the holder of each outstanding related Note affected
thereby, however, no supplemental indenture may: (i) change the due date of any
installment of principal of or interest on any Note or reduce the principal
amount thereof, the interest rate thereon or the redemption price with respect
thereto, change the provisions of the Indenture relating to the application of
collections on or the proceeds of the sale of, the collateral for the Notes to
payment of principal of or interest on the Notes or change any place of payment
where or the coin or currency in which any Note or any interest thereon is
payable, (ii) impair the right to institute suit for the enforcement of certain
provisions of the Indenture regarding payment, (iii) reduce the percentage of
the aggregate principal amount of the outstanding Notes the consent of the
holders of which is required for any such supplemental indenture or the consent
of the holders of which is required for any waiver of compliance with certain
provisions of the Indenture or of certain defaults thereunder and their
consequences as provided for in the Indenture, (iv) modify or alter the
provisions of the Indenture regarding the voting of Notes held by the Trust, the
Seller, an affiliate of either of them or any obligor on the Notes, (v) reduce
the percentage of the aggregate outstanding amount of the Notes the consent of
the holders of which is required to direct the Indenture Trustee on behalf of
the Trust to sell or liquidate the Receivables if the proceeds of such sale
would be insufficient to pay the principal amount and accrued but unpaid
interest on the outstanding Notes, (vi) decrease the percentage of the aggregate
principal amount of the Notes required to amend the sections of the Indenture
which specify the applicable percentage of aggregate principal amount of the
Notes necessary to amend the Indenture or certain other related agreements,
(vii) modify any of the provisions of the Indenture in such manner as to affect
the calculation of the amount of any payment of interest on any Distribution
Date or principal due on any Note on any Distribution Date (including the
calculation of any of the individual components of such calculation) or to
affect the rights of the Noteholders to the benefit of any provision for the
mandatory redemption of the Notes contained in the Indenture or (viii) permit
the creation of any lien ranking prior to or on a parity with the lien of the
Indenture with respect to any of the collateral for the Notes or, except as
otherwise permitted or contemplated in the Indenture, terminate the lien of the
Indenture on any such collateral or deprive the holder of any Note of the
security provided by the lien of the Indenture.
Events of Default; Rights Upon Event of Default. With respect to each
Trust, unless otherwise specified in the related Prospectus Supplement, "Events
of Default" under the Indenture will consist of: (i) a default
for five days or more in the payment of any interest on any Note after the same
becomes due and payable; (ii) a default in the payment of the principal or of
any installment of the principal of any Note when the same becomes due and
payable; (iii) a default in the observance or performance of any covenant or
agreement of the Trust made in the Indenture and the continuation of any such
default for a period of 30 days after notice thereof is given to the Trust by
the Indenture Trustee or to the Trust and the Indenture Trustee by the holders
of at least 25% in aggregate principal amount of the related Notes then
outstanding (or for such longer period, not in excess of 90 days, as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 90 days or less and the Owner Trustee delivers an
officer's certificate to the Indenture Trustee to the effect that the Trust has
commenced, or will promptly commence and diligently pursue, all reasonable
efforts to remedy such default); (iv) any representation or warranty made by the
Trust in the Indenture or in any certificate delivered pursuant thereto or in
connection therewith having been incorrect in a material respect as of the time
made, and such breach not having been cured within 30 days after notice thereof
is given to the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the holders of a least 25% in aggregate principal amount of the Notes
then outstanding (or for such longer period, not in excess of 90 days as may be
reasonably necessary to remedy such default; provided that such default is
capable of remedy within 90 days or less and the Owner Trustee delivers an
officer's certificate to the Indenture Trustee to the effect that the Trust has
commenced, or will promptly commence and diligently pursue, all reasonable
efforts to remedy such default) or (v) certain events of bankruptcy, insolvency,
receivership or liquidation of the Trust. However, the amount of principal due
and payable on any class of Notes on any Payment Date (prior to the final
scheduled Payment Date, if any, for such class) will generally be determined by
the amount available to be deposited in the Note Distribution Account for such
Payment Date. Therefore, the failure to pay principal on a class of Notes
generally will not result in the occurrence of an Event of Default unless such
class of Notes has a final scheduled Payment Date, and then not until such final
scheduled Payment Date for such class of Notes.
Unless otherwise specified in the related Prospectus Supplement, if an
Event of Default should occur and be continuing with respect to the Notes of any
series, the related Indenture Trustee or a Note Majority may declare the
principal of the Notes to be immediately due and payable. Such declaration may
be rescinded by a Note Majority if (i) the Trust has paid to the Indenture
Trustee a sum sufficient to pay all amounts then due with respect to the Notes
(without giving effect to such acceleration) and certain amounts payable to the
Indenture Trustee and (ii) all Events of Default (other than nonpayment of the
principal of the Notes due solely as a result of such acceleration) have been
cured or waived.
Unless otherwise specified in the related Prospectus Supplement, if the
Notes of any series have been declared due and payable following an Event of
Default with respect thereto, the related Indenture Trustee may institute
proceedings to collect amounts due or foreclose on Trust Property, exercise
remedies as a secured party, sell the related Receivables or elect to have the
Trust maintain possession of such Receivables and continue to apply collections
on such Receivables as if there had been no declaration of acceleration. The
Indenture Trustee, however, will be prohibited from selling the related
Receivables following an Event of Default, other than a default in the payment
of any principal or a default for five days or more in the payment of any
interest on any Note, unless (i) the holders of all the outstanding related
Notes consent to such sale; (ii) the proceeds of such sale are sufficient to pay
in full the principal of and the accrued interest on such outstanding Notes at
the date of such sale; or (iii) the Indenture Trustee determines that the
proceeds of the Receivables would not be sufficient on an ongoing basis to make
all payments on the Notes as such payments would have become due if such
obligations had not been declared due and payable, and the Indenture Trustee
obtains the consent of the holders representing 66-2/3% of the aggregate
principal balance of the outstanding related Notes. In the event the Notes are
accelerated and the Receivables are sold, no distributions will be made on the
Certificates until all of the interest on and principal of the Notes has been
paid in full. In such event, all the funds, if any, on deposit in any reserve
account or received from another source of credit support will be available to
first pay interest on and principal of the Notes.
Subject to the provisions of the Indenture relating to the duties of the
Indenture Trustee, if an Event of Default occurs and is continuing with respect
to a series of Notes, the Indenture Trustee will be under no obligation to
exercise any of the rights or powers under the Indenture at the request or
direction of any of the holders of such Notes, if the Indenture Trustee
reasonably believes it will not be adequately indemnified against the costs,
expenses and liabilities which might be incurred by it in complying with such
request. Subject to the provisions for indemnification and certain limitations
contained in the Indenture, a Note Majority in a series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Indenture Trustee with respect to the Notes or exercising any
trust or power conferred on the Indenture Trustee and a Note Majority may, in
certain cases, waive any default with respect thereto, except a default in the
payment of principal or interest or a default in respect of a covenant or
provision of the Indenture that cannot be modified without the waiver or consent
of all of the holders of such outstanding Notes.
No holder of a Note of any series will have the right to institute any
proceeding with respect to the related Indenture unless (i) such holder
previously has given to the Indenture Trustee written notice of a continuing
Event of Default, (ii) the holders of not less than 25% in principal amount of
the outstanding Notes of such series have made written request of the Indenture
Trustee to institute such proceeding in its own name as Indenture Trustee, (iii)
such holder or holders have offered the Indenture Trustee reasonable indemnity,
(iv) the Indenture Trustee has for 60 days failed to institute such proceeding,
(v) no direction inconsistent with such written request has been given to the
Indenture Trustee during such 60-day period by the holders of a majority in
principal amount of such outstanding Notes, and (vi) in the case of a series of
Notes with respect to which a guaranty insurance policy has been issued, unless
otherwise specified in the related Prospectus Supplement, an Insurer Default (as
defined in the related Prospectus Supplement) has occurred and is continuing.
If an Event of Default occurs and is continuing and if it is known to the
Indenture Trustee, the Indenture Trustee will mail to each Noteholder notice of
the Event of Default within 90 days after it occurs. Except in the case of a
failure to pay principal of or interest on any Note, the Indenture Trustee may
withhold the notice if and so long as it determines in good faith that
withholding the notice is in the interests of the Noteholders.
In addition, each Indenture Trustee and the related Noteholders, by
accepting the related Notes, will covenant that they will not at any time
institute against the related Trust, the Seller and the Affiliated Purchaser any
bankruptcy, reorganization or other proceeding under any federal or state
bankruptcy or similar law.
No recourse may be taken, directly or indirectly, with respect to the
obligations of a Trust, the Seller, the Servicer, the Affiliated Purchaser, the
Owner Trustee or the Indenture Trustee on the related Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Affiliated Purchaser, the Indenture
Trustee or the Owner Trustee in its individual capacity or (ii) any partner,
owner, beneficiary, agent, officer, director, employee or agent of the Seller,
the Servicer, such Trust, the Affiliated Purchaser, the Owner Trustee or the
Indenture Trustee or of any successor or assignee of the Seller, the Servicer,
the Affiliated Purchaser, the Indenture Trustee or the Owner Trustee in its
individual capacity, except as any such person may have expressly agreed (it
being understood that the Indenture Trustee and the Owner Trustee will have no
such obligations in their individual capacity) and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Certain Covenants. Each Indenture will provide that the related Trust may
not consolidate with or merge into any other entity, unless (i) the entity
formed by or surviving such consolidation or merger is organized under the laws
of the United States, any state or the District of Columbia, (ii) such entity
expressly assumes the Trust's obligation to make due and punctual payments upon
the Notes and the performance or observance of every agreement and covenant of
the Trust under the Indenture, (iii) no Default or Event of Default shall have
occurred and be continuing immediately after such merger or consolidation, (iv)
none of the applicable Rating Agencies, after 10 days' prior notice, shall have
notified the Seller, the Servicer or the Trust in writing that such transaction
will result in a reduction or withdrawal of the then current ratings of the
Notes, (v) unless the related Prospectus Supplement provides otherwise, the
third party credit enhancement provider, if any, has consented to such merger or
consolidation and no Insurer Default (as defined in the related Prospectus
Supplement) has occurred and is continuing, (vi) the Trust has received an
opinion of counsel to the effect that such transaction would have no material
adverse Federal or state tax consequence to the Trust or to any
Certificateholder or Noteholder, (vii) any action necessary to maintain the lien
and security interest created by the Indenture has been taken and (viii) the
Trust has delivered to the Indenture Trustee an officers' certificate of the
Trust and an opinion of counsel each stating that such transaction and the
supplemental indenture executed in connection with such transaction comply with
the Indenture and that all conditions precedent relating to the transaction have
been complied with (including any filing required by the Exchange Act).
Also, each Trust may not convey or transfer all or substantially all its
properties or assets to any other entity, unless (i) the entity that acquires
the assets of the Trust (A) agrees that all right, title and interest conveyed
or transferred shall be subject and subordinate to the rights of Noteholders,
(B) unless otherwise agreed, expressly agrees to indemnify, defend and hold
harmless the Trust against and from any loss, liability or expense arising under
or related to the Indenture and the Notes, (C) expressly agrees to make all
filings with the Securities and Exchange Commission (and any other appropriate
entity) required by the Exchange Act in connection with the Notes and (D) is
organized under the laws of the United States or any state; and (ii) the
criteria specified in clauses (ii) through (vii) of the preceding paragraph have
been complied with.
Each Trust will not, among other things, (i) except as expressly permitted
by the Indenture, the Purchase Agreement, the Trust Documents or certain related
documents for such Trust (collectively, the "Related Documents"),
sell, transfer, exchange or otherwise dispose of any of the assets
of the Trust, (ii) claim any credit on or make any deduction from the principal
and interest payable in respect of the related Notes (other than amounts
withheld under the Internal Revenue Code of 1986, as amended, or applicable
state law) or assert any claim against any present or former holder of such
Notes because of the payment of taxes levied or assessed upon the collateral for
the Notes, (iii) except as contemplated by the Related Documents, dissolve or
liquidate in whole or in part, (iv) permit the validity or effectiveness of the
related Indenture to be impaired or permit any person to be released from any
covenants or obligations with respect to the related Notes under such Indenture
except as may be expressly permitted thereby, (v) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance to be created on
or extend to or otherwise arise upon or burden the collateral for the Notes or
any part thereof, or any interest therein or proceeds thereof except as
expressly permitted by the Related Documents or (vi) permit the lien of the
Indenture not to constitute a valid first priority security interest in the
collateral for the Receivables.
No Trust may engage in any activity other than as specified under the
section of the related Prospectus Supplement entitled "The Trust." No Trust will
incur, assume or guarantee any indebtedness other than indebtedness incurred
pursuant to the related Notes and the related Indenture or otherwise in
accordance with the Related Documents.
Annual Compliance Statement. Each Trust will be required to
file annually with the related Indenture Trustee a written
statement as to the fulfillment of its obligations under the
Indenture.
Indenture Trustee's Annual Report. The Indenture Trustee will be required
to mail each year to all related Noteholders a brief report relating to, among
other things, its eligibility and qualification to continue as Indenture Trustee
under the related Indenture, any amounts advanced by it under the Indenture, the
amount, interest rate and maturity date of certain indebtedness owing by the
Trust to the Indenture Trustee in its individual capacity, the property and
funds physically held by the Indenture Trustee as such and any action taken by
it that materially affects the Notes and that has not been previously reported.
Satisfaction and Discharge of Indenture. The Indenture will be discharged
with respect to the collateral securing the related Notes upon the delivery to
the related Indenture Trustee for cancellation of all such Notes or, with
certain limitations, upon deposit with the Indenture Trustee of funds sufficient
for the payment in full of all of such Notes.
Trust Indenture Act. The Indenture will comply with applicable provisions
of the Trust Indenture Act of 1939, as amended.
THE INDENTURE TRUSTEE
The Indenture Trustee for a series of Notes will be specified in the
related Prospectus Supplement. The Indenture Trustee for one series of Notes may
serve as the Owner Trustee with respect to another series of Securities. The
Indenture Trustee may resign at any time, in which event the Seller will be
obligated to appoint a successor trustee eligible under the Indenture which,
unless the related Prospectus Supplement provides otherwise, shall be acceptable
to the third party credit enhancement provider, if any, so long as no Insurer
Default (as defined in the related Prospectus Supplement) has occurred and is
continuing. The Seller may also remove the Indenture Trustee, with the consent
of the third party credit enhancement provider, if any, if the Indenture Trustee
ceases to be eligible to continue as such under the Indenture or if the
Indenture Trustee becomes insolvent. In such circumstances, the Seller will be
obligated to appoint a successor trustee eligible under the Indenture which,
unless the related Prospectus Supplement provides otherwise, shall be acceptable
to the third party credit enhancement provider, if any, so long as no Insurer
Default (as defined in the related Prospectus Supplement) has occurred and is
continuing. Any resignation or removal of the Indenture Trustee and appointment
of a successor trustee will be subject to any conditions or approvals, including
the approval of the issuer of any credit enhancement, if any, specified in the
related Prospectus Supplement and will not become effective until acceptance of
the appointment by a successor trustee.
CERTAIN INFORMATION REGARDING THE SECURITIES
INDEXED SECURITIES
To the extent so specified in any Prospectus Supplement, any class of
Securities of a given series may consist of Securities ("Indexed
Securities") in which the principal amount payable at the
final scheduled Distribution Date (the "Indexed Principal Amount")
is determined by reference to a measure (the "Index")
which will be related to (i) the difference in the rate of exchange between
United States dollars and a currency or composite currency (the "Indexed
Currency") specified in the applicable Prospectus Supplement
(such Indexed Securities, "Currency Indexed Securities");
(ii) the difference in the price of a specified commodity (the
"Indexed Commodity") on specified dates (such Indexed
Securities, "Commodity Indexed Securities"); (iii)
the difference in the level of a specified stock index (the "Stock Index"),
which maybe based on U.S. or foreign stocks, on specified dates (such
Indexed Securities, "Stock Indexed Securities"); or (iv)
such other objective price or economic measures as are described in the
applicable Prospectus Supplement. The manner of determining the Indexed
Principal Amount of an Indexed Security and historical and other information
concerning the Indexed Currency, the Indexed Commodity, the Stock Index or other
price or economic measures used in such determination will be set forth in the
applicable Prospectus Supplement, together with information concerning tax
consequences to the holders of such Indexed Securities.
If the determination of the Indexed Principal Amount of an Indexed
Security is based on an Index calculated or announced by a third party and such
third party either suspends the calculation or announcement of such Index or
changes the basis upon which such Index is calculated (other than changes
consistent with policies in effect at the time such Indexed Security was issued
and permitted changes described in the applicable Prospectus Supplement), then
such Index shall be calculated for purposes of such Indexed Security by an
independent calculation agent named in the applicable Prospectus Supplement on
the same basis, and subject to the same conditions and controls, as applied to
the original third party. If for any reason such index cannot be calculated on
the same basis and subject to the same conditions and controls as applied to the
original third party, then the Indexed Principal Amount of such Indexed Security
shall be calculated in the manner set forth in the applicable Prospectus
Supplement. Any determination of such independent calculation agent shall in the
absence of manifest error be binding on all parties.
Interest on an Indexed Security will be payable based on the amount
designated in the applicable Prospectus Supplement (the "Face Amount").
The applicable Prospectus Supplement will describe whether the
principal amount of the related Indexed Security, if any, that would be payable
upon redemption or repayment prior to the applicable final scheduled
Distribution Date will be the Face Amount of such Indexed Security, the Indexed
Principal Amount of such Indexed Security at the time of redemption or repayment
or another amount described in such Prospectus Supplement.
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement, persons
acquiring beneficial ownership interests in the Securities of each Series may
hold their interests through DTC in the United States or, in the case of any
series of Notes, Cedel or Euroclear in Europe. Each Class of Certificates will
be registered in the name of Cede as nominee for DTC. Cedel and Euroclear will
hold omnibus positions with respect to the Notes and, if the related Prospectus
Supplement so provides, the Certificates on behalf of Cedel Participants and
Euroclear Participants, respectively, through customers' securities accounts in
Cedel's and Euroclear's name on the books of their respective depositories
(collectively, the "Depositories") which in turn will hold such
positions in customers' securities accounts in the Depositories' names on the
books of DTC. For additional information regarding clearance and settlement
procedures see Annex I hereto.
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC accepts securities for deposit from its participating
organizations ("Participants") and facilitates the clearance and
settlement of securities transactions between Participants in such securities
through electronic book-entry changes in accounts of Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks and trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("indirect participants"). The rules
applicable to DTC and its participants are on file with the Commission.
Certificate Owners and Note Owners who are not Participants but desire to
purchase, sell or otherwise transfer ownership of Securities may do so only
through Participants (unless and until Definitive Certificates or Definitive
Notes, each as defined below, are issued). In addition, Certificate Owners and
Note Owners will receive all distributions of principal of, and interest on, the
Securities, from the Owner Trustee or the Indenture Trustee, as applicable,
through DTC and Participants. Certificate Owners and Note Owners will not
receive or be entitled to receive certificates representing their respective
interests in the Securities, except under the limited circumstances described
below and such other circumstances, if any, as may be specified in the related
Prospectus Supplement.
Unless and until Definitive Securities are issued, it is anticipated that
the only Certificateholder of the Certificates and the only Noteholder of the
Notes, if any, will be Cede & Co., as nominee of DTC. Certificate Owners and
Note Owners will not be recognized by the Owner Trustee as Certificateholders or
by the Indenture Trustee as Noteholders as those terms are used in the related
Trust Documents or Indenture. Certificate Owners and Note Owners will be
permitted to exercise the rights of Certificateholders or Noteholders, as the
case may be, only indirectly through Participants and DTC.
With respect to any series of Securities issued in book-entry form, while
such Securities are outstanding (except under the circumstances described
below), under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry
transfers among Participants on whose behalf it acts with respect to the
Securities and is required to receive and transmit distributions of principal
of, and interest on, the Securities. Participants with whom Certificate Owners
or Note Owners have accounts with respect to Securities are similarly required
to make book-entry transfers and receive and transmit such distributions on
behalf of their respective Certificate Owners and Note Owners. Accordingly,
although Certificate Owners and Note Owners will not possess Securities, the
Rules provide a mechanism by which Certificate Owners and Note Owners will
receive distributions and will be able to transfer their interests.
Transfers between Participants will occur in accordance with DTC Rules.
Transfers between Cedel Participants and Euroclear Participants will occur in
accordance with their respective rules and operating procedures.
Because of time zone differences, credits of securities received in Cedel
or Euroclear as a result of a transaction with a Participant will be made during
subsequent securities settlement processing and dated the business day following
the DTC settlement date, and any such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or Cedel Participants on such business day. Cash received in Cedel or
Euroclear as a result of sales of Notes and, if the related Prospectus
Supplement so provides, Certificates by or through a Cedel Participant or
Euroclear Participant to a DTC Participant will be received with value on the
DTC settlement date but will be available in the relevant Cedel or Euroclear
cash account only as of the business day following settlement in DTC.
Cross-market transfers between persons directly holding Notes and, if the
related Prospectus Supplement so provides, Certificates or indirectly through
DTC, on the one hand, and directly or indirectly through Cedel Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC Rules on behalf of the relevant European international clearing system by
its Depository; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadline (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depository to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same day
funds settlement applicable to DTC. Cedel Participants and Euroclear
Participants may not deliver instructions to the Depositories.
With respect to any series of Securities, Certificates and Notes (if any)
will be issued in registered form to Certificate Owners and Note Owners, or
their nominees, rather than to DTC (such Certificates and Notes being referred
to herein as "Definitive Certificates" and "Definitive
Notes," respectively), only if (i) the Seller advises the Owner
Trustee or the Indenture Trustee, as the case may be, in writing that DTC is no
longer willing or able to discharge properly its responsibilities as nominee and
depository with respect to the Certificates or the Notes and the Seller is
unable to locate a qualified successor, (ii) the Seller at its sole option has
advised the Owner Trustee or the Indenture Trustee, as the case may be, in
writing that it elects to terminate the book-entry system through DTC or (iii)
after the occurrence of an Event of Default, the holders representing a majority
of the Certificate Balance (a "Certificate Majority") or a
Note Majority advises the Owner Trustee or the Indenture Trustee, as the case
may be, through DTC that continuation of a book-entry system is no longer in
their best interests. Upon issuance of Definitive Certificates or Definitive
Notes to Certificate Owners or Note Owners, such Certificates or Notes will be
transferable directly (and not exclusively on a book-entry basis) and registered
holders will deal directly with the Owner Trustee or the Indenture Trustee, as
the case may be, with respect to transfers, notices and distributions.
DTC has advised the Seller that, unless and until Definitive Certificates
or Definitive Notes are issued, DTC will take any action permitted to be taken
by a Certificateholder or a Noteholder under the related Trust Documents or
Indenture only at the direction of one or more Participants to whose DTC
accounts the Certificates or Notes are credited. DTC has advised the Seller that
DTC will take such action with respect to any fractional interest of the
Certificates or the Notes only at the direction of and on behalf of such
Participants beneficially owning a corresponding fractional interest of the
Certificates or the Notes. DTC may take actions, at the direction of the related
Participants, with respect to some Certificates or Notes which conflict with
actions taken with respect to other Certificates or Notes.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations ("Cedel
Participants") and facilitates the clearance and settlement of
securities transactions between Cedel Participants through electronic book-entry
changes in accounts of Cedel Participants, thereby eliminating the need for
physical movement of certificates. Transactions may be settled in Cedel in any
of 28 currencies, including United States dollars. Cedel provides to its Cedel
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedel interfaces with domestic markets in several
countries. As a professional depository, Cedel is subject to regulation by the
Luxembourg Monetary Institute. Cedel Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to Cedel is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedel Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for its participants
("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may be settled in any of 32 currencies,
including United States dollars. Euroclear includes various other services,
including securities lending and borrowing and interfaces with domestic markets
in several countries generally similar to the arrangements for cross-market
transfers with DTC described above. Euroclear is operated by the Brussels,
Belgium office of Morgan Guaranty Trust Company of New York the "Euroclear
Operator"), under contract with Euroclear Clearance Systems,
S.C., a Belgian cooperative corporation (the "Cooperative"). All
operations are conducted by the Euroclear Operator, and all Euroclear securities
clearance accounts and Euroclear cash accounts are accounts with the Euroclear
Operator, not the Cooperative. The Cooperative establishes policy for Euroclear
on behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries. Indirect access to Euroclear is also available to
other firms that clear through, or maintain a custodial relationship with a
Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of Euroclear, and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within Euroclear, withdrawals
of securities and cash from Euroclear and receipts of payments with respect to
securities in Euroclear. All securities in Euroclear are held on a fungible
basis without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and Conditions
only on behalf of Euroclear Participants and has no record of or relationship
with persons holding through Euroclear Participants.
Distributions with respect to Notes and, if the related Prospectus
Supplement so provides, Certificates held through Cedel or Euroclear will be
credited to the cash accounts of Cedel Participants or Euroclear Participants in
accordance with the relevant system's rules and procedures, to the extent
received by its Depository. Such distributions will be subject to tax reporting
in accordance with relevant United States tax laws and regulations. Cedel or the
Euroclear Operator, as the case may be, will take any other action permitted to
be taken by a beneficial holder of Notes and, if the related Prospectus
Supplement so provides, Certificates under the Agreement on behalf of a Cedel
Participant or Euroclear Participant only in accordance with its relevant rules
and procedures and subject to its Depository's ability to effect such actions on
its behalf through DTC.
Although DTC, Cedel and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of interests in the Notes and, if the related
Prospectus Supplement so provides, the Certificates among Direct Participants of
DTC, Cedel and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
NEITHER THE TRUST, THE SELLER, THE SERVICER, THE REPRESENTATIVE, THE OWNER
TRUSTEE, THE INDENTURE TRUSTEE, NOR ANY OF THE UNDERWRITERS WILL HAVE ANY
RESPONSIBILITY OR OBLIGATION TO ANY PARTICIPANTS, CEDEL PARTICIPANTS OR
EUROCLEAR PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT
TO (1) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC, CEDEL, EUROCLEAR OR ANY
PARTICIPANT, (2) THE PAYMENT BY DTC, CEDEL, EUROCLEAR OR ANY PARTICIPANT OF ANY
AMOUNT DUE TO ANY BENEFICIAL OWNER IN RESPECT OF THE PRINCIPAL BALANCE OF, OR
INTEREST ON, THE NOTES AND, IF THE RELATED PROSPECTUS SUPPLEMENT SO PROVIDES,
THE CERTIFICATES, (3) THE DELIVERY BY ANY PARTICIPANT, CEDEL PARTICIPANT OR
EUROCLEAR PARTICIPANT OF ANY NOTICE TO ANY BENEFICIAL OWNER WHICH IS REQUIRED OR
PERMITTED UNDER THE TERMS OF THE AGREEMENT TO BE GIVEN TO NOTEHOLDERS AND, IF
THE RELATED PROSPECTUS SUPPLEMENT SO PROVIDES, CERTIFICATEHOLDERS OR (4) ANY
OTHER ACTION TAKEN BY DTC OR ITS NOMINEE AS THE NOTEHOLDER AND, IF THE RELATED
PROSPECTUS SUPPLEMENT SO PROVIDES, THE CERTIFICATEHOLDER.
Issuance of Certificates and Notes in book-entry form rather than as
physical certificates or notes may adversely affect the liquidity of
Certificates or Notes in the secondary market and the ability of the Certificate
Owners or Note Owners to pledge them. In addition, since distributions on the
Certificates and the Notes will be made by the Owner Trustee or the Indenture
Trustee to DTC unless and until Definitive Certificates and Definitive Notes are
issued and DTC will credit such distributions to the accounts of its
Participants, with the Participants further crediting such distributions to the
accounts of indirect participants or Certificate Owners or Note Owners,
Certificate Owners and Note Owners may experience delays in the receipt of such
distributions.
STATEMENTS TO SECURITYHOLDERS
On or prior to each Distribution Date, the Servicer will prepare and
provide to the Owner Trustee a statement to be delivered to the related
Certificateholders on such Distribution Date. On or prior to each Payment Date,
the Servicer will prepare and provide to the Indenture Trustee a Statement to be
delivered to the related Noteholders on such Payment Date. Such statements will
be based on the information in the related Servicer's Certificate setting forth
certain information required under the Trust Documents (the "Servicer's
Certificate"). Each such statement to be delivered to
Certificateholders will include the following information as to the Certificates
with respect to such Distribution Date or the period since the previous
Distribution Date, as applicable, and each such statement to be delivered to
Noteholders will include the following information as to the Notes with respect
to such Payment Date or the period since the previous Payment Date, as
applicable:
(i) the amount of the distribution allocable to interest on
or with respect to each class of Securities;
(ii) the amount of the distribution allocable to principal
on or with respect to each class of Securities;
(iii) the Certificate Balance and the Certificate Factor for each class of
Certificates and the aggregate outstanding principal balance and, if applicable,
the Note Factor for each class of Notes, after giving effect to all payments
reported under (ii) above on such date;
(iv) the amount of the Servicing Fee paid to the Servicer
with respect to the related Monthly Period or Periods, as the
case may be;
(v) the Pass-Through Rate, Interest Rate or other applicable rate of
return, if any, for the next period for any class of Certificates or Notes with
variable or adjustable rates;
(vi) the amount, if any, distributed to Certificateholders and Noteholders
applicable to payments under any credit enhancement; and
(vii) such other information as may be specified in the related Prospectus
Supplement.
Each amount set forth pursuant to subclauses (i), (ii), (iv), (vi) and
(vii) with respect to Certificates or Notes will be expressed as a dollar amount
per $1,000 of the initial Certificate Balance or the initial principal balance
of the Notes, as applicable.
Unless and until Definitive Certificates or Definitive Notes are issued,
such reports with respect to a series of Securities will be sent on behalf of
the related Trust to the Owner Trustee, the Indenture Trustee and Cede & Co., as
registered holder of the Certificates and the Notes and the nominee of DTC.
Certificate Owners and Note Owners may receive copies of such reports upon
written request, together with a certification that they are Certificate Owners
or Note Owners, as the case may be, and payment of any expenses associated with
the distribution of such reports, from the Owner Trustee or the Indenture
Trustee, as applicable. See "Reports to Securityholders" and " - Book-Entry
Registration" above.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of a Trust, the Owner Trustee and the
Indenture Trustee, as applicable, will mail to each holder of a class of
Securities who at any time during such calendar year has been a Securityholder,
and received any payment thereon, a statement containing certain information for
the purposes of such Securityholder's preparation of federal income tax return.
See "Certain Federal Income Tax Consequences."
LIST OF SECURITYHOLDERS
At such time, if any, as Definitive Certificates have been issued, the
Owner Trustee will, upon written request by three or more Certificateholders or
one or more holders of Certificates evidencing not less than 25% of the
Certificate Balance, within five Business Days after provision to the Owner
Trustee of a statement of the applicants' desire to communicate with other
Certificateholders about their rights under the related Trust Documents or the
Certificates and a copy of the communication that the applicants propose to
transmit, afford such Certificateholders access during business hours to the
current list of Certificateholders for purposes of communicating with other
Certificateholders with respect to their rights under the Trust Documents. The
Trust Documents will not provide for holding any annual or other meetings of
Certificateholders.
At such time, if any, as Definitive Notes have been issued, the Indenture
Trustee will, upon written request by three or more Noteholders or one or more
holders of Notes evidencing not less than 25% of the aggregate principal balance
of the related Notes, within five Business Days after provision to the Indenture
Trustee of a statement of the applicants' desire to communicate with other
Noteholders about their rights under the related Indenture or the Notes and a
copy of the communication that the applicants propose to transmit, afford such
Noteholders access during business hours to the current list of Noteholders for
purposes of communicating with other Noteholders with respect to their rights
under the Indenture. The Indenture will not provide for holding any annual or
other meetings of Noteholders.
DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE
TRUST DOCUMENTS
The following summary describes certain terms of the Purchase Agreements
(each a "Purchase Agreement") pursuant to which the Seller
will purchase Receivables from TMS Auto Finance and certain terms of either (i)
the Pooling and Servicing Agreements or (ii) the Sale and Servicing Agreements
and the Trust Agreements (in either case collectively referred to as the "Trust
Documents") pursuant to which the Seller will sell and assign
such Receivables to a Trust and TMS Auto Finance will agree to service such
Receivables on behalf of the Trust, and pursuant to which such Trust will be
created and Certificates will be issued. Forms of the Purchase Agreement and the
Trust Documents have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part. The Seller will provide a copy of such
agreements (without exhibits) upon request to a Securityholder described
therein. This summary does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all of the provisions of the forms of
Purchase Agreement and the Trust Documents.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date with respect to a series of Securities
specified in the related Prospectus Supplement, TMS Auto Finance will enter into
a Purchase Agreement with the Seller pursuant to which TMS Auto Finance will, on
or prior to such Closing Date, sell and assign to the Seller, without recourse,
its entire interest in and to the related Receivables, including its security
interest in the Financed Vehicles securing such Receivables and its rights to
receive all payments on, or proceeds with respect to, such Receivables to the
extent paid or payable after the applicable Cutoff Date. Pursuant to the
Purchase Agreement, unless another party is identified in the related Prospectus
Supplement as having so agreed, TMS Auto Finance will agree that, upon the
occurrence of a breach of a representation or warranty under the related Trust
Documents with respect to any of the Receivables of a Trust which causes the
Seller to be obligated to repurchase a Receivable, the Owner Trustee will be
entitled to require TMS Auto Finance to repurchase such Receivables from the
Trust. Such rights of the Trust under the Purchase Agreement will constitute
part of the property of the Trust and may be enforced directly by the Owner
Trustee and, unless the related Prospectus Supplement provides otherwise, the
third party credit enhancement provider, if any. In addition, the Owner Trustee
will pledge such rights to the Indenture Trustee as collateral for the Notes, if
any, and such rights may be enforced directly by the Indenture Trustee.
On the Closing Date, the Seller will sell and assign to the Owner Trustee,
without recourse, the Seller's entire interest in the related Receivables and
the proceeds thereof, including its security interest in the Financed Vehicles.
Each Receivable transferred by the Seller to the Trust will be identified in a
schedule appearing as an exhibit to the related Trust Documents (the "Schedule
of Receivables"). Concurrently with such transfer and
assignment, the Owner Trustee will execute and deliver the related certificates
representing the Certificates to or upon the order of the Seller, and the Owner
Trustee will execute and the Indenture Trustee will authenticate and deliver the
Notes, if any, to or upon the order of the Seller. The net proceeds received
from the sale of the Certificates and the Notes of a given series will be
applied to the purchase of the related Receivables from the Seller and, to the
extent specified in the related Prospectus Supplement, to the deposit of the
Pre-Funded Amount into the Pre-Funding Account.
ELIGIBILITY CRITERIA
In the Purchase Agreement, TMS Auto Finance will represent and warrant to
the Seller, and in the Trust Documents the Representative and the Seller will
represent and warrant to the Owner Trustee and/or the Indenture Trustee, as the
case may be, among other things, that (i) the information provided with respect
to the Receivables is correct in all material respects; (ii) the Obligor on each
Receivable is required to maintain physical damage insurance in accordance with
the Servicer's normal requirements; (iii) at the date of issuance of the
Certificates and any Notes, the Initial Receivables and on the applicable
Subsequent Transfer Date, if any, the related Subsequent Receivables, as the
case may be, are, to the best of its knowledge, free and clear of all security
interests, liens, charges and encumbrances and no offsets, defenses, or
counterclaims against it have been asserted or threatened; (iv) at the date of
issuance of the Certificates and any Notes, and on the applicable Subsequent
Transfer Date, if any, each of the Initial Receivables or Subsequent
Receivables, as the case may be, is or will be secured by a first perfected
security interest in the Financed Vehicle in favor of TMS Auto Finance; and (v)
each Receivable, at the time it was originated, complied, and at the date of
issuance of the Certificates and any Notes, and on the applicable Subsequent
Transfer Date, if any, the related Subsequent Receivables, as the case may be,
complies in all material respects with applicable federal and state laws,
including consumer credit, truth in lending, equal credit opportunity and
disclosure laws.
If the related Prospectus Supplement specifies that Subsequent Receivables
are to be acquired by a Trust, then during the related Funding Period, pursuant
to the Purchase Agreement, the Seller will be obligated to purchase from TMS
Auto Finance and, pursuant to the Agreement, sell to the Trust Subsequent
Receivables. The aggregate principal balance of the Subsequent Receivables will
be in an amount that TMS Auto Finance anticipates will equal the amount
deposited in the Pre-Funding Account on the date of the issuance of the related
series. On each Subsequent Transfer Date, TMS Auto Finance will sell and assign
to the Seller, without recourse, its entire interest in the Subsequent
Receivables identified in a schedule attached to a supplemental conveyance
relating to such Subsequent Receivables executed on such date by TMS Auto
Finance and the Seller. In connection with each purchase of Subsequent
Receivables, the Trust will be required to pay to the Seller a cash purchase
price equal to the outstanding principal balance of each Subsequent Receivable
as of its Subsequent Cutoff Date, which price the Seller will pay to TMS Auto
Finance. The purchase price will be withdrawn from the Pre-Funding Account and
paid to the Seller for payment to TMS Auto Finance so long as the
representations and warranties set forth in the preceding paragraph and under
"The Receivables -- General" apply to each Subsequent Receivable to be conveyed,
and the conditions set forth below are satisfied. TMS Auto Finance will convey
the Subsequent Receivables to the Seller on each such Subsequent Transfer Date
pursuant to the Purchase Agreement and the applicable Subsequent Transfer
Agreement (each, a "Subsequent Transfer Agreement")
executed by TMS Auto Finance and the Seller on the Subsequent Transfer Date and
including as an exhibit a schedule identifying the Subsequent Receivables
transferred on such date. The Seller will convey the Subsequent Receivables to
the Trust on such Subsequent Transfer Date pursuant to the Agreement and the
applicable Subsequent Transfer Assignment (each, a "Subsequent Transfer
Assignment") executed by the Seller and the
Trustee on the Subsequent Transfer Date and including as an exhibit a schedule
identifying the Subsequent Receivables transferred on such date.
Any conveyance of Subsequent Receivables will be subject to the following
conditions, among others specified in the related Prospectus Supplement: (i)
each such Subsequent Receivable must satisfy the eligibility criteria specified
in the preceding paragraph as of its Subsequent Cutoff Date and such additional
criteria as may be specified in the related Prospectus Supplement; (ii) if and
to the extent specified in the related Prospectus Supplement, the third-party
credit enhancement provider, if any, shall have approved the transfer of such
Subsequent Receivables to the Trust; (iii) neither TMS Auto Finance nor the
Seller will have selected such Subsequent Receivables in a manner that either
believes is adverse to the interests of the Securityholders; (iv) TMS Auto
Finance and the Seller will deliver certain opinions of counsel to the
Trustee(s) and the Rating Agencies with respect to the validity of the
conveyance of such Subsequent Receivables; and (v) the Rating Agencies shall
confirm that the ratings on the Securities of such series have not been
withdrawn or reduced as a result of the transfer of such Subsequent Receivables
to the Owner Trustee.
As of the last day of the second (or, if the Seller elects, the first)
month following the discovery by the Seller or receipt by the Seller of notice
from the Representative, the Servicer, the Owner Trustee, the Indenture Trustee
or the third party credit enhancement provider, if any, of a breach of any
representation or warranty of the Seller which the Owner Trustee or the
Indenture Trustee, as the case may be, determines materially and adversely
affects the interests of the Securityholders in a Receivable, the Seller, unless
it cures the breach, will be required to purchase the Receivable from the Owner
Trustee, and TMS Auto Finance will be required to purchase the Receivable from
the Seller, at a price equal to the amount of outstanding principal and accrued
interest of the Receivable (including one month's interest thereon, in the month
of payment, at the APR less, so long as TMS Auto Finance is the Servicer, the
Servicing Fee), after giving effect to the receipt of any moneys collected (from
whatever source) on such Receivable, if any (such price is hereinafter referred
to as the "Purchase Amount"). The "second month" shall mean the
month following the month in which discovery occurs or notice is given, and the
"first month" shall mean the month in which discovery occurs or notice is given.
If the Seller or TMS Auto Finance fails to purchase the Receivable, the
Representative will be obligated to purchase such Receivable on the date such
Receivable was required to be so purchased. The purchase obligation will
constitute the sole remedy available to the Securityholders, the Owner Trustee
and the third party credit enhancement provider, if any, for any such uncured
breach.
CUSTODY OF RECEIVABLE FILES
Pursuant to the Trust Documents, the Servicer will service and administer
the Receivables. The Trust Documents will also designate the Servicer as
custodian to maintain possession, as the Owner Trustee's and Indenture
Trustee's, if any, agent, of the motor vehicle retail installment sale contracts
and any other documents relating to the Receivables. The documents will be
physically segregated from other similar documents that are in the Servicer's
possession and are stamped or marked to reflect the transfer to a Trust. Uniform
Commercial Code financing statements reflecting the sale and assignment of the
Receivables to the Seller and by the Seller to the Owner Trustee will be filed,
and TMS Auto Finance's accounting records and computer systems will be marked to
reflect such sale and assignment. See "Certain Legal Aspects of the Receivables
- - Security Interests in Vehicles".
ACCOUNTS
With respect to each Trust that issues Notes, the Servicer will establish
and maintain with the related Indenture Trustee one or more accounts, in the
name of the Indenture Trustee on behalf of the related Noteholders and
Certificateholders, into which all payments made on or with respect to the
related Receivables will be deposited (the "Collection Account").
The Servicer will establish and maintain with such Indenture Trustee
an account, in the name of such Indenture Trustee on behalf of such Noteholders,
into which amounts released from the Collection Account and any Pre-Funding
Account, reserve account or other credit enhancement for payment to such
Noteholders will be deposited and from which all distributions to such
Noteholders will be made (the "Note Distribution Account").
The Servicer will establish and maintain with the related Owner
Trustee an account, in the name of such Owner Trustee on behalf of such
Certificateholders, into which amounts released from the Collection Account and
any Pre-Funding Account, reserve account or other credit or cash flow
enhancement for distribution to such Certificateholders will be deposited and
from which all distributions to such Certificateholders will be made (the
"Certificate Distribution Account"). With
respect to each Trust that does not issue Notes, the Servicer will also
establish and maintain the Collection Account and any other Trust Account
specified in the related Prospectus Supplement in the name of the related Owner
Trustee on behalf of the related Certificateholders.
The Servicer will also establish an additional account (the "Payahead
Account") in the name of the Owner Trustee or the Indenture
Trustee, into which early payments by or on behalf of the Obligors which
constitute neither scheduled payments, full prepayments, nor certain partial
prepayments as described below ("Payaheads") will be deposited until
such time as the payment falls due. Unless otherwise specified in the related
Prospectus Supplement, if the Trust elects to be treated as a grantor trust, the
Payahead Account will not be an asset of such Trust, but will be pledged to the
Owner Trustee for the benefit of Certificateholders and any third-party credit
enhancement provider and all Investment Earnings thereon will be for the benefit
of, and will be distributable to, the Seller.
In addition, the Servicer will establish as additional segregated trust
accounts, if specified in the related Prospectus Supplement, a Pre-Funding
Account and one or more spread accounts or reserve or other accounts in the name
of the Owner Trustee or the Indenture Trustee on behalf of the Securityholders.
For any series of Securities, funds in the Collection Account, the Note
Distribution Account, the Certificate Distribution Account and any Payahead
Account and any Pre-Funding Account, reserve account and other accounts
identified as such in the related Prospectus Supplement (collectively, the
"Accounts") will be invested as provided in the related Sale and
Servicing Agreement or Pooling and Servicing Agreement in Eligible Investments.
"Eligible Investments" are limited to (a) direct obligations
of, and obligations fully guaranteed as to timely payment by, the United States
of America; (b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank), provided, that at the time of the
investment, the commercial paper or other short-term senior unsecured debt
obligations of such depository institution or trust company shall have a minimum
credit rating satisfying each of the Rating Agencies rating such Securities; (c)
commercial paper having a minimum credit rating satisfying each of the Rating
Agencies rating such Securities; (d) investments in money market funds having a
minimum credit rating satisfying each of the Rating Agencies rating such
Securities; (e) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
entered into with a depository institution or trust company (acting as
principal) referred to in clause (b) above; and (f) other investments acceptable
to the Rating Agencies rating such Securities which are consistent with the
rating of such Securities. The related Prospectus Supplement will specify
whether and the extent to which investment earnings on funds deposited in the
Accounts, net of losses and investment expenses (collectively, "Investment
Earnings"), will be deposited in the applicable Collection
Account on each Distribution Date and treated as collections of interest on the
related Receivables or distributed to the Servicer, as additional servicing
compensation, the Seller or any other person. Investment Earnings on a
Pre-Funding Account will be deposited in the applicable Collection Account on
each Distribution Date and treated as collections of interest on the
Receivables.
The Accounts will be maintained as Eligible Deposit Accounts. "Eligible
Deposit Account" means either (a) a segregated account
with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States of America or any one of the states thereof or the District
of Columbia (or any domestic branch of a foreign bank), having corporate trust
powers and acting as trustee for funds deposited in such account, so long as any
of the securities of such depository institution have a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade. "Eligible Institution" means, with respect to a
Trust, (a) the corporate trust department of the related Indenture Trustee or
the related Owner Trustee, as applicable, or (b) a depository institution
organized under the laws of the United States of America or any one of the
states thereof or the district of Columbia (or any domestic branch of a foreign
bank), (i) which has either (A) a long-term unsecured debt rating acceptable to
the Rating Agencies or (B) a short-term unsecured debt rating or certificate of
deposit rating acceptable to the Rating Agencies and (ii) whose deposits are
insured by the FDIC.
SERVICING PROCEDURES
The Servicer will be required to make reasonable efforts to collect all
payments due with respect to the Receivables and will be required to continue
such collection procedures as it follows with respect to its own motor vehicle
retail installment sale contracts, in a manner consistent with the Trust
Documents. Consistent with its normal procedures, the Servicer may, in its
discretion, arrange with the Obligor on a Receivable to extend or modify the
payment schedule, but no such arrangement will, for purposes of any Sale and
Servicing Agreement or Pooling and Servicing Agreement, modify the original due
dates (other than to permit payment on a different date in the same month in
which the original due date falls) or the amount of the scheduled payments
(unless the obligor is in default or, in the judgment of the Servicer, such
default is imminent) or extend the final payment date of any Receivable beyond
the Final Scheduled Maturity Date (as such term is defined with respect to any
Receivables Pool in the related Prospectus Supplement). Some of such
arrangements may result in the Representative or the Servicer being required to
purchase the Receivable for the Purchase Amount, while others may result in the
Servicer being required to make Advances. If the Servicer determines that
eventual payment in full of a Receivable is unlikely, the Servicer will follow
its normal practices and procedures to realize upon the Receivable, including
the repossession and disposition of the Financed Vehicle securing the Receivable
at a public or private sale, or the taking of any other action permitted by
applicable law.
COLLECTIONS
The Servicer will be required to deposit all payments on Receivables
received (net of amounts in respect of the Servicing Fee, the Supplemental
Servicing Fee and reimbursement for Advances, if any, included in such payments)
and all proceeds of Receivables collected during each Monthly Period (net of
amounts in respect of the Servicing Fee, the Supplemental Servicing Fee and
reimbursement for Advances, if any, included in such proceeds) into the
Collection Account as specified in the related Prospectus Supplement. However,
at any time that and for so long as (i) TMS Auto Finance is the Servicer, (ii)
there exists no Servicer Default, (iii) the credit enhancement provider, if any,
consents and (iv) each other condition to making deposits less frequently than
daily as may be specified by the Rating Agencies or set forth in the related
Prospectus Supplement is satisfied, the Servicer will not be required to deposit
such amounts into the Collection Account until on or before the applicable
Distribution Date or Payment Date. Pending deposit into the Collection Account,
collections may be invested by the Servicer at its own risk and for its own
benefit and will not be segregated from its own funds. If the Servicer were
unable to remit such funds, Securityholders might incur a loss. To the extent
set forth in the related Prospectus Supplement, TMS Auto Finance may in order to
satisfy the requirements described above, obtain a letter of credit or other
security for the benefit of the related Trust to secure timely remittances of
collections on the related Receivables and payment of the aggregate Purchase
Amount with respect to Receivables purchased by TMS Auto Finance. If the
conditions specified above are satisfied, TMS Auto Finance, the Seller and the
Representative, as the case may be, will be required to remit the aggregate
Purchase Amount of Receivables to be purchased from the Trust to the Collection
Account on the Business Day immediately preceding the Distribution Date.
For purposes of the Trust Documents, collections on a Receivable made
during a Monthly Period are required to be applied first to the scheduled
payment thereof. To the extent that such collections on a Receivable during a
Monthly Period exceed the scheduled payment on such Receivable, the collections
(other than Payaheads) are required to be applied to prepay the Receivable in
full. In the case of Precomputed Receivables, if the collections are
insufficient to prepay the Receivable in full, they generally are required to be
treated as Payaheads until such later Monthly Period as such Payaheads may be
applied either to the scheduled payment or to prepay the Receivable in full.
ADVANCES
If and to the extent specified in the related Prospectus Supplement, the
Servicer may be required to advance (each, an "Advance") monthly payments
of interest in respect of a delinquent Receivable that the Servicer, in its sole
discretion, expects to receive from subsequent payments on or with respect to
such Receivable or from other Receivables. The Servicer shall be entitled to
reimbursement of Advances from subsequent payments on or with respect to the
Receivables to the extent described in the related Prospectus Supplement.
SERVICING COMPENSATION
The Servicer is entitled under the Trust Documents to receive or retain,
as specified in the related Prospectus Supplement on each Distribution Date a
servicing fee (the "Servicing Fee") for the related Monthly Period
at the rate specified in the related Prospectus Supplement (the "Servicing Fee
Rate") multiplied by the Pool Balance as of the first day of
such Monthly Period. The Servicer is also entitled to retain from collections a
supplemental servicing fee (the "Supplemental Servicing Fee")
for each Monthly Period equal to any late fees, prepayment fees,
rebates and other administrative fees and expenses collected during the Monthly
Period plus reinvestment proceeds on any payments received in respect of
Receivables. If specified in the related Prospectus Supplement, the Servicer may
be entitled to additional compensation from investment earnings (net of losses)
on certain accounts or otherwise. The Servicer, in its discretion at its
election, may defer receipt of all or any portion of the Servicing Fee, the
Supplemental Servicing Fee or any additional compensation from investment
earnings for any Monthly Period to and until a later Monthly Period for any
reason, including in order to avoid a shortfall in any payments due on any
Securities. Any such deferred amount shall be payable to (or may be retained
from subsequent collections by) the Servicer on demand.
The Servicing Fee and the Supplemental Servicing Fee and any other amounts
specified in the related Prospectus Supplement (collectively, the "Servicer
Fee") are intended to compensate the Servicer for performing the
functions of a third-party servicer of the Receivables as an agent for the
Securityholders, including collecting and posting all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, reporting
tax information to Obligors, paying costs of collections and policing the
collateral. The Servicer Fee will also compensate the Servicer for administering
the Receivables, including accounting for collections, furnishing monthly and
annual statements to the Owner Trustee and any Indenture Trustee with respect to
distributions and generating federal income tax information for the Trust. The
Servicer Fee also will reimburse the Servicer for certain taxes, the Trustee's
fees, accounting fees, outside auditor fees, data processing costs and other
costs incurred in connection with administering the Receivables.
MANDATORY PREPAYMENT
To the extent a Pre-Funding Account is specified in the related Prospectus
Supplement, the Securities will be prepaid in part on the Distribution Date on
which the Funding Period ends (or on the Distribution Date immediately following
the last day of the Funding Period, if the Funding Period does not end on a
Distribution Date) in the event that any amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of Subsequent
Receivables, if any, on such Distribution Date. The aggregate principal amount
of Securities to be prepaid will be an amount equal to the amount then on
deposit in the Pre-Funding Account in such portions as specified in the related
Prospectus Supplement. In such event, if and to the extent specified in the
related Prospectus Supplement, a limited recourse mandatory prepayment premium
(the "Prepayment Premium") may be payable by the Trust to the
offered Securityholders if the aggregate principal amount of the offered
Securities to be prepaid pursuant to such mandatory prepayment exceeds such
threshold amount as will be specified in the related Prospectus Supplement. The
amount of such Prepayment Premium, if any, will be specified in the related
Prospectus Supplement. A Trust's obligation to pay the Prepayment Premium shall
be limited to funds which are received from the Seller under the Purchase
Agreement as liquidated damages for the failure to deliver Subsequent
Receivables. No other assets of the Trust will be available for the purpose of
making such payment. The ratings of any series of Securities with respect to
which a Prepayment Premium is payable does not evaluate the Prepayment Premium
or the likelihood that the Prepayment Premium will be paid.
DISTRIBUTIONS
With respect to each Trust, beginning on the Distribution Date or Payment
Date, as applicable, specified in the related Prospectus Supplement,
distributions of principal and interest (or, where applicable, of principal or
interest only) on each class of Securities entitled thereto will be made by the
Owner Trustee or the Indenture Trustee, as applicable, to the Securityholders.
The timing, calculation, allocation, order, source and priorities of, and
requirements for, all distributions to each class of Certificateholders and all
payments to each class of Noteholders will be set forth in the related
Prospectus Supplement.
REVOLVING PERIOD AND AMORTIZATION PERIOD; RETAINED INTEREST
If the related Prospectus Supplement so provides, there may be a period
commencing on the date of issuance of a class or classes of Notes or
Certificates of a series and ending in the date set forth on the related
Prospectus Supplement (the "Revolving Period") during which no
principal payments will be made to one or more classes of Notes or Certificates
of the related series as are identified in such Prospectus Supplement. All
collections of principal otherwise allocated to such classes of Notes or
Certificates may be (i) utilized by the Trust during the Revolving Period to
acquire additional Receivables which satisfy the criteria described under "The
Receivables - General" herein and the criteria set forth in the related
Prospectus Supplement, (ii) held in an account and invested in Eligible
Investments for later distribution to Securityholders, (iii) applied to those
Notes or Certificates, if any, specified in the related Prospectus Supplement as
then are in amortization, or (iv) otherwise applied as specified in the related
Prospectus Supplement.
An "Amortization Period" is the period during which an amount of principal
is payable to holders of a series of Securities which, during the Revolving
Period, were not entitled to such payments. If so specified in the related
Prospectus Supplement, during an Amortization Period all or a portion of
principal collections on the Receivables may be applied as specified above for a
Revolving Period and, to the extent not so applied, will be distributed to the
classes of Notes or Certificates specified in the related Prospectus Supplement
as then being entitled to payments of principal. In addition, if so specified in
the related Prospectus Supplement, amounts deposited in certain accounts for the
benefit of one or more classes of Notes or Certificates may be released from
time to time or on a specified date and applied as a payment of principal on
such classes of Notes or Certificates. The related Prospectus Supplement will
set forth the circumstances which will result in the commencement of an
Amortization Period.
Each Trust which has a Revolving Period may also issue to the Seller a
certificate evidencing a Retained Interest in the Trust not represented by the
other Securities issued by such Trust. As further described in the related
Prospectus Supplement, the value of such Retained Interest will fluctuate as the
amount of Trust Property fluctuates and the amount of Notes and Certificates of
the related series of Securities outstanding is reduced.
NET DEPOSITS
As an administrative convenience, unless otherwise specified in the
related Prospectus Supplement, the Servicer will be permitted to make the
deposit of collections, aggregate Advances and Purchase Amounts on the related
Receivables for any Trust for or with respect to the related Monthly Period net
of distributions to be made to the Servicer for such Trust with respect to such
Monthly Period. The Servicer may cause to be made a single, net transfer from
the Collection Account to the related Payahead Account, if any, or vice versa.
The Servicer, however, will account to the Trustee, any Indenture Trustee, the
third party credit enhancement provider, if any, the Noteholders, if any, and
the Certificateholders with respect to each Trust as if all deposits,
distributions and transfers were made individually. With respect to any Trust
that issues both Certificates and Notes, if the related Payment Dates do not
coincide with Distribution Dates, all distributions, deposits or other
remittances made on a Payment Date will be treated as having been distributed,
deposited or remitted on the Distribution Date for the applicable Monthly Period
for purposes of determining other amounts required to be distributed, deposited
or otherwise remitted on such Distribution Date.
CREDIT ENHANCEMENT
The amounts and types of credit enhancement, and the provider of any
credit enhancement, if any, with respect to each class of Securities will be set
forth in the related Prospectus Supplement. If and to the extent provided in the
related Prospectus Supplement, credit enhancement may be in the form of the
subordination of one or more classes of Securities, a spread account or other
type of reserve account, accelerated payments of principal relative to the
amortization of the related Receivables, financial guaranty insurance policy,
letter of credit, credit or liquidity facility, repurchase obligation, third
party payment or other support, cash deposit or such other arrangement, or any
combination of two or more of the foregoing, as may be described in the related
Prospectus Supplement. A Trust may also include a guaranteed investment contract
or reinvestment agreement pursuant to which funds held in one or more accounts
will be invested at a specified rate. If any class of Certificates or Notes of a
series has a floating interest rate, or if any of the Receivables has a floating
interest rate, the related Trust may include an interest rate swap contract, an
interest rate cap agreement or similar contract providing limited protection
against interest rate risks. If specified in the applicable Prospectus
Supplement, credit enhancement for a series of Securities may cover one or more
other series of Securities.
The presence of credit enhancement is intended to enhance the likelihood
of receipt by the credit enhanced Securityholders of the full amount of
principal and interest due thereon and to decrease the likelihood that such
Securityholders will experience losses. The credit enhancement for a class of
Securities will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal and interest thereon. If losses
occur which exceed the amount covered by any credit enhancement or which are not
covered by any credit enhancement, Securityholders will bear their allocable
share of deficiencies. In addition, if a form of credit enhancement covers more
than one series of Securities, Securityholders of any such series will be
subject to the risk that such credit enhancement will be exhausted by the claims
of Securityholders of other series.
EVIDENCE AS TO COMPLIANCE
The Trust Documents will provide that a firm of independent public
accountants will furnish to the Owner Trustee and the Indenture Trustee, if any,
and the third party credit enhancement provider, if any, on or before April 30
of each year, beginning in the calendar year following the establishment of the
related Trust, a statement as to compliance by the Servicer during the preceding
twelve months ended December 31 (or, for the initial report with respect to any
Securities for such longer or shorter period as shall have elapsed from the date
of issuance of the related Securities) with certain standards relating to the
servicing of the Receivables, the Servicer's accounting and computer systems
with respect thereto, and certain other matters.
The Trust Documents will also provide for delivery to the Owner Trustee
and the Indenture Trustee, if any, and the third party credit enhancement
provider, if any, on or before December 31 of each year, commencing in the
calendar year following the establishment of the related Trust, of a certificate
signed by an officer of the Servicer stating that the Servicer has fulfilled its
obligations under the applicable Trust Documents throughout the preceding twelve
months ended April 30 (or, for the initial report with respect to any Securities
for such longer or shorter period as shall have elapsed from the date of
issuance of the related Securities) or, if there has been a default in the
fulfillment of any such obligation, describing each such default.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the Owner Trustee or the
Indenture Trustee, as the case may be.
CERTAIN MATTERS REGARDING THE SERVICER
The Trust Documents will provide that the initial Servicer may not resign
from its obligations and duties as Servicer thereunder, except upon a
determination that the Servicer's performance of such duties is no longer
permissible under applicable law. No such resignation will become effective
until the Owner Trustee or, if Notes have been issued, the Indenture Trustee, or
a successor servicer has assumed the Servicer's servicing obligations and duties
under the Trust Documents, and the third-party credit enhancer, if any, does not
elect to waive the obligations of the Servicer to perform the duties which
render it legally unable to act or does not elect to delegate those duties to
another person.
The Trust Documents will further provide that neither the Servicer, nor
any of its directors, officers, employees, and agents will be under any
liability to any Trust or any Securityholders for taking any action or for
refraining from taking any action pursuant to the Trust Documents, or for errors
in judgment; provided, however, that neither the Servicer nor any such person
will be protected against any liability that would otherwise be imposed by
reason of willful misfeasance, bad faith or negligence (except for errors in
judgment) in the performance of duties, or by reason of reckless disregard of
obligations and duties thereunder. In addition, the Trust Documents will provide
that the Servicer is under no obligation to appear in, prosecute or defend any
legal action that is not incidental to the Servicer's servicing responsibilities
under the Trust Documents and that, in its opinion, may cause it to incur any
expense or liability. The Servicer may, however, undertake any reasonable action
that it may deem necessary or desirable in respect of the Trust Documents, the
rights and duties of the parties thereto and the interests of the
Securityholders thereunder. In such event, the legal expenses and costs of such
action and any liability resulting therefrom will be expenses, costs and
liabilities of the Servicer, and the Servicer will not be entitled to be
reimbursed therefor out of any Account held by the Owner Trustee or the
Indenture Trustee, as applicable.
Any entity into which the Servicer or the Seller, as the case may be, may
be merged or consolidated, or any entity resulting from any merger, conversion
or consolidation to which the Servicer or the Seller, as the case may be, is a
party, or any entity succeeding to the business of the Servicer or the Seller,
as the case may be, which assumes the obligations of the Servicer or the Seller,
as the case may be, will be the successor of the Servicer or the Seller, as the
case may be, under the Trust Documents. The Servicer may at any time perform its
duties as Servicer through one or more subservicers, but no such delegation
shall relieve the Servicer of its obligations under the Trust Documents.
SERVICER DEFAULT
"Servicer Default" under the Pooling and Servicing
Agreements or the Sale and Servicing Agreements, as the case may be, will
consist of (i) any failure by the Servicer and/or any other party identified in
the related Prospectus Supplement as so obligated to deliver to the Owner
Trustee or the Indenture Trustee, as applicable, to make any required
distributions therefrom, which failure continues unremedied for five business
days after written notice from the Owner Trustee or Indenture Trustee is
received by the Servicer or after discovery of such failure by the Servicer,
(ii) any failure by the Seller or the Servicer duly to observe or perform in any
material respect any other covenant or agreement in the Trust Documents which
failure materially and adversely affects the rights of Securityholders and which
continues unremedied for 60 days after the giving of written notice of such
failure (1) to the Seller or the Servicer, as applicable, by the Owner Trustee
or the Indenture Trustee, or (2) to the Seller or the Servicer, as applicable,
and to the Owner Trustee or the Indenture Trustee by Securityholders evidencing
not less than 25% of a class of Securities constituting at least 25% of the then
Pool Balance for such series; (or such longer period, not in excess of 120 days,
as may be reasonably necessary to remedy such default; provided that such
default is capable of remedy within 120 days or less and the Servicer delivers
an officer's certificate to the Owner Trustee and, if applicable, Indenture
Trustees to such effect and to the effect that the Servicer has commenced, or
will promptly commence and diligently pursue, all reasonable efforts to remedy
such default); and (iii) certain events of insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings with respect to the
Servicer indicating its insolvency, reorganization pursuant to bankruptcy
proceedings, or inability to pay its obligations.
RIGHTS UPON SERVICER DEFAULT
In the case of any Trust that has issued Notes, as long as a Servicer
Default under a Sale and Servicing Agreement remains unremedied, the related
Indenture Trustee or holders of Notes of the related series evidencing not less
than 25% of principal amount of such Notes then outstanding may terminate all
the rights and obligations of the Servicer under such Sale and Servicing
Agreement, whereupon such Indenture Trustee or a successor servicer appointed by
such Indenture Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement and will be
entitled to similar compensation arrangements. In the case of any Trust that has
not issued Notes, as long as a Servicer Default under the related Sale and
Servicing Agreement or Pooling and Servicing Agreement remains unremedied, the
related Owner Trustee or holders of Certificates of the related series
evidencing not less than 25% of the principal amount of such Certificates then
outstanding may terminate all the rights and obligations of the Servicer under
such Sale and Servicing Agreement or Pooling and Servicing Agreement, whereupon
such Owner Trustee will succeed to all the responsibilities, duties and
liabilities of the Servicer under such Sale and Servicing Agreement or Pooling
and Servicing Agreement and will be entitled to similar compensation
arrangements. If, however, a bankruptcy trustee or similar official has been
appointed for the Servicer, and no Servicer Default other than such appointment
has occurred, such trustee or official may have the power to prevent such
Indenture Trustee, such Noteholders, such Owner Trustee or such
Certificateholders from effecting a transfer of servicing. In the event that
such Indenture Trustee or Owner Trustee is unwilling or unable to so act, it may
appoint, or petition a court of competent jurisdiction for the appointment of, a
successor with a net worth of at least $50,000,000 and whose regular business
includes the servicing of motor vehicle retail installment sale contracts. Such
Indenture Trustee or Trustee may make such arrangements for compensation to be
paid, which in no event may be greater than the servicing compensation to the
Servicer under such Sale and Servicing Agreement or Pooling and Servicing
Agreement. Notwithstanding the foregoing, if and to the extent specified in the
related Prospectus Supplement, a third-party credit enhancement provider may
exercise the rights and remedies of the Owner Trustee, Indenture Trustee,
Noteholders and Certificateholders specified above.
WAIVER OF PAST DEFAULTS
With respect to each Trust that has issued Notes, the holders of Notes
evidencing at least a majority in principal amount of the then-outstanding Notes
of the related series (or the holders of the Certificates of such series
evidencing not less than a majority of the outstanding Certificate Balance, in
the case of any Servicer Default which does not adversely affect the related
Indenture Trustee or such Noteholders) may, on behalf of all such Noteholders
and Certificateholders, waive any default by the Servicer in the performance of
its obligations under the related Sale and Servicing Agreement and its
consequences, except a Servicer Default in making any required deposits to or
payments from any of the Accounts in accordance with such Sale and Servicing
Agreement. With respect to each Trust that has not issued Notes, holders of
Certificates of such series evidencing not less than a majority of the principal
amount of such Certificates then outstanding may, on behalf of all such
Certificateholders, waive any default by the Servicer in the performance of its
obligations under the related Sale and Servicing Agreement or Pooling and
Servicing Agreement, except a Servicer Default in making any required deposits
to or payments from the Certificate Distribution Account or the related Accounts
in accordance with such Sale and Servicing Agreement or Pooling and Servicing
Agreement. No such waiver will impair such Noteholders' or Certificateholders'
rights with respect to subsequent defaults. Notwithstanding the foregoing, if
and to the extent specified in the related Prospectus Supplement, a third-party
credit enhancement provider may exercise the rights and remedies of the Owner
Trustee, Indenture Trustee, Noteholders and Certificateholders specified above.
AMENDMENT
Unless otherwise specified in the related Prospectus Supplement, each of
the Agreements may be amended by the parties thereto, without the consent of the
related Noteholders or Certificateholders, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Agreements or of modifying in any manner the rights of such Noteholders of
Certificateholders; PROVIDED that such action will not, in the opinion of
counsel satisfactory to the related Owner Trustee or Indenture Trustee, as
applicable, materially and adversely affect the interest of any such Noteholder
or Certificateholder. Unless otherwise specified in the related Prospectus
Supplement, the Purchase Agreements, Pooling and Servicing Agreements and Sale
and Servicing Agreements may also be amended by the Seller, the Servicer, the
related Owner Trustee and any related Indenture Trustee with the consent of the
holders of Notes evidencing at least a majority in principal amount of then
outstanding Notes, if any, of the related series and the holders of the
Certificates of such series evidencing at least a majority of the principal
amount of such Certificates then outstanding, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Agreements or of modifying in any manner the rights of such Noteholders or
Certificateholders; PROVIDED, HOWEVER, that no such amendment may (i) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on the related Receivables or distributions that are
required to be made for the benefit of such Noteholders or Certificateholders or
(ii) reduce the aforesaid percentage of the Notes or Certificates of such series
which are required to consent to any such amendment, without the consent of the
holders of all the outstanding Notes or Certificates, as the case may be, of
such series.
In addition, holders of certain classes of Securities of a series may have
the right to take actions that are detrimental to the interests of the
Securityholders of certain other classes of Securities of such series, as
specified in the related Prospectus Supplement. In certain cases, the senior
classes of securities may have the exclusive right to remove the Servicer, waive
defaults or control the disposition of collateral. In addition, because of the
relative size of the senior classes to the subordinate classes in most
senior/subordinate structures, the senior classes may effectively have voting
control over the Trust on matters that require the vote of all classes of
securities. In no event, however, will any class of securities have the right to
affect the interest rate or payment priorities of another class of securities.
Notwithstanding any of the foregoing, if and to the extent specified in
the related Prospectus Supplement, the consent of the third-party credit
enhancement provider, if any, for the related series may be required to any such
amendment.
INSOLVENCY EVENT
With respect to a Trust that is not a grantor trust, if an Insolvency
Event occurs with respect to the Affiliated Purchaser, the related Receivables
of such Trust will be liquidated and the Trust will be terminated 90 days after
the date of such Insolvency Event, unless, before the end of such 90-day period,
the related Owner Trustee shall have received written instructions from (i)
holders of each class of the Certificates (other than the Affiliated Purchaser)
with respect to such Trust representing more than 50% of the aggregate unpaid
principal amount of each such class (not including the principal amount of such
Certificates held by such Company and (ii) holders of each class of Notes, if
any, with respect to such Trust representing more than 50% of the aggregate
unpaid principal amount of each such class to the effect that each such party
disapproves of the liquidation of such Receivables and termination of such
Trust. Promptly after the occurrence of an Insolvency Event with respect to the
Affiliated Purchaser, notice thereof is required to be given to such Noteholders
and Certificateholders; PROVIDED that any failure to give such required notice
will not prevent or delay termination of such Trust. Upon termination of any
Trust, the related Owner Trustee shall, or shall direct the related Indenture
Trustee to, promptly sell the assets of such Trust (other than the Accounts) in
a commercially reasonable manner and on commercially reasonable terms. The
proceeds from any such sale, disposition or liquidation of the Receivables of
such Trust will be treated as collections on such Receivables and deposited in
the related Collection Account. With respect to any Trust, if the proceeds from
the liquidation of the related Receivables and any amounts on deposit in the
reserve account (if any), the Payahead Account (if any), the Note Distribution
Account (if any) and the Certificate Distribution Account are not sufficient to
pay the Notes, if any, and the Certificates of the related series in full, the
amount of principal returned to Noteholders and Certificateholders thereof will
be reduced and some or all of such Noteholders and Certificateholders will incur
a loss.
Each Trust Agreement will provide that the applicable Trustee does not
have the power to commence a voluntary proceeding in bankruptcy with respect to
the related Owner Trust without the unanimous prior approval of all
Certificateholders (including the applicable Affiliated Purchaser) of such Trust
and the delivery to such Trustee by each such Certificateholder (including such
Affiliated Purchaser) of a certificate certifying that such Certificateholder
reasonably believes that such Trust is insolvent.
PAYMENT OF NOTES
Upon the payment in full of all outstanding Notes of a given series and
the satisfaction and discharge of the related Indenture, the related Owner
Trustee will succeed to all the rights of the Indenture Trustee, and the
Certificateholders of such series will succeed to all the rights of the
Noteholders of such series, under the related Sale and Servicing Agreement,
except as otherwise provided therein.
AFFILIATED PURCHASER LIABILITY
Under each Trust Agreement, the Affiliated Purchaser will agree to be
liable directly to an injured party for the entire amount of any losses, claims,
damages or liabilities (other than those incurred by a Noteholder or a
Certificateholder in the capacity of an investor with respect to such Trust)
arising out of or based on the arrangement created by such Trust Agreement as
though such arrangement created a partnership under the Delaware Revised Uniform
Limited Partnership Act in which such Affiliated Purchaser was a general
partner.
TERMINATION
With respect to each Trust, the obligations of the Servicer, the Seller,
the related Owner Trustee and the related Indenture Trustee, if any, pursuant to
the Pooling and Servicing Agreement or Sale and Servicing Agreement, as
applicable, will terminate upon the latest of (i) the maturity or other
liquidation of the last related Receivable and the disposition of any amounts
received upon liquidation of any such remaining Receivables, (ii) the payment to
Noteholders, if any, and Certificateholders of the related series of all amounts
required to be paid to them pursuant to the Pooling and Servicing Agreement or
Sale and Servicing Agreement, as applicable, and the payment of any fees or
other amounts owing to the third party credit enhancement provider, if any, for
such Trust, and (iii) the occurrence of either event described below or such
other events provided in the related Prospectus Supplement.
The related Prospectus Supplement will specify whether the Servicer will
be permitted at its option to purchase from each Trust, as of the end of any
applicable Monthly Period, when the then outstanding Pool Balance with respect
to the Receivables held by such Trust is 10% (or such other percentage specified
in the related Prospectus Supplement) or less of the Original Pool Balance
(calculated after giving effect to the principal balance of any Subsequent
Receivables as of their respective Cutoff Dates), all remaining related
Receivables at a price equal to the aggregate of the Purchase Amounts thereof as
of the end of such Monthly Period. If specified in the related Prospectus
Supplement, any such repurchase may require the consent of the third-party
credit enhancement provider, if any, of the related series.
If and to the extent provided in the related Prospectus Supplement with
respect to a Trust, the Owner Trustee or, if Notes are outstanding, the
Indenture Trustee, will, within ten days following a Distribution Date as of
which the Pool Balance is equal to or less than the percentage of the Original
Pool Balance (calculated after giving effect to the principal balance of any
Subsequent Receivables as of their respective Subsequent Cutoff Dates) specified
in the related Prospectus Supplement, solicit bids for the purchase of the
Receivables remaining in such Trust, in the manner and subject to the terms and
conditions set forth in such Prospectus Supplement. If the Owner Trustee or
Indenture Trustee, as applicable, receives satisfactory bids as described in
such Prospectus Supplement, then the Receivables remaining in such Trust will be
sold to the highest bidder. If specified in the related Prospectus Supplement,
any such sale may require the consent of the third-party credit enhancement
provider, if any, of the related series.
As more fully described in the related Prospectus Supplement, any
outstanding Notes of the related series will be redeemed concurrently with
either of the events specified above and the subsequent distribution to the
related Certificateholders of all amounts required to be distributed to them
pursuant to the applicable Trust Agreement or Pooling and Servicing Agreement
will effect early retirement of the Certificates of such series.
DUTIES OF THE OWNER TRUSTEE AND INDENTURE TRUSTEE
The Owner Trustee and any Indenture Trustee will make no representations
as to the validity or sufficiency of the Trust Documents, the Certificates
(other than the authentication of the Certificates) or the Notes or any
Receivables or related documents, and is not accountable for the use or
application by the Servicer of any funds paid to the Seller or the Servicer in
respect of the Certificates, the Notes or the Receivables. The Owner Trustee and
any Indenture Trustee have not independently verified the Receivables. If no
Event of Default has occurred, the Owner Trustee or the Indenture Trustee is
required to perform only those duties specifically required of it under the
Trust Documents. Generally, those duties are limited to the receipt of the
various certificates, reports or other instruments required to be furnished to
the Owner Trustee or the Indenture Trustee under the Trust Documents, in which
case it is only required to examine them to determine whether they conform to
the requirements of the Trust Documents. The Owner Trustee and any Indenture
Trustee shall not be charged with knowledge of a breach of a representation or
warranty, or a failure by the Servicer to perform its duties under the Trust
Documents which failure constitutes an Event of Default unless the Owner Trustee
or the Indenture Trustee obtains actual knowledge of such breach or such failure
as specified in the Trust Documents.
The Owner Trustee and any Indenture Trustee are under no obligation to
exercise any of the rights or powers vested in them by the Trust Documents or to
make any investigation of matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
direction of any of the Securityholders, unless such Securityholders have
offered to the Owner Trustee or the Indenture Trustee, as the case may be,
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby. No Securityholder will have any right
under the Trust Documents to institute any proceeding with respect to such Trust
Document or any related agreement, unless such holder previously has given to
the Owner Trustee or the Indenture Trustee written notice of default and unless
the Securityholders then outstanding evidencing not less than 25% of a class of
Securities constituting at least 25% of the then Pool Balance for such series
have made written request upon the Owner Trustee or the Indenture Trustee to
institute such proceeding in its own name as Owner Trustee or Indenture Trustee
thereunder and have offered to the Owner Trustee or Indenture Trustee reasonable
indemnity and the Owner Trustee or Indenture Trustee for 30 days has neglected
or refused to institute any such proceeding.
THE OWNER TRUSTEE AND THE INDENTURE TRUSTEE
The Owner Trustee and any Indenture Trustee for each Trust will be
specified in the related Prospectus Supplement. The Owner Trustee or the
Indenture Trustee, in its individual capacity or otherwise, may hold Securities
in its own name or as pledgee. For the purpose of meeting the legal requirements
of certain jurisdictions, the Servicer and the Owner Trustee acting jointly (or
in some instances, the Owner Trustee acting alone) with (unless the related
Prospectus Supplement provides otherwise) the consent of the third party credit
enhancement provider, if any, so long as no Insurer Default (as defined in the
related Prospectus Supplement) has occurred and is continuing, shall have the
power to appoint co-trustees or separate trustees of all or any part of the
Trust. In the event of such appointment, all rights, powers, duties, and
obligations conferred or imposed upon the Owner Trustee by the Trust Documents
shall be conferred or imposed upon the Owner Trustee and such separate trustee
or co-trustee jointly, or, in any jurisdiction in which the Owner Trustee shall
be incompetent or unqualified to perform certain acts, singly upon such separate
trustee or co-trustee who shall exercise and perform such rights, powers, duties
and obligations solely at the direction of the Owner Trustee.
The Owner Trustee and any Indenture Trustee may resign at any time, in
which event the Seller with (unless the related Prospectus Supplement provides
otherwise) the consent of the third party credit enhancement provider, if any,
so long as no Insurer Default (as defined in the related Prospectus Supplement)
has occurred and is continuing, will be obligated to appoint a successor
trustee. The Sellers with (unless the related Prospectus Supplement provides
otherwise) the consent of the third party credit enhancement provider, if any
(so long as no Insurer Default (as defined in the related Prospectus Supplement)
has occurred and is continuing), may also remove the Owner Trustee if the Owner
Trustee ceases to be eligible to continue as such under the Trust Documents,
becomes legally unable to act or becomes insolvent. In such circumstances, the
Seller will be obligated to appoint a successor trustee. Any resignation or
removal of the Owner Trustee and appointment of a successor trustee does not
become effective until acceptance of the appointment by the successor trustee.
Any Indenture Trustee may be removed as set forth in the related Prospectus
Supplement.
The Trust Documents will provide that the Servicer will pay the Owner
Trustee's and any Indenture Trustee's fees. The Trust Documents will further
provide that the Owner Trustee and any Indenture Trustee will be entitled to
indemnification by the Seller and the Servicer for, and will be held harmless
against, any loss, liability, fee, disbursement or expense incurred by the Owner
Trustee or any Indenture Trustee not resulting from its own willful misfeasance,
bad faith or negligence (other than by reason of a breach of any of its
representations or warranties set forth in the Trust Documents). The Trust
Documents will further provide that the Servicer will indemnify the Owner
Trustee and any Indenture Trustee for certain taxes that may be asserted in
connection with the transaction.
INDEMNIFICATION OF THE INSURER
The Trust Documents will provide that the third party credit enhancement
provider with respect to a Trust will be indemnified by the Seller and the
Servicer for, and held harmless against, any loss, liability, fee, disbursement
or expense incurred by such third party credit enhancement provider not
resulting from its own willful misfeasance, bad faith or negligence (other than
by reason of a breach of any of its representations or warranties set forth in
the Trust Documents) and arising out of or resulting from the use, ownership or
operation by the Servicer or any affiliate thereof of a Financial Vehicle.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The Contracts are "chattel paper" as defined in the Uniform Commercial
Code as in effect in California and the other states in which the Contracts are
originated ("UCC"). Pursuant to the UCC, an ownership interest in chattel
paper may be perfected by possession of the chattel paper or filing a UCC-1
financing statement with the Secretary of State or other central filing office
in the appropriate state as required by the applicable UCC.
TMS Auto Finance will take or cause to be taken such action as is required
to perfect the Trust's rights in the Contracts and will represent and warrant
that the Trust, subject to the interest of the provider of credit enhancement,
if any, has good title, free and clear of liens and encumbrances, to each
Contract on the Closing Date. Under the Trust Documents, TMS Auto Finance, as
Servicer, will have possession of the Contracts following the sale of the
Contracts to the Trust and will hold the Contracts as custodian and agent of the
Owner Trustee and Indenture Trustee, if any. The Contracts will be physically
marked to indicate the ownership interest thereof by the Trust. UCC-1 financing
statements will also be filed with the California Secretary of State to perfect
by filing and give notice of the Trust's ownership interest in the Contracts.
TMS Auto Finance will agree in the Trust Documents to take all necessary action
to preserve and protect the Trust's ownership interest in the Contracts. The
Seller will represent and warrant that each Contract is secured by a Financed
Vehicle.
SECURITY INTERESTS IN VEHICLES
All of the Financed Vehicles were registered in the states where the
related Contracts were originated. Security interests in vehicles registered in
the State of California may be perfected by depositing with the California
Department of Motor Vehicles a properly endorsed certificate of title showing
the secured party as legal owner or an application for an original registration
together with an application for registration of the secured party as legal
owner. Security interests in vehicles registered in most other states are
perfected, generally, in a similar manner. The Seller will represent and warrant
to the Trust in the Trust Documents that all steps necessary to obtain a
perfected first priority security interest with respect to the Financed Vehicles
securing the Contracts have been taken. If the Servicer fails, because of
clerical error or otherwise, to effect or maintain such notation for a Financed
Vehicle, the Trust may not have a first priority security interest in such
Financed Vehicle. Each Receivable in a pool, unless that related Prospectus
Supplement indicates otherwise, typically prohibits the sale or transfer of the
Financed Vehicle without the Servicer's consent.
Perfection of security interests in the vehicles is generally governed by
the motor vehicle registration laws of the state in which the vehicle is
located. In California and the other states in which the Receivables have been
originated, a security interest in a vehicle generally may be perfected only by
causing such vehicle's certificate of title to be amended to note the security
interest of the secured party. Such notation of a secured party's security
interest is generally effected in California and such other states by depositing
with the applicable state motor vehicles registrar, or similar authority, along
with any necessary registration fees, the vehicle's certificate of title and an
application containing the name and address of the secured party.
Pursuant to the Purchase Agreement, TMS Auto Finance will assign its
security interests in the Financed Vehicles securing the Receivables to the
Seller and, pursuant to the Trust Documents, the Seller will assign its security
interests in the Financed Vehicles securing the Receivables to the Owner
Trustee. However, because of the administrative burden and expense, the
Servicer, the Seller and the Owner Trustee will not amend any certificate of
title to identify the Trust as the new secured party on the certificates of
title relating to the Financed Vehicles. Also, the Servicer will continue to
hold any certificates of title relating to the Financed Vehicles in its
possession as custodian for the Owner Trustee pursuant to the Trust Documents.
Under the law of California and most other states, assignments such as
those under the Purchase Agreement and the Trust Documents are an effective
conveyance of a security interest without amendment of any security interest
noted on a vehicle's certificate of title, and the assignee succeeds thereby to
the assignor's rights as secured party. In the absence of fraud or forgery by
the vehicle owner or the Servicer or administrative error by state or local
agencies, the notation of the Servicer's security interest on the certificates
of title or the Servicer's possession of the certificate of title will be
sufficient to protect the Trust against the rights of subsequent purchasers of a
Financed Vehicle or subsequent lenders who take a security interest in a
Financed Vehicle. If there are any Financed Vehicles as to which a perfected
security interest was not obtained, the Trust's security interest would be
subordinate to, among others, subsequent purchasers of the Financed Vehicles,
lienholders and holders of perfected security interests. Such a failure,
however, would constitute a breach of TMS Auto Finance's warranties under the
Purchase Agreement and of the Seller's warranties under the Trust Documents and
would create an obligation of TMS Auto Finance and/or another party, if any,
designated, in the related Prospectus Supplement, under the Purchase Agreement
and of the Seller and/or another party, if any, designated, in the related
Prospectus Supplement, under the Trust Documents to purchase the related
Receivable unless the breach is cured. The Seller will assign its rights under
the Purchase Agreement to the Trust. By not identifying the Trust as the secured
party on the certificate of title, the security interest of the Trust in the
Financed Vehicle could be defeated through fraud or negligence.
Under the laws of most states, the perfected security interest in a
vehicle would continue for four months after a vehicle is moved to a state other
than the state in which it is initially registered and thereafter until the
vehicle owner re-registers the vehicle in the new state. A majority of states,
including California, generally require surrender of a certificate of title to
re-register a vehicle; accordingly, a secured party must surrender possession if
it holds the certificate of title to the vehicle, or, in the case of vehicles
registered in states providing for the notation of a security interest on the
certificate of title but not possession by the secured party, the secured party
would receive notice of surrender if the security interest is noted on the
certificate of title. Thus, the secured party would have the opportunity to
re-perfect its security interest in the vehicle in the state of relocation. In
states that do not require a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection. In the ordinary course of
servicing receivables, TMS Auto Finance takes steps to effect re-perfection upon
receipt of notice of re-registration or information from the Obligor as to
relocation. Similarly, when an Obligor sells a vehicle, TMS Auto Finance must
surrender possession of the certificate of title or will receive notice as a
result of its security interest noted thereon and accordingly will have an
opportunity to require satisfaction of the related Receivable before release of
the security interest. Under the Trust Documents, the Servicer is obligated to
take appropriate steps, at the Servicer's expense, to maintain perfection of
security interests in the Financed Vehicles.
Under the laws of California, Texas and most other states, liens for
repairs performed on, and for storage of, a motor vehicle and liens for certain
unpaid taxes take priority over even a perfected security interest in a Financed
Vehicle. The Internal Revenue Code of 1986, as amended, also grants priority to
certain federal tax liens over the security interest of a secured party. The
laws of certain states and federal law permit the confiscation of motor vehicles
under certain circumstances if used in unlawful activities, which may result in
the loss of a secured party's perfected security interest in the confiscated
motor vehicle. TMS Auto Finance will represent to the Seller and the Seller will
represent to the Trust that each security interest in a Financed Vehicle is or
will be prior to all other present liens (other than tax liens and liens that
arise by operation of law) upon and security interests in such Financed Vehicle.
However, liens for repairs or taxes, or the confiscation of a Financed Vehicle,
could arise or occur at any time during the term of a Receivable. No notice will
be given to the Owner Trustee, the Indenture Trustee, if any, or any
Securityholders in the event such a lien arises or confiscation occurs.
REPOSSESSION
In the event of a default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the UCC, except where specifically limited by other laws. In addition to
the provisions of the UCC, under California law the Contracts originated in
California are subject to the provisions of its Rees-Levering Motor Vehicle
Sales and Finance Act (the "Rees-Levering Act"). Contracts
originated in other states are subject to retail installment sales laws and
similar laws of those states. The provisions of the Rees-Levering Act and
similar laws of other states control in the event of a conflict with the
provisions of the UCC. The UCC remedies of a secured party include the right to
repossession by self-help means, unless such means would constitute a breach of
the peace. Unless a vehicle is voluntarily surrendered, self-help repossession
by outside agencies is the method employed by TMS Auto Finance in the majority
of instances in which a default occurs and is accomplished by retaking
possession of the financed vehicle. The Rees-Levering Act and similar laws of
other states place restrictions on repossession sales, including notice to the
debtor of the intent to sell and of the debtor's right to redeem the vehicle. In
addition, the UCC requires commercial reasonableness in the conduct of the sale.
In cases where the Obligor objects or raises a defense to repossession, or if
otherwise required by applicable state law, a court order must be obtained from
the appropriate state court, and the vehicle must then be repossessed in
accordance with that order. In certain states under certain circumstances after
the vehicle has been repossessed, the Obligor may reinstate the contract by
paying the delinquent installments on the contract and other amounts due.
NOTICE OF SALE; REDEMPTION RIGHTS
In the event of default by the Obligor, some jurisdictions require that
the Obligor be notified of the default and be given a time period within which
the Obligor may cure the default prior to repossession. Generally, this right of
reinstatement may be exercised on a limited number of occasions in any one-year
period.
The UCC and other state laws require the secured party to provide the
Obligor with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. In
some states the Obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding, and preparing the collateral
for disposition and arranging for this sale, plus, in some jurisdictions,
reasonable attorneys' fees, or, in some other states, by payment of delinquent
installments or the unpaid balance. Repossessed vehicles are generally resold by
TMS Auto Finance through automobile auctions which are attended principally by
automotive dealers.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the repossessed vehicles generally will be
applied to the expenses of resale and repossession and then to the satisfaction
of the indebtedness of the Obligor on the Receivable. While some states impose
prohibitions or limitations on deficiency judgments if the net proceeds from
resale do not cover the full amount of the indebtedness, a deficiency judgment
can be sought in those states that do not prohibit or limit such judgments.
Under California law the proceeds from the resale of the motor vehicle securing
the debtor's loan are required to be applied first to the expenses of resale and
repossession, and if the remaining proceeds are not sufficient to repay the
indebtedness, the creditor may seek a deficiency judgment for the balance. The
priority of application of proceeds of sale as to repossessed vehicles under
Contracts originated in most other states is similar. However, the deficiency
judgment would be a personal judgment against the Obligor for the shortfall, and
a defaulting Obligor can be expected to have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any other holder of any lien with respect to the
vehicle or, if no such lienholder exists or there are remaining funds, the UCC
requires the lender to remit the surplus to the former Obligor.
INSOLVENCY MATTERS
TMS Auto Finance will intend that any transfer of Receivables to the
Seller will constitute a sale, rather than a pledge of the Receivables to secure
indebtedness of TMS Auto Finance. However, if TMS Auto Finance were to become a
debtor under the federal bankruptcy code or similar applicable state laws
(collectively, the "Insolvency Laws"), a creditor or trustee in
bankruptcy thereof, or TMS Auto Finance as debtor-in-possession, might argue
that such sale of Receivables was a pledge of Receivables rather than a sale
and/or that the assets and liabilities of the Seller should be consolidated with
the assets and liabilities of TMS Auto Finance. The Seller has taken and will
take steps in structuring the transactions contemplated hereby and by any
Prospectus Supplement that are intended to minimize the risk that the voluntary
or involuntary application for relief under any Insolvency Law would result in
the assets and liabilities of the Seller being consolidated with the assets and
liabilities of any other person. Nevertheless, if TMS Auto Finance were to
become a debtor under any Insolvency Laws, and such positions - that the
transfer of Receivables was a pledge rather than a sale or otherwise should be
treated as part of its bankruptcy estate and/or that the assets and liabilities
of the Seller should be consolidated - were presented to or accepted by a court,
then delays in payments to Securityholders could occur or reductions in the
amounts of such payments could result. In addition, if the Seller were to become
a debtor under any Insolvency Law and a creditor or trustee-in-bankruptcy of
such debtor or such debtor itself were to take the position that the sale of
Receivables to such Trust should instead be treated as a pledge of such
Receivables to secure a borrowing of such debtor, delays in payments of
collections of Receivables to the related Securityholders could occur or
reductions in the amounts of such payments could result. In addition, if the
transfer of any Receivables is recharacterized as a pledge, a tax lien, other
governmental lien, or other lien created by operation of law on the property of
the Servicer, the holder of such lien may have priority over the Trust's
interest in such Receivables. See "The Seller."
In addition, in a case recently decided by the United States Court of
Appeals for the Tenth Circuit, OCTAGON GAS SYSTEM, INC. V. RIMMER, such Circuit
Court found that "accounts", a defined term under the Uniform Commercial Code,
sold prior to a bankruptcy should be treated as part of the bankruptcy estate of
the seller of such accounts. If TMS Auto Finance or the Seller were to become a
debtor in a bankruptcy proceeding and a court applied the reasoning of the
Circuit Court reflected in the case described above, delays in payments to
Securityholders could occur or reductions in the amounts of such payments could
result.
With respect to each Trust that is not a grantor trust, if an Insolvency
Event with respect to the Affiliated Purchaser (which will be, as specified in
the related Prospectus Supplement, the Seller, a wholly owned subsidiary of the
Seller or a limited partnership of which such subsidiary is the general partner
and the Seller is the limited partner, as set forth in such Prospectus
Supplement) occurs, the Indenture Trustee or Owner Trustee for such Trust will
promptly sell, dispose of or otherwise liquidate the related Receivables in a
commercially reasonable manner on commercially reasonable terms, except under
certain limited circumstances. The proceeds from any such sale, disposition or
liquidation of Receivables will be treated as collections on the Receivables and
deposited in the Collection Account of such Trust. If the proceeds from the
liquidation of the Receivables and any amounts on deposit in the Collection
Account or other accounts available for Securityholders with respect to any such
Trust and any amounts available from any credit enhancement are not sufficient
to pay any Notes and the Certificates of the related series in full, the amount
of principal returned to any Noteholders or the Certificateholders will be
reduced and such Noteholders and Certificateholders will incur a loss.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance. These laws include the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Federal Trade Commission Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, state adaptations
of the National Consumer Act and of the Uniform Consumer Credit Code, the
Rees-Levering Act and state motor vehicle retail installment sales acts, retail
installment sales acts and other similar laws. Also, state laws impose finance
charge ceilings and other restrictions on consumer transactions and require
contract disclosures in addition to those required under federal law. These
requirements impose specific statutory liabilities upon creditors who fail to
comply with their provisions. In some cases, this liability could affect an
assignee's (such as the Trust's) ability to enforce consumer finance contracts
such as the Receivables.
The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission
(the "FTC Rule"), the provisions of which are generally duplicated by
the Uniform Consumer Credit Code, state statutes or the common law in certain
states, has the effect of subjecting a seller (and certain related lenders and
their assignees, such as the Trust) in a consumer credit transaction and any
assignee of the seller to all claims and defenses which the obligor in the
transaction could assert against the seller of the goods. Liability under the
FTC Rule is limited to the amounts paid by the obligor under the contract, and
the holder of the contract may also be unable to collect any balance remaining
due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, the Owner Trustee, as holder of the Receivables, will be
subject to any claims or defenses that the purchaser of the Financed Vehicle may
assert against the seller of the Financed Vehicle. Such claims are limited to a
maximum liability equal to the amounts theretofore paid by the obligor on the
Receivable. Under most state motor vehicle dealer licensing laws, sellers of
motor vehicles are required to be licensed to sell motor vehicles at retail
sale. Furthermore, Federal Odometer Regulations promulgated under the Motor
Vehicle Information and Cost Savings Act require that all sellers of new and
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if an
Odometer Disclosure Statement was not provided to the purchaser of the related
financed vehicle, the obligor may be able to assert a defense against the seller
of the vehicle.
Courts have imposed general equitable principles on secured parties
pursuing repossession of collateral or litigation involving deficiency balances.
These equitable principles may have the effect of relieving an obligor from some
or all of the legal consequences of a default.
In several cases, obligors have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to consumers.
In addition to those parties, if any, identified in the related Prospectus
Supplement, TMS Auto Finance and the Seller will warrant under the Purchase
Agreement and the Trust Documents, that each Receivable complies with all
requirements of law in all material respects. Accordingly, if an Obligor has a
claim against the Trust for violation of any law and the Owner Trustee or the
Indenture Trustee, as the case may be, determines such claim materially and
adversely affects the Trust's interest in a Receivable, such violation would
constitute a breach of warranty under the Purchase Agreement and the Trust
Documents and would create an obligation of TMS Auto Finance, the Seller and the
party, if any, identified in the related Prospectus Supplement, to repurchase
the Receivable unless the breach is cured.
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
resale upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle, and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value of the
motor vehicle at the time of bankruptcy (as determined by the court), leaving
the party providing financing as a general unsecured creditor for the remainder
of the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
TRANSFERS OF VEHICLES
The Receivables in a pool, unless the related Prospectus Supplement
indicates otherwise, typically prohibit the sale or transfer of the vehicle
securing a Receivable without the Servicer's consent and permit the Servicer to
accelerate the maturity of the Receivable upon a sale or transfer without its
consent. The Servicer generally will not consent to a sale or transfer without
prepayment of the Receivable. However, in certain circumstances the Servicer may
enter into a transfer of equity agreement with the secondary purchaser for the
purpose of effecting the transfer of the Financed Vehicle.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. Stroock & Stroock & Lavan, special federal tax counsel for the
Seller ("Federal Tax Counsel"), is of the opinion that the
discussion hereunder fully and fairly discloses all material federal tax risks
associated with the purchase, ownership and disposition of the Notes and
Certificates. The summary does not purport to deal with federal income tax
consequences or special rules that are applicable to certain categories of
holders. Moreover, there are no cases or Internal Revenue Service ("IRS")
rulings on all of the issues discussed below. As a result, the IRS may disagree
with all or a part of the discussion below. Prospective investors are urged to
consult their own tax advisors in determining the federal, state, local, foreign
and any other tax consequences to them of the purchase, ownership and
disposition of the Notes and the Certificates.
The following summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the Treasury regulations
promulgated thereunder and judicial or ruling authority, all of which are
subject to change, which change may be retroactive. The opinion of Federal Tax
Counsel, however, is not binding on the IRS or the courts. No ruling on any of
the issues discussed below will be sought from the IRS. For purposes of the
following summary, references to the Trust, the Notes, the Certificates and
related terms, parties and documents shall be deemed to refer, unless otherwise
specified herein, to each Trust and the Notes, Certificates and related terms,
parties and documents applicable to such Trust.
The federal income tax consequences to Certificateholders will vary
depending on whether the Trust will be treated as a partnership under the Code,
whether the Trust will be treated as a grantor trust, or whether it is intended
that the Trust serve as a security device for the issuance of Certificates that
are to be treated as indebtedness for federal income tax purposes. The
Prospectus Supplement for each series of Certificates will specify whether the
Trust will be treated as a partnership, a grantor trust, or is intended to serve
as a security device as just described. In addition, if the related Prospectus
Supplement so provides, the Transaction Documents for a Trust may provide that
an election will be made on or after September 1, 1997 to qualify such Trust as
a Financial Asset Securitization Investment Trust pursuant to new provisions of
the Code which will be effective as of such date.
TRUSTS TREATED AS PARTNERSHIPS
Tax Characterization of the Trust as a Partnership
Federal Tax Counsel will deliver its opinion that a Trust which is
intended to be a partnership, as specified in the related Prospectus Supplement,
will not be an association (or publicly traded partnership) taxable as a
corporation for federal income tax purposes. This opinion will be based on the
assumption that the terms of the Trust Agreement and related documents will be
complied with, and on counsel's conclusions that (1) the Trust will not have
certain characteristics necessary for a business trust to be classified as an
association taxable as a corporation and (2) the nature of the income of the
Trust will exempt it from the rule that certain publicly traded partnerships are
taxable as corporations.
If the Trust were taxable as a corporation for federal income tax
purposes, the Trust would be subject to corporate income tax on its taxable
income. The Trust's taxable income would include all its income on the
Receivables, possibly reduced by its interest expense on the Notes. Any such
corporate income tax could materially reduce cash available to make payments on
the Notes and distributions on the Certificates, and Certificateholders could be
liable for any such tax that is unpaid by the Trust.
Tax Consequences to Holders of the Notes Issued by a Partnership
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for federal income tax purposes. Federal Tax Counsel will, except as otherwise
provided in the related Prospectus Supplement, advise the Trust that in its
opinion the Notes will be classified as debt for federal income tax purposes.
The discussion below assumes this characterization of the Notes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes. Moreover, the discussion assumes that the
interest formula for the Notes meets the requirements for "qualified stated
interest" under Treasury regulations (the "OID regulations")
relating to original issue discount ("OID"), and that any OID on the Notes
(i.e, any excess of the principal amount of the Notes over their issue price)
does not exceed a de minimis amount (i.e., generally 1/4% of their principal
amount multiplied by the number of full years included in their term), all
within the meaning of the OID regulations. If these conditions are not satisfied
with respect to any given series of Notes, additional tax considerations with
respect to such Notes will be disclosed in the applicable Prospectus Supplement.
Interest Income on the Notes. Based on the above assumptions the Notes
generally will not be considered issued with OID. The stated interest thereon
will be taxable to a Noteholder as ordinary interest income when received or
accrued in accordance with such Noteholder's method of tax accounting. Under the
OID regulations, a holder of a Note issued with a de minimis amount of OID
generally must include such OID in income, on a pro rata basis, as principal
payments are made on the Note. However, a holder may elect to accrue de minimis
OID under a constant yield method in connection with an election to accrue all
interest, discount, and premium on the Note using the constant yield method. See
"Trusts Treated as Grantor Trusts--Taxation of Holders if Stripped Bond Rules Do
Not Apply--Election to Treat All Interest as OID" for a discussion of such
election. A purchaser who buys a Note for more or less than its principal amount
will generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one
year from the issue date of such Note (a "Short-Term Note") may
be subject to special rules. An accrual basis holder of a Short-Term Note (and
certain cash method holders, including regulated investment companies, as set
forth in Section 1281 of the Code) generally would be required to report
interest income as interest accrues on a straight-line basis over the term of
each interest period. Other cash basis holders of a Short-Term Note would, in
general, be required to report interest income as interest is paid (or, if
earlier, upon the taxable disposition of the Short-Term Note). However, a cash
basis holder of a Short-Term Note reporting interest income as it is paid may be
required to defer a portion of any interest expense otherwise deductible on
indebtedness incurred to purchase or carry the Short-Term Note until the taxable
disposition of the Short-Term Note. A cash basis taxpayer may elect under
Section 1281 of the Code to accrue interest income on all nongovernment debt
obligations with a term of one year or less, in which case the taxpayer would
include interest on the Short-Term Note in income as it accrues, but would not
be subject to the interest expense deferral rule referred to in the preceding
sentence. Certain special rules apply if a Short-Term Note is purchased for more
or less than its principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder
will recognize gain or loss in an amount equal to the difference between the
amount realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, acquisition discount, OID,
if any, and gain previously included by such Noteholder in income with respect
to the Note and decreased by the amount of bond premium (if any) previously
amortized and by the amount of principal payments previously received by such
Noteholder with respect to such Note. Any such gain or loss generally will be
capital gain or loss if the Note was held as a capital asset, except for gain
representing accrued interest and accrued market discount not previously
included in income.
Capital losses generally may be used only to offset capital gains.
Foreign Holders. Interest payments made (or accrued) to a Noteholder
who is a Foreign Investor, as defined below, generally will be considered
"portfolio interest," and generally will not be subject to United States federal
income tax and withholding tax, if the interest is not effectively connected
with the conduct of a trade or business within the United States by the Foreign
Investor and the Foreign Investor (i) is not actually or constructively a "10
percent shareholder" of the Trust or the Seller (including a holder of 10% of
the outstanding Certificates) or a "controlled foreign corporation" with respect
to which the Trust or the Seller is a "related person" within the meaning of the
Code and (ii) provides the Owner Trustee or other person who is otherwise
required to withhold U.S. tax with respect to the Notes with an appropriate
statement (on Form W-8 or a similar form), signed under penalties of perjury,
certifying that the beneficial owner of the Note is a Foreign Investor and
providing the Foreign Investor's name and address. If a Note is held through a
securities clearing organization or certain other financial institutions, the
organization or institution may provide the relevant signed statement to the
withholding agent; in that case, however, the signed statement must be
accompanied by a Form W-8 or substitute form provided by the Foreign Investor
that owns the Note. If such interest is not portfolio interest, then it will be
subject to United States federal income and withholding tax at a rate of 30
percent, unless reduced or eliminated pursuant to an applicable tax treaty.
Any gain realized on the sale, redemption, retirement or other taxable
disposition of a Note by a foreign person will be exempt from United States
federal income and withholding tax, provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the Foreign Investor, (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year, and (iii) in the case of gain representing accrued
interest or OID, the conditions described in the immediately preceding paragraph
are satisfied.
If the interest, gain or income on a Note held by a Foreign Investor is
effectively connected with the conduct of a trade or business in the United
States by the Foreign Investor (although exempt from the withholding tax
previously discussed if the holder provides an appropriate and timely statement
on Form 4224), the holder generally will be subject to United States federal
income tax on the interest, gain or income at regular federal income tax rates.
In addition, if the Foreign Investor is a foreign corporation, it may be subject
to a branch profits tax equal to 30% of its "effectively connected earnings and
profits" within the meaning of the Code for the taxable year, as adjusted for
certain items, unless it qualifies for a lower rate under an applicable tax
treaty (as modified by the branch profits tax rules).
Proposed Treasury regulations which would be effective for payments
made after December 31, 1997 if adopted in their current form would provide
alternative certification requirements and means by which a Foreign Investor
could claim the exemptions from federal income and withholding taxes.
For purposes of this tax discussion, a Foreign Person or Foreign
Investor is any person other than (i) a citizen or resident of the United
States, (ii) a corporation, partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate whose income is includable in gross income for United States
federal income taxation regardless of source, or (iv) a trust other than a
"Foreign Trust," as such term is defined in Section 7701(a)(31) of the Code.
Backup Withholding. Each holder of a Note (other than an exempt holder
such as a corporation, tax-exempt organization, qualified pension and
profit-sharing trust, individual retirement account or nonresident alien who
provides certification as to status as a nonresident) will be required to
provide, under penalties of perjury, a certificate containing, among other
things, the holder's name, address, correct federal taxpayer identification
number and a statement that the holder is not subject to backup withholding.
Should a nonexempt Noteholder fail to provide the required certification, the
Trust will be required to withhold 31 percent of the amount otherwise payable to
the holder, and remit the withheld amount to the IRS as a credit against the
holder's federal income tax liability.
Possible Alternative Treatments of the Notes. If, contrary to the
opinion of Federal Tax Counsel, the IRS successfully asserted that one or more
of the Notes did not represent debt for federal income tax purposes, the Notes
might be treated as equity interests in the Trust. If so treated, the Trust
might be taxable as a corporation with the adverse consequences described above
(and the taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on Notes recharacterized as equity).
Alternatively, the Trust might be treated as a publicly traded partnership that
would not be taxable as a corporation if it met certain qualifying income tests.
Nonetheless, treatment of the Notes as equity interests in such a publicly
traded partnership could have adverse tax consequences to certain holders. For
example, income to Foreign Investors generally would be subject to U.S. tax and
U.S. tax return filing and withholding requirements, and individual holders
might be subject to certain limitations on their ability to deduct their share
of Trust expenses.
Tax Consequences to Holders of the Certificates Issued by a Partnership
Treatment of the Trust as a Partnership. The Seller and TMS Auto
Finance will agree, and the Certificateholders will agree by their purchase of
Certificates, to treat the Trust as a partnership for purposes of federal and
state income tax, franchise tax and any other tax measured in whole or in part
by income, with the assets of the partnership being the assets held by the
Trust, the partners of the partnership being the Certificateholders, and the
Notes being debt of the partnership. However, the proper characterization of the
arrangement involving the Trust, the Certificates, the Notes, the Seller and TMS
Auto Finance is not clear because there is no authority on transactions closely
comparable to that contemplated herein.
For example, because the Certificates may have certain features
characteristic of debt, the Certificates might be considered debt of the Seller
or the Trust. Generally, provided such Certificates are issued at or close to
face value, any characterization would not result in materially adverse tax
consequences to Certificateholders as compared to the consequences from
treatment of the Certificates as equity in a partnership, described below. If
Certificates are issued at a substantial discount, a discussion of the relevant
tax consequences will be set forth in the related Prospectus Supplement. The
following discussion assumes that the Certificates represent equity interests in
a partnership.
Indexed Securities, etc. The following discussion assumes that all
payments on the Certificates are denominated in U.S. dollars, none of the
Certificates are Indexed Securities or Strip Certificates, and that a series of
Securities includes a single class of Certificates. If these conditions are not
satisfied with respect to any given series of Certificates, additional tax
considerations with respect to such Certificates will be disclosed in the
applicable Prospectus Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject
to federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's allocated share of income, gains,
losses, deductions and credits of the Trust. In certain instances, however, the
Trust could have an obligation to make payments of withholding tax on behalf of
a Certificateholder. See "Backup Withholding" and "Tax Consequences to Foreign
Certificateholders" below. The Trust's income will consist primarily of interest
and finance charges earned on the Receivables (including appropriate adjustments
for market discount, OID and bond premium) and any gain upon collection or
disposition of Receivables. The Trust's deductions will consist primarily of
interest accruing with respect to the Notes, servicing and other fees, and
losses or deductions upon collection or disposition of Receivables.
The tax items of a partnership are allocable to the partners in
accordance with the Code, Treasury regulations and the partnership agreement
(here, the Trust Agreement and related documents). The Trust Agreement will
provide, in general, that the Certificateholders will be allocated taxable
income of the Trust for each month equal to the sum of (i) the interest that
accrues on the Certificates in accordance with their terms for such month,
including interest accruing at the Pass Through Rate for such month and interest
on amounts previously due on the Certificates but not yet distributed; (ii) any
Trust income attributable to discount on the Receivables that corresponds to any
excess of the principal amount of the Certificates over their initial issue
price; (iii) prepayment premium payable to the Certificateholders for such
month; and (iv) any other amounts of income payable to the Certificateholders
for such month. Such allocation will be reduced by any amortization by the Trust
of premium on Receivables that corresponds to any excess of the issue price of
Certificates over their principal amount. Based on the economic arrangement of
the parties, this approach for allocating Trust income should be permissible
under applicable Treasury regulations, although Federal Tax Counsel is unable to
opine that the IRS would not require a greater amount of income to be allocated
to Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be allocated income equal to the entire Pass-Through Rate
plus the other items described above even though the Trust might not have
sufficient cash to make current cash distributions of such amount. Thus, cash
basis holders will in effect be required to report income from the Certificates
on the accrual basis and Certificateholders may become liable for taxes on Trust
income even if they have not received cash from the Trust to pay such taxes. In
addition, because tax allocations and tax reporting will be done on a uniform
basis for all Certificateholders but Certificateholders may be purchasing
Certificates at different times and at different prices, Certificateholders may
be required to report on their tax returns taxable income that is greater or
less than the amount reported to them by the Trust.
All of some of the taxable income allocated to a Certificateholder that
is a pension, profit sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) may constitute "unrelated business
taxable income" generally taxable to such a holder under the Code.
An individual taxpayer's share of expenses of the Trust (including fees
to the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust. Such deductions may also be subject to reduction under Section 68 of
the Code if the individual's adjusted gross income exceeds certain limits.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. It is believed that the Receivables will not be
issued with OID, and, therefore, the Trust should not have OID income. However,
the purchase price paid by the Trust for the Receivables may be greater or less
than the remaining principal balance of the Receivables at the time of purchase.
If so, the Receivables will have been acquired at a premium or discount, as the
case may be. (As indicated above, the Trust will make this calculation on an
aggregate basis, but might be required to recompute it on a
Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium,
the Trust will elect to include any such discount in income currently as it
accrues over the life of the Receivables or to offset any such premium against
interest income on the Receivables. As indicated above, a portion of such market
discount income or premium deduction will be allocated to Certificateholders if
the related Trust Agreement so provides. Any such allocation will be disclosed
in the related Prospectus Supplement.
Section 708 Termination. Under Section 708 of the Code, the Trust will
be deemed to terminate for federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. Proposed
regulations would provide that if a termination occurs the partnership will be
considered to transfer its assets and liabilities to a new partnership in
exchange for interests in that new partnership which it would then be treated as
transferring to its partners. The Trust will not comply with certain technical
requirements that might apply when such a constructive termination occurs. As a
result, the Trust may be subject to certain tax penalties and may incur
additional expenses if it is required to comply with those requirements.
Furthermore, the Trust might not be able to comply due to lack of data.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income (includible in
income) and decreased by any distributions received with respect to such
Certificate. In addition, both the tax basis in the Certificates and the amount
realized on a sale of a Certificate would include the holder's share of the
Notes and other liabilities of the Trust. A holder acquiring Certificates at
different prices may be required to maintain a single aggregate adjusted tax
basis in such Certificates, and, upon sale or other disposition of some of the
Certificates, allocate a portion of such aggregate tax basis to the Certificates
sold (rather than maintaining a separate tax basis in each Certificate for
purposes of computing gain or loss on a sale of that Certificate).
Any gain on the sale of a Certificate attributable to the holder's
share of unrecognized accrued market discount on the Receivables would generally
be treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the
Trust's taxable income and losses will be determined monthly and the tax items
for a particular calendar month will be apportioned among the Certificateholders
in proportion to the principal amount of Certificates owned by them as of the
close of the last day of such month. As a result, a holder purchasing
Certificates may be allocated tax items (which will affect its tax liability and
tax basis) attributable to periods before the actual purchase takes place.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
of the Trust might be reallocated among the Certificateholders. The Affiliated
Purchaser is authorized to revise the Trust's method of allocation between
transferors and transferees to conform to a method permitted by future
regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (or loss), the purchasing Certificateholder will have a
higher (or lower) basis in the Certificates than the selling Certificateholder
had. The tax basis of the Trust's assets will not be adjusted to reflect that
higher (or lower) basis unless the Trust were to file an election under Section
754 of the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Owner Trustee is required to keep or have
kept complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Owner Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust and will report each Certificateholder's allocable share of items of Trust
income and expense to holders and the IRS on Schedule K-1. The Trust will
provide the Schedule K-1 information to nominees that fail to provide the Trust
with the information statement described below and such nominees will be
required to forward such information to the beneficial owners of the
Certificates. Generally, holders must file tax returns that are consistent with
the information return filed by the Trust or be subject to penalties unless the
holder notifies the IRS of all such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly owned agency or
instrumentality of either of the foregoing, and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
The Seller will be designated as the tax matters partner in the related
Trust Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS with respect to partnership
items. The Code provides for administrative examination of a partnership as if
the partnership were a separate and distinct taxpayer. Generally, the statute of
limitations for partnership items does not expire before three years after the
date on which the partnership information return is filed. Any adverse
determination following an audit of the return of the Trust by the appropriate
taxing authorities could result in an adjustment of the returns of the
Certificateholders, and, under certain circumstances, a Certificateholder may be
precluded from separately litigating a proposed adjustment to the items of the
Trust. An adjustment could also result in an audit of a Certificateholder's
returns and adjustments of items not related to the income and losses of the
Trust.
Tax Consequences to Foreign Certificateholders. As discussed below, an
investment in a Certificate is not suitable for any Foreign Person, as defined
above, which is not eligible for a complete exemption from U.S. withholding tax
on interest under a tax treaty with the United States. Accordingly, no interest
in a Certificate should be acquired by or on behalf of any such Foreign Person.
No regulations, published rulings or judicial decisions exist that
would discuss the characterization for Federal withholding tax purposes with
respect to a Foreign Person of a partnership with activities substantially the
same as the Trust. Depending upon the particular terms of the related Trust
Agreement and Sale and Servicing Agreement, a trust may be considered to be
engaged in a trade or business in the United States for purposes of Federal
withholding taxes with respect to non-U.S. persons. If the Trust is considered
to be engaged in a trade or business in the United States for such purposes, the
income of the Trust distributable to a non-U.S. person would be subject to
Federal withholding tax at a rate of 35% for persons taxable as a corporation
and 39.6% for all other Foreign Persons. Also, in such cases, a Foreign Person
that is a corporation may be subject to the branch profits tax. If the Trust is
notified that a Certificateholder is a Foreign Person, the Trust may withhold as
if it were engaged in a trade or business in the United States in order to
protect the Trust from possible adverse consequences of a failure to withhold.
Subsequent adoption of Treasury regulations or the issuance of other
administrative pronouncements may require the Trust to change its withholding
procedures.
If a Trust is engaged in a trade or business, each foreign
Certificateholder will be required to file a United States federal individual or
corporate income tax return (including in the case of a corporation, the branch
profits tax) on its share of the Trust's income. A foreign holder generally
would be entitled to file with the IRS a claim for refund with respect to
withheld taxes, taking the position that no taxes were due because the Trust was
not engaged in a United States trade or business. However, interest payments
made to (or accrued by) a Certificateholder who is a Foreign Person may be
considered guaranteed payments to the extent such payments are determined
without regard to the income of the Trust and for that reason or because of the
nature of the Receivables, the interest will likely not be considered "portfolio
interest." See "--Tax Consequences to Holders of the Notes Issued by a
Partnership -Foreign Holders" for a discussion of portfolio interests. As a
result, even if the Trust is not considered to be engaged in a U.S. trade or
business, Certificateholders would be subject to United States Federal income
tax which must be withheld at a rate of 30% on their share of the Trust's income
(without reduction for interest expense), unless reduced or eliminated pursuant
to an applicable income tax treaty. If the Trust is notified that a
Certificateholder is a Foreign Person, the Trust may be required to withhold and
pay over such tax, which can exceed the amounts otherwise available for
distribution to such a Certificateholder. A Foreign Person would generally be
entitled to file with the IRS a refund claim for such withheld taxes, taking the
position that the interest was portfolio interest and therefore not subject to
U.S. tax. However, the IRS may disagree and no assurance can be given as to the
appropriate amount of tax liability. As a result, each potential foreign
Certificateholder should consult its tax advisor as to whether the tax
consequences of holding an interest in a Certificate make it an unsuitable
investment.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a "backup" withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code.
TRUSTS TREATED AS GRANTOR TRUSTS
Tax Characterization of the Trust as a Grantor Trust
As specified in the related Prospectus Supplement, if a partnership
election is not made and the Certificates are not treated as debt for federal
income tax purposes as discussed below, Federal Tax Counsel will deliver its
opinion that the Trust will not be classified as an association taxable as a
corporation and that such Trust will be classified as a grantor trust under
subpart E, Part I of subchapter J of the Code. In this case, owners of
Certificates (referred to herein as "Grantor Trust Certificateholders") will be
treated for federal income tax purposes as
owners of a portion of the Trust's assets as described below. The Certificates
issued by a Trust that is treated as a grantor trust are referred to herein as
"Grantor Trust Certificates."
Characterization. Each Grantor Trust Certificateholder will be treated
as the owner of a pro rata undivided interest in the interest and principal
portions of the Trust represented by the Grantor Trust Certificates and will be
considered the equitable owner of a pro rata undivided interest in each of the
Receivables in the Trust. Any amounts received by a Grantor Trust
Certificateholder in lieu of amounts due with respect to any Receivable because
of a default or delinquency in payment will be treated for federal income tax
purposes as having the same character as the payments they replace.
Each Grantor Trust Certificateholder will be required to report on its
federal income tax return in accordance with such Grantor Trust
Certificateholder's method of accounting its pro rata share of the entire income
from the Receivables in the Trust represented by Grantor Trust Certificates,
including interest, OID, if any, prepayment fees, assumption fees, any gain
recognized upon an assumption and late payment charges received by the Servicer.
Under Sections 162 or 212 each Grantor Trust Certificateholder will be entitled
to deduct its pro rata share of servicing fees, prepayment fees, assumption
fees, any loss recognized upon an assumption and late payment charges retained
by the Servicer, provided that such amounts are reasonable compensation for
services rendered to the Trust. Grantor Trust Certificateholders that are
individuals, estates or trusts will be entitled to deduct their share of
expenses only to the extent such expenses plus such holder's other miscellaneous
itemized deductions exceed two percent of such holder's adjusted gross income.
Such deductions may also be limited by Code Section 68 for an individual whose
adjusted gross income exceeds certain limits. A Grantor Trust Certificateholder
using the cash method of accounting must take into account its pro rata share of
income and deductions as and when collected by or paid to the Servicer. A
Grantor Trust Certificateholder using an accrual method of accounting must take
into account its pro rata share of income and deductions as they become due or
are paid to the Servicer, whichever is earlier. If the servicing fees or other
amounts paid to the Servicer exceed reasonable servicing compensation, the
amount of such excess would be considered as an ownership interest retained by
the Servicer (or any person to whom the Servicer assigned all or a portion of
the servicing fees) in a portion of the interest payments on the Receivables.
The Receivables would then be subject to the stripped bond rules of the Code
discussed below.
Taxation of Holders If Stripped Bond Rules Apply
In the absence of comprehensive regulations, Federal Tax Counsel is
unable to opine as to the tax treatment of stripped bonds. The preamble to
certain stripped bond regulations suggests that each purchaser of a Grantor
Trust Certificate will be treated with respect to each Receivable as the
purchaser of a single stripped bond consisting of all of the stripped portions
of the applicable Receivable (such portions with respect to a Receivable are
referred to herein as a "Stripped Bond") which generally should be
treated as a single debt instrument issued on the day it is purchased for
purposes of calculating any original issue discount. Generally, under Treasury
regulations relating to Stripped Bonds (the "Section 1286 Treasury
Regulations"), if the discount on a Stripped
Bond is larger than a de minimis amount (as calculated for purposes of the OID
rules of the Code) such Stripped Bond will be considered to have been issued
with OID. See "-- Original Issue Discount" herein. Based on the preamble to the
Section 1286 Treasury regulations, although the matter is not entirely clear,
the interest income on the Certificates at the sum of the Pass-Through Rate and
the portion of the Servicing Fee Rate that does not constitute excess servicing
should be treated as "qualified stated interest" within the meaning of the
Section 1286 Treasury regulations, assuming all other requirements for treatment
as qualified stated interest are satisfied, and such income will be so treated
in the Trustee's tax information reporting.
Original Issue Discount. When Stripped Bonds have more than a de
minimis amount of OID, the special rules of the Code relating to "original issue
discount" (currently Sections 1271 through 1275) will be applicable to a Grantor
Trust Certificateholder's interest in those Stripped Bonds. Generally, a Grantor
Trust Certificateholder that acquires an interest in a Stripped Bond issued or
acquired with OID must include in gross income the sum of the "daily portions,"
as defined below, of the OID on such Stripped Bond for each day on which it owns
a Certificate, including the date of purchase but excluding the date of
disposition. Although the proper method is not entirely clear, the Trust intends
to calculate the daily portions of OID with respect to a Stripped Bond generally
as follows. A calculation will be made of the portion of OID that accrues on the
Stripped Bond during each successive monthly accrual period (or shorter period
in respect of the date of original issue or the final Distribution Date). This
will be done, in the case of each full monthly accrual period, by adding (i) the
present value of all remaining payments to be received on the Stripped Bond
under the prepayment assumption, if any, used in respect of the Stripped Bonds
and (ii) any payments received during such accrual period, and subtracting from
that total the "adjusted issue price" of the Stripped Bond at the beginning of
such accrual period. No representation is made that the Stripped Bonds will
prepay at any prepayment assumption. The "adjusted issue price" of a Stripped
Bond at the beginning of the first accrual period is its issue price (as
determined for purposes of the OID rules of the Code) and the "adjusted issue
price" of a Stripped Bond at the beginning of a subsequent accrual period is the
"adjusted issue price" at the beginning of the immediately preceding accrual
period plus the amount of OID allocable to that accrual period and reduced by
the amount of any payment (other than "qualified stated interest") made at the
end of or during that accrual period. The OID accruing during such accrual
period will then be divided by the number of days in the period to determine the
daily portion of OID for each day in the period. With respect to an initial
accrual period shorter than a full monthly accrual period, the daily portions of
OID must be determined according to an appropriate allocation under either an
exact or approximate method set forth in the OID Regulations, or some other
reasonable method, provided that such method is consistent with the method used
to determine the yield to maturity of the Receivables.
With respect to the Stripped Bonds, the method of calculating OID as
described above will cause the accrual of OID to either increase or decrease
(but never below zero) in any given accrual period to reflect the fact that
prepayments are occurring at a faster or slower rate than the prepayment
assumption used in respect of the Stripped Bonds.
Taxation of Holders If Stripped Bond Rules Do Not Apply
Premium. The price paid for a Grantor Trust Certificate by a holder
will be allocated to such holder's undivided interest in each Receivable based
on each Receivable's relative fair market value, so that such holder's undivided
interest in each Receivable will have its own tax basis. A Grantor Trust
Certificateholder that acquires an interest in Receivables at a premium may
elect to amortize such premium under a constant interest method. Amortizable
bond premium will be treated as an offset to interest income on such Grantor
Trust Certificate. The basis for such Grantor Trust Certificate will be reduced
to the extent that amortizable premium is applied to offset interest payments.
It is unclear whether a reasonable prepayment assumption should be used in
computing amortization of premium allowable under Section 171. A Grantor Trust
Certificateholder that makes this election for Receivables that are construed to
be acquired at a premium will be deemed to have made an election to amortize
bond premium with respect to all debt instruments having amortizable bond
premium that such Grantor Trust Certificateholder acquires during the year of
the election or thereafter.
If a premium is not subject to amortization using a reasonable
prepayment assumption or it prepays faster than the prepayment assumption, the
holder of a Grantor Trust Certificate acquired at a premium should recognize a
loss if a Receivable prepays in full, equal to the difference between the
portion of the prepaid principal amount of such Receivable that is allocable to
the Grantor Trust Certificate and the portion of the adjusted basis of the
Grantor Trust Certificate that is allocable to such Receivable.
Market Discount. A Grantor Trust Certificateholder that acquires an
undivided interest in Receivables may be subject to the market discount rules of
Sections 1276 through 1278 to the extent an undivided interest in a Receivable
is considered to have been purchased at a "market discount." Generally, the
amount of market discount is equal to the excess of the portion of the principal
amount of such Receivable allocable to such holder's undivided interest over
such holder's tax basis in such interest. Market discount with respect to a
Receivable will be considered to be zero if the amount allocable to the
Receivable is less than 0.25% of the Receivable's stated redemption price at
maturity multiplied by the weighted average maturity remaining after the date of
purchase. Treasury regulations implementing the market discount rules have not
yet been issued; therefore, investors should consult their own tax advisors
regarding the application of these rules and the advisability of making any of
the elections allowed under Code Sections 1276 through 1278.
The Code provides that any principal payment (whether a scheduled
payment or a prepayment) or any gain on disposition of a market discount bond
shall be treated as ordinary income to the extent that it does not exceed the
accrued market discount at the time of such payment. The amount of accrued
market discount for purposes of determining the tax treatment of subsequent
principal payments or dispositions of the market discount bond is to be reduced
by the amount so treated as ordinary income.
The Code also grants the Treasury Department authority to issue
regulations providing for the computation of accrued market discount on debt
instruments, the principal of which is payable in more than one installment.
Because the regulations described above have not been issued, Federal Tax
Counsel is unable to opine as to what effect those regulations might have on the
tax treatment of a Grantor Trust Certificate purchased at a discount.
A holder who acquired a Grantor Trust Certificate at a market discount
also may be required to defer a portion of its interest deductions for the
taxable year attributable to any indebtedness incurred or continued to purchase
or carry such Grantor Trust Certificate purchased with market discount. For
these purposes, the de minimis rule referred to above applies. Any such deferred
interest expense would not exceed the market discount that accrues during such
taxable year and is, in general, allowed as a deduction not later than the year
in which such market discount is includible in income. If such holder elects to
include market discount in income currently as it accrues on all market discount
instruments acquired by such holder in that taxable year or thereafter, the
interest deferral rule described above will not apply.
Election to Treat All Interest as OID. The OID regulations permit a
Grantor Trust Certificateholder to elect to accrue all interest, discount
(including de minimis market or original issue discount) and premium in income
as interest, based on a constant yield method. If such an election were to be
made with respect to a Grantor Trust Certificate with market discount, the
Certificateholder would be deemed to have made an election to include in income
currently market discount with respect to all other debt instruments having
market discount that such Grantor Trust Certificateholder acquires during the
year of the election or thereafter. Similarly, a Grantor Trust Certificateholder
that makes this election for a Grantor Trust Certificate that is acquired at a
premium will be deemed to have made an election to amortize bond premium with
respect to all debt instruments having amortizable bond premium that such
Grantor Trust Certificateholder owns or acquires. See "--Premium" herein. The
election to accrue interest, discount and premium on a constant yield method
with respect to a Grantor Trust Certificate is irrevocable.
Taxation of Holders Regardless of Whether Stripped Bond Rules Apply
Sale or Exchange of a Grantor Trust Certificate. Sale or exchange of a
Grantor Trust Certificate prior to its maturity will result in gain or loss
equal to the difference, if any, between the amount received and the owner's
adjusted basis in the Grantor Trust Certificate. Such adjusted basis generally
will equal the seller's purchase price for the Grantor Trust Certificate,
increased by the OID included in the seller's gross income with respect to the
Grantor Trust Certificate, and reduced by principal payments on the Grantor
Trust Certificate previously received by the seller. Subject to the discussion
of market discount above, such gain or loss generally will be capital gain or
loss to an owner for which a Grantor Trust Certificate is a "capital asset"
within the meaning of Section 1221, and will be long-term or short-term
depending on whether the Grantor Trust Certificate has been owned for the
long-term capital gain holding period (currently more than one year).
Grantor Trust Certificates will be "evidences of indebtedness" within
the meaning of Section 582(c)(1), so that gain or loss recognized from the sale
of a Grantor Trust Certificate by a bank or a thrift institution to which such
section applies will be treated as ordinary income or loss.
Non-U.S. Persons. To the extent that a Grantor Trust Certificate
evidences ownership in underlying Receivables that were issued on or before July
18, 1984, interest or OID paid by the person required to withhold tax under
Section 1441 or 1442 to (i) an owner that is a Foreign Person or (ii) a Grantor
Trust Certificateholder holding on behalf of an owner that is a Foreign Person
will be subject to federal income tax, collected by withholding, at a rate of
30% or such lower rate as may be provided for interest by an applicable tax
treaty. Accrued OID recognized by the owner on the sale or exchange of such a
Grantor Trust Certificate also will be subject to federal income tax at the same
rate. Generally, such payments would be considered portfolio interest and would
not be subject to withholding to the extent that a Grantor Trust Certificate
evidences ownership in Receivables issued after July 18, 1984, if such Grantor
Trust Certificateholder complies with certain identification requirements
(including delivery of a statement, signed by the Grantor Trust
Certificateholder under penalties of perjury, certifying that such Grantor Trust
Certificateholder is the beneficial owner, is not a U.S. Person and providing
the name and address of such Grantor Trust Certificateholder). Additional
restrictions apply to Receivables where the Obligor is not a natural person in
order to qualify for the exemption from withholding. See "--Tax Consequences to
Holders of the Notes Issued by a Partnership--Foreign Holders" for a discussion
of when interest will constitute portfolio interest.
Information Reporting and Backup Withholding. The Servicer will furnish
or make available, within a reasonable time after the end of each calendar year,
to each person who was a Grantor Trust Certificateholder at any time during such
year, such information as may be deemed necessary or desirable to assist Grantor
Trust Certificateholders in preparing their federal income tax returns, or to
enable holders to make such information available to beneficial owners or
financial intermediaries that hold Grantor Trust Certificates as nominees on
behalf of beneficial owners. If a holder, beneficial owner, financial
intermediary or other recipient of a payment on behalf of a beneficial owner
fails to supply a certified taxpayer identification number or if the Secretary
of the Treasury determines that such person has not reported all interest and
dividend income required to be shown on its federal income tax return, 31%
backup withholding may be required with respect to any payments. Any amounts
deducted and withheld from a distribution to a recipient would be allowed as a
credit against such recipient's federal income tax liability.
CERTAIN CERTIFICATES TREATED AS INDEBTEDNESS
Upon the issuance of Certificates that are intended to be treated as
indebtedness for federal income tax Special Federal Tax Counsel will
opine that based upon its analysis of the factors discussed below and certain
assumptions and qualifications the Certificates will be treated as indebtedness
for federal income tax IRS and there can be no assurance that the IRS could not
successfully challenge this conclusion. Such Certificates that are intended to
be treated as indebtedness are herein referred to as "Debt Certificates" and
holders of such Certificates are herein referred to as "Debt
Certificateholders."
The Seller will express in the Trust Documents its intent that for
federal, state and local income and franchise tax purposes, the Debt
Certificates will be indebtedness secured by the Receivables. The Seller agrees
and each Debt Certificateholder, by acquiring an interest in a Debt Certificate,
agrees or will be deemed to agree to treat the Debt Certificates as indebtedness
for federal, state and local income or franchise tax purposes. However, because
different criteria are used to determine the non-tax accounting characterization
of the transactions contemplated by the Trust Documents, the Seller expects to
treat such transactions, for regulatory and financial accounting purposes, as a
sale of ownership interests in the Receivables and not as debt obligations.
In general, whether for federal income tax purposes a transaction
constitutes a sale of property or a loan the repayment of which is secured by
the property, is a question of fact, the resolution of which is based upon the
economic substance of the transaction. The form of a transaction, while a
relevant factor, is not conclusive evidence of its economic substance. In
appropriate circumstances, the courts have allowed taxpayers, as well as the IRS
to treat a transaction in accordance with its economic substance, as determined
under federal income tax laws, notwithstanding that the participants
characterize the transaction differently for non-tax purposes. In some
instances, however, courts have held that a taxpayer is bound by a particular
form it has chosen for a transaction, even if the substance of the transaction
does not accord with its form. It is expected that Federal Tax Counsel will
advise that the rationale of those cases will not apply to the transactions
evidenced by a series of Debt Certificates.
While the IRS and the courts have set forth several factors to be taken
into account in determining whether the substance of a transaction is a sale of
property or a secured indebtedness for federal income tax purposes, the primary
factor in making this determination is whether the transferee has assumed the
risk of loss or other economic burdens relating to the property and has obtained
the economic benefits of ownership thereof. Federal Tax Counsel will analyze and
rely on several factors in reaching its opinion that the weight of the benefits
and burdens of ownership of the Receivables has not been transferred to the Debt
Certificateholders and that the Debt Certificates are properly characterized as
indebtedness for federal income tax purposes. Contrary characterizations that
could be asserted by the IRS are described below under "--Possible
Characterization of the Transaction as a Partnership or as an Association
Taxable as a Corporation."
Taxation of Income of Debt Certificateholders
As set forth above, it is expected that Federal Tax Counsel will advise
the Seller that the Debt Certificates will constitute indebtedness for Federal
income tax purposes, and accordingly, holders of Debt Certificates generally
will be taxed in the manner described above in "Trusts Treated as
Partnerships--Tax Consequences to Holders of Notes Issued by a Partnership."
If the Debt Certificates are issued with OID that is more than a de
minimis amount as defined in the Code and Treasury regulations (see "Trusts
Treated as Partnerships--Tax Consequences to Holders of Notes Issued by a
Partnership") a United States holder of a Debt Certificate (including a cash
basis holder) generally would be required to accrue the OID on its interest in a
Certificate in income for federal income tax purposes on a constant yield basis,
resulting in the inclusion of OID in income in advance of the receipt of cash
attributable to that income. Under section 1272(a)(6) of the Code, special
provisions apply to debt instruments on which payments may be accelerated due to
prepayments of other obligations securing those debt instruments. However, no
regulations have been issued interpreting those provisions, and the manner in
which those provisions would apply to the Debt Certificates is unclear.
Additionally, the IRS could take the position based on Treasury regulations that
none of the interest payable on a Debt Certificate is "unconditionally payable"
and hence that all of such interest should be included in the Debt Certificate's
stated redemption price at maturity. Accordingly, Federal Tax Counsel is unable
to opine as to whether interest payable on a Debt Certificates constitutes
"qualified stated interest" that is not included in a Certificate's stated
redemption price at maturity. Consequently, prospective investors in Debt
Certificates should consult their own tax advisors concerning the impact to them
in their particular circumstances. The Prospectus Supplement will indicate
whether the Trust intends to treat the interest on the Certificates as
"qualified stated interest".
Tax Characterization of Trust
Consistent with the treatment of the Debt Certificates as indebtedness,
the Trust will be treated as a security device to hold Receivables securing the
repayment of the Debt Certificates. In connection with the issuance of Debt
Certificates of any series, Federal Tax Counsel will render an opinion that,
based on the assumptions and qualifications set forth therein, under then
current law, the issuance of the Debt Certificates of such series will not cause
the applicable Trust to be characterized for Federal income tax purposes as an
association (or publicly traded partnership) taxable as a corporation.
Possible Classification of the Transaction as a Partnership or as an
Association Taxable as a Corporation
The opinion of Federal Tax Counsel with respect to Debt Certificates
will not be binding on the courts or the IRS. It is possible that the IRS could
assert that, for federal income tax purposes, the transactions contemplated
constitute a sale of the Receivables (or an interest therein) to the Debt
Certificateholders and that the proper classification of the legal relationship
between the Seller and some or all of the Debt Certificateholders resulting from
the transactions is that of a partnership (including a publicly traded
partnership), a publicly traded partnership taxable as a corporation, or an
association taxable as a corporation. The Seller currently does not intend to
comply with the federal income tax reporting requirements that would apply if
any Classes of Debt Certificates were treated as interests in a partnership or
corporation.
If a transaction were treated as creating a partnership between the
Seller and the Debt Certificateholders, the partnership itself would not be
subject to federal income tax (unless it were characterized as a publicly traded
partnership taxable as a corporation); rather, the partners of such partnership,
including the Debt Certificateholders, would be taxed individually on their
respective distributive shares of the partnership's income, gain, loss,
deductions and credits. The amount and timing of items of income and deductions
of a Debt Certificate could differ if the Debt Certificates were held to
constitute partnership interests, rather than indebtedness. Moreover, unless the
partnership were treated as engaged in a trade or business, an individual's
share of expenses of the partnership would be miscellaneous itemized deductions
that, in the aggregate, are allowed as deductions only to the extent they exceed
two percent of the individual's adjusted gross income, and would be subject to
reduction under Section 68 of the Code if the individual's adjusted gross income
exceeded certain limits. As a result, the individual might be taxed on a greater
amount of income than the stated rate on the Debt Certificates. Finally, all or
a portion of any taxable income allocated to a Debt Certificateholder that is a
pension, profit-sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) may, under certain circumstances,
constitute "unrelated business taxable income" which generally would be taxable
to the holder under the Code.
If it were determined that a transaction created an entity classified
as an association or as a publicly traded partnership taxable as a corporation,
the Trust would be subject to federal income tax at corporate income tax rates
on the income it derives from the Receivables, which would reduce the amounts
available for distribution to the Debt Certificateholders. Such classification
may also have adverse state and local tax consequences that would reduce amounts
available for distribution to Debt Certificateholders. Moreover, distributions
on Debt Certificates that are recharacterized as equity in an entity taxable as
a corporation would not be deductible in computing the entity's taxable income,
and cash distributions on such Debt Certificates generally would be treated as
dividends for tax purposes to the extent of such deemed corporation's earnings
and profits.
Foreign Investors
If the IRS were to contend successfully that the Debt Certificates are
interest in a partnership and if such partnership were considered to be engaged
in a trade or business in the United States, the partnership would be subject to
a withholding tax on income of the Trust that is allocable to a Foreign Investor
and such Foreign Investor would be credited for his or her share of the
withholding tax paid by the partnership. In such case, the holder generally
would be subject to United States federal income tax at regular income tax
rates, and possibly a branch profits tax in the case of a corporate holder.
Alternatively, although there may be arguments to the contrary, if such
partnership is not considered to be engaged in a trade or business within the
United States and if income with respect to the Debt Certificates is not
otherwise effectively connected with the conduct of a trade or business in the
United States by the Foreign Investor, the Foreign Investor would be subject to
United States income tax and withholding at a rate of 30% (unless reduced by an
applicable tax treaty) on the holder's distributive share of the partnership's
interest income. See "Trusts Treated as Partnerships--Tax Consequences to
Holders of the Certificates Issued by the Partnership--Tax Consequences to
Foreign Certificateholders" for a more detailed discussion of the consequences
of an equity investment by a Foreign Investor in an entity characterized as a
partnership.
If the Trust were taxable as a corporation, distribution to foreign
investors, to the extent treated as dividends, would generally be subject to
withholding at the rate of 30% unless such rate were reduced or eliminated by an
applicable income tax treaty.
STATE AND LOCAL TAXATION
The discussion above does not address the tax treatment of a Trust, the
Certificates, the Notes or the holders of Certificates or Notes of any series
under state and local tax laws. Prospective investors are urged to consult their
own tax advisors regarding state and local tax treatment of the Trust, the
Certificates, the Notes and the consequences of purchase, ownership or
disposition of the Certificates and Notes under any state or local tax law.
ERISA CONSIDERATIONS
A fiduciary of an employee benefit plan subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), should consider
the fiduciary standards under ERISA in the context of the plan's particular
circumstances before authorizing an investment of a portion of such plan's
assets in the Securities. Accordingly, among other factors, such fiduciary
should consider (i) whether the investment is for the exclusive benefit of plan
participants and their beneficiaries; (ii) whether the investment satisfies the
diversification requirements of Section 404 of ERISA; (iii) whether the
investment is in accordance with the documents and instruments governing the
plan and (iv) whether the investment is prudent, considering the nature of the
investment. Fiduciaries of such plans also should consider ERISA's prohibition
on improper delegation of control over, or responsibility for, plan assets.
In addition, fiduciaries of employee benefit plans subject to Title I of
ERISA, as well as certain plans or other retirement arrangements not subject to
ERISA, but which are subject to Section 4975 of the Code (such as individual
retirement accounts and Keogh plans covering only a sole proprietor or
partners), or any entity (including an insurance company general account) whose
underlying assets include plan assets by reason of a plan or account investing
in such entity (collectively, "Plans(s)") are prohibited from engaging in a
broad range of transactions involving Plan assets and persons having certain
specified relationships to a Plan ("parties in interest" and "disqualified
persons"). Such transactions are treated as "prohibited transactions" under
Sections 406 and 407 of ERISA and excise taxes are imposed upon such persons by
Section 4975 of the Code. The Seller, the Trustee, the Owner Trustee and any
underwriter of the offered Securities and certain of their affiliates might be
considered "parties in interest" or "disqualified persons" with respect to a
Plan. If so, the acquisition, holding or transfer of Securities by, or on behalf
of, such Plan could be considered to give rise to a "prohibited transaction"
within the meaning of ERISA and the Code unless a regulatory exception or
administrative exemption is available. In addition, the Department of Labor
("DOL") has issued a regulation (29 C.F.R. Section 2510.3-101) (the "Plan
Assets Regulation") concerning the definition of what
constitutes the assets of a Plan, which provides that, as a general rule, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Plan makes an "equity" investment will be
deemed for purposes of ERISA to be assets of the investing Plan unless certain
exceptions apply. If an investing Plan's assets were deemed to include an
interest in the Trust Property and not merely an interest in the Securities,
transactions occurring in connection with the servicing, management and
operation of the Trust between the Seller, the Owner Trustee, the Trustee, the
Servicer (or any other servicer), any insurer or any of their respective
affiliates might constitute prohibited transactions, and the Trust Property
would become subject to the fiduciary investment standards of ERISA, unless a
regulatory exception or administrative exemption applies.
With respect to offered Securities which are Certificates, the DOL has
issued to a number of underwriters of pass-through certificates, similar to the
Certificates, administrative exemptions (collectively, the
"Exemption"), which generally exempt from the application of the
prohibited transaction provisions of Section 406(a), Section 406(b)(1) and
Section 406(b)(2) of ERISA, and the excise taxes imposed pursuant to Section
4975(a) and (b) of the Code, the initial purchase, holding and subsequent resale
of mortgage-backed or asset-backed pass-through certificates representing a
beneficial undivided interest in certain fixed pools of assets held in a trust
(as defined in paragraph III.B of Section III of the Exemption), along with
certain transactions relating to the servicing and operation of such asset
pools, provided that certain conditions set forth in the Exemption are
satisfied. Paragraph III.B of Section III of the Exemption provides in part that
a trust means an investment pool the corpus of which is held in trust and
consists solely of: (1) secured consumer receivables, (2) secured credit
instruments, (3) obligations secured by residential or commercial real property,
(4) obligations secured by motor vehicles or equipment or qualified motor
vehicle leases, (5) guaranteed governmental mortgage pool certificates or (6) an
undivided fractional interest in any of the obligations listed in clauses (1) -
(5) above.
If the general conditions of Section II of the Exemption are satisfied,
the Exemption may provide an exemption from the restrictions imposed by Sections
406(a) and 407(a) of ERISA (as well as the excise taxes imposed by Section
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code) in connection with the direct or indirect sale, exchange or transfer
of Certificates by Plans in the initial issue of Certificates, the holding of
Certificates by Plans or the direct or indirect acquisition or disposition in
the secondary market of Certificates by Plans. However, no exemption is provided
from the restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for
the acquisition or holding of a Certificate on behalf of an "Excluded
Plan" by any person who has discretionary authority or renders
investment advice with respect to the assets of such Excluded Plan. For purposes
of the Certificates, an Excluded Plan is a Plan sponsored by (1) an underwriter
which has been granted an Exemption (or certain specified entities affiliated or
associated with such underwriter) ("Underwriter"), (2) the Seller,
(3) the Servicer (or any other servicer), (4) the Trustee or Owner Trustee, (5)
any obligor with respect to Receivables constituting more than 5 percent of the
aggregate unamortized principal balance of the Receivables as of the date of
initial issuance, (6) any insurer and (7) any affiliate or successor of a person
described in (1) to (6) above (the "Restricted Group").
If the specific conditions of paragraph I.B of Section I of the Exemption
are also satisfied, the Exemption may provide an exemption from the restrictions
imposed by Sections 406(b)(1) and (b)(2) of ERISA and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c)(I)(E) of the
Code in connection with (1) the direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of Certificates between the Seller or
Underwriter and a Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of Plan assets in
Certificates is (a) an obligor with respect to 5 percent or less of the fair
market value of the Receivables or (b) an affiliate of such a person, (2) the
direct or indirect acquisition or disposition in the secondary market of
Certificates by Plans and (3) the holding of Certificates by Plans.
If the specified conditions of paragraph I.C of Section I of the Exemption
are satisfied, the Exemption may provide an exemption from the restrictions
imposed by Sections 406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation of
the Trust and the Trust Property.
The Exemption may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of the Code
if such restrictions are deemed to otherwise apply merely because a person is
deemed to be a "party in interest" or a "disqualified person" with respect to an
investing Plan by virtue of providing services to the Plan (or by virtue of
having certain specified relationships to such a person) solely as a result of
such Plan's ownership of Certificates.
The Exemption sets forth the following seven general conditions which must
be satisfied for a transaction to be eligible for exemptive relief thereunder.
(1) The acquisition of the Certificates by a Plan is on terms
(including the price for the Certificates) that are at least as favorable to the
Plan as they would be in an arm's length transaction with an unrelated party;
(2) The rights and interests evidenced by the Certificates acquired
by the Plan are not subordinated to the rights and interests evidenced by other
Securities issued by the Trust;
(3) The Certificates acquired by the Plan have received a rating at
the time of such acquisition that is one of the three highest generic rating
categories from either Standard & Poor's Structured Ratings Group, Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. or Fitch Investors
Service, L.P. ("National Credit Rating Agencies");
(4) Neither the Trustee or the Owner Trustee is an affiliate of any other
member of the Restricted Group (as defined above);
(5) The sum of all payments made to and retained by the Underwriter
in connection with the distribution of Certificates represents not more than
reasonable compensation for underwriting the Certificates. The sum of all
payments made and retained by the Seller pursuant to the assignment of the loans
to the trust fund represents not more than the fair market value of such loans.
The sum of all payments made to and retained by the Servicer or any other
servicer represents not more than reasonable compensation for such person's
services under the pooling and servicing agreement and reimbursement of such
person's reasonable expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited
investor" as defined in Rule 501(a)(1) of Regulation D under the Securities Act
of 1933. The Seller assumes that only Plans which are accredited investors under
the federal securities laws will be permitted to purchase the Certificates.
(7) The trust fund must also meet the following
requirements:
(i) the corpus of the trust fund must consist solely of assets
of the type that have been included in other investment
pools;
(ii) certificates in such other investment pools must have been
rated in one of the three highest rating categories of one
of the National Credit Rating Agencies for at least one
year prior to the Plan's acquisition of Certificates; and
(iii) certificates evidencing interests in such other investment
pools must have been purchased by investors other than
Plans for at least one year prior to any Plan's acquisition
of certificates.
The Exemption may apply to a Plan's purchase, holding and transfer of
Certificates and the operation, management and servicing of the Trust and the
Trust Property as specified in the related Prospectus Supplement. In addition,
in the event the Exemption is not available, certain exemptions from the
prohibited transaction rules may be applicable depending on the type and
circumstances of the plan fiduciary making the decision to acquire a
Certificate. Included among these exemptions are: Prohibited Transaction Class
Exemption ("PTCE") 90-1, regarding investments by insurance company pooled
separate accounts; PTCE 91-38 regarding investments by bank collective
investment funds PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 96-23, regarding transactions affected by in-house asset
managers; and PTCE 84-14, regarding transactions effected by "qualified
professional asset managers".
Certain transactions involving the purchase of Securities which are Notes
might be deemed to constitute prohibited transactions under ERISA and the Code
if the Trust Property were deemed to be assets of a Plan. Under the Plan Assets
Regulation, the Trust Property would be treated as plan assets of a Plan for the
purposes of ERISA and the Code only if the Plan acquires an "Equity Interest" in
the Trust and none of the exceptions contained in the Plan Assets Regulation is
applicable. An equity interest is defined under the Plan Assets Regulation as an
interest other than an instrument which is treated as indebtedness under
applicable local law and which has no substantial equity features. The Seller
believes that the Notes should be treated as indebtedness without substantial
equity features for purposes of the Plan Assets Regulation. In addition, even in
the event that the Notes are deemed to be an Equity Interest in the Trust, the
Exemption may be applicable to both a Plan's purchase, holding and transfer of
Notes (which in this situation are considered Certificates for purposes of the
Exemption) and the operation, management and servicing of the Trust and the
Trust Property, if so specified in the related Prospectus Supplement.
Without regard to whether the Notes are characterized as Equity Interests,
the acquisition, transfer or holding of Notes by or on behalf of a Plan could be
considered to give rise to a prohibited transaction if the Trust, the Owner
Trustee or the Trustee or any of their respective affiliates is or becomes a
party in interest or a disqualified person with respect to such Plan. In such
case, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23 and PTCE 84-14 may be
applicable depending on the type and circumstances of the plan fiduciary making
the decision to acquire a Note.
Investors that are insurance companies should consult with their legal
counsel with respect to the United States Supreme Court case, John Hancock
Mutual Life Insurance co. v. Harris Trust and Savings Bank, 114 S.Ct. 517
(1993). In Harris Trust, the Supreme Court ruled that assets held in an
insurance company's general account may be deemed plan assets under certain
circumstances. Accordingly, such insurance company general accounts would be
subject to the same considerations under ERISA and would be eligible for the
same relief under the Exemption that would apply to any other Plan investor. In
the event the Exemption is not applicable to the purchase, holding and transfer
of Securities and the operation, management and servicing of the Trust and Trust
Property, PTCE 95-60 may be applicable depending on the circumstances.
Any Plan fiduciary considering the purchase of Securities should consult
with its counsel with respect to the potential applicability of the fiduciary
responsibility and prohibited transaction provisions of ERISA and the Code to
such investment.
RATINGS
As a condition of issuance, the offered Securities of each series will be
rated an investment grade, that is, in one of its four highest rating
categories, by at least one nationally recognized rating agency (a "Rating
Agency") as specified in the related Prospectus Supplement. The
ratings will be based on the Receivables related to each series, the terms of
the Securities, and the subordination and any credit enhancement provided
therefor. There is no assurance that the ratings initially assigned to such
Securities will not be subsequently lowered or withdrawn by the Rating Agencies.
In the event the rating initially assigned to any Securities is subsequently
lowered for any reason, no person or entity will be obligated to provide any
credit enhancement unless otherwise specified in the related Prospectus
Supplement. The ratings of any Securities with respect to which a prepayment
premium may be payable do not evaluate such prepayment premium payable to such
Securityholders or the likelihood that such prepayment premium will be paid.
PLAN OF DISTRIBUTION
On the terms and conditions set forth in an underwriting agreement (the
"Underwriting Agreement") with respect to each Trust, the
Seller will agree to sell to each of the underwriters named therein and in the
related Prospectus Supplement, and each of such underwriters will severally
agree to purchase from the Seller, the principal amount of each class of
Securities of the related series set forth therein and in the related Prospectus
Supplement.
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities described therein which are offered hereby and by the related
Prospectus Supplement if any of such Securities are purchased. In the event of a
default by any such underwriter, each Underwriting Agreement will provide that,
in certain circumstances, purchase commitments of the nondefaulting underwriters
may be increased or the Underwriting Agreement may be terminated.
Each Prospectus Supplement will either (i) set forth the price at which
each class of Securities being offered thereby will be offered to the public and
any concessions that may be offered to certain dealers participating in the
offering of such Securities, or (ii) specify that the related Securities are to
be resold by the underwriters in negotiated transactions at varying prices to be
determined at the time of such sale. After the initial public offering of any
Securities, the public offering price and such concessions may be changed.
Each Underwriting Agreement will provide that the Seller will indemnify
the underwriters against certain liabilities, including liabilities under the
Securities Act.
The Owner Trustee or the Indenture Trustee, if any, may, from time to
time, invest funds held by it in any accounts in Eligible Investments acquired
from one or more of the underwriters.
Under each Underwriting Agreement, the closing of the sale of any class of
Securities subject thereto will be conditioned on the closing of the sale of all
other classes.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the related Prospectus Supplement.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of any Series of Securities in Canada ("Canadian
Securities") is being made only on a private placement basis
exempt from the requirement that the Trust prepare and file a prospectus with
the securities regulatory authorities in each province where trades of any
Canadian Securities are effected. Accordingly, any resale of any Canadian
Securities must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
any Canadian Securities.
REPRESENTATIONS OF PURCHASERS
Each purchaser of any Canadian Securities who receives a purchase
confirmation will be deemed to represent to the Seller, the Trust and the dealer
from whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such Canadian
Securities without the benefit of a prospectus qualified under such securities
laws, (ii) where required by law, that such purchaser is purchasing as principal
and not as agent, and (iii) such purchaser has reviewed the text above under
"Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
The Trust, the Seller, the Representative, the Servicer, the Owner
Trustee, the Indenture Trustee and their respective directors and officers, if
any, as well as the experts named herein, may be located outside of Canada and,
as a result, it may not be possible for Ontario purchasers to effect service of
process within Canada upon the Issuer or such persons. All or a substantial
portion of the assets of the Issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the Issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such Issuer or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of any Canadian Securities to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any of the Securities acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #88/5. Only one such report must be filed in respect of any
Canadian Securities acquired on the same date and under the same prospectus
exemption.
LEGAL OPINIONS
Unless otherwise specified in the Prospectus Supplement, certain legal
matters relating to the validity of the issuance of the Certificates and the
Notes, if any, of each series will be passed upon for the Seller and the
Representative by Eric R. Elwin, Esq., Corporate Counsel of the Representative,
and certain legal matters relating to the validity of the issuance of the
Certificates and the Notes, if any, of such series will be passed upon for the
Underwriter of the Certificates and the Notes, if any, of such series by Stroock
& Stroock & Lavan, New York, New York. Stroock & Stroock & Lavan has performed
legal services for the Representative and it is expected that it will continue
to perform such services in the future.
<PAGE>
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION
PROCEDURES
Except in certain limited circumstances, any globally offered Series of
Securities (the "Global Securities") will be available only in
book-entry form. Investors in the Global Securities may hold such Global
Securities through any of DTC, Cedel or Euroclear. The Global Securities will be
tradeable as home market instruments in both the European and U.S. domestic
markets. Initial settlement and all secondary trades will settle in same-day
funds.
Secondary market trading between investors holding Global Securities
through Cedel and Euroclear will be conducted in the ordinary way in accordance
with their normal rules and operating procedures and in accordance with
conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedel or Euroclear and DTC
Participants holding Notes and, if the related Prospectus Supplement so
provides, Certificates will be effected on a delivery-against-payment basis
through the respective Depositories of Cedel and Euroclear (in such capacity)
and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet certain requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their Participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name
of Cede as nominee of DTC. Investors' interests in the Global Securities will be
represented through financial institutions acting on their behalf as direct and
indirect Participants in DTC. As a result, Cedel and Euroclear will hold
positions on behalf of their Participants through their respective Depositories,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC will follow
the settlement practices specified by the Underwriters. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global securities
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in same-day
funds.
SECONDARY MARKET TRADING
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to insure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC Seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or Euroclear
Participant at least one business day prior to settlement. Cedel or Euroclear
will instruct the respective Depository, as the case may be, to receive the
Global Securities against payment. Payment will include interest accrued on the
Global Securities from and including the last coupon payment date to and
excluding the settlement date, on the basis of the actual number of days in such
accrual period and year assumed to consist of 360 days. For transactions
settling on the 31st of the month, payment will include interest accrued to and
excluding the first day of the following month. Payment will then be made by the
respective Depository of the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The securities credit will appear the next day (European
time) and the cash debt will be back-valued to, and the interest on the Global
Securities will accrue from, the value date (which would be the preceding day
when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedel or Euroclear cash debt
will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to preposition funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to preposition
funds and allow that credit line to be drawn upon to finance the settlement.
Under this procedure, Cedel Participants or Euroclear Participants purchasing
Global Securities would incur overdraft charges for one day, assuming they
cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedel
Participant's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective European Depository for the benefit of Cedel Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
the settlement date. Thus, to the DTC Participants a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear Seller and DTC Purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing system, through the
respective Depository, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases Cedel or Euroclear
will instruct the respective Depository, as appropriate, to deliver the Global
Securities to the DTC Participant's account against payment. Payment will
include interest accrued on the Global Securities from and including the last
interest payment to and excluding the settlement date on the basis of the actual
number of days in such accrual period and a year assumed to consist of 360 days.
For transactions settling on the 31st of the month, payment will include
interest accrued to and excluding the first day of the following month. The
payment will then be reflected in the account of the Cedel Participant or
Euroclear Participant the following day, and receipt of the cash proceeds in the
Cedel Participant's or Euroclear Participant's account would be back-valued to
the value date (which would be the preceding day, when settlement occurred in
New York). Should the Cedel Participant or Euroclear Participant have a line of
credit with its respective clearing system and elect to be in debt in
anticipation of receipt of the sale proceeds in its account, the back-valuation
will extinguish any overdraft incurred over that one-day period. If settlement
is not completed on the intended value date (i.e., the trade fails), receipt of
the cash proceeds in the Cedel Participant's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
Finally, day traders that use Cedel or Euroclear and that purchase Global
Securities from DTC Participants for delivery to Cedel Participants or Euroclear
Participants should note that these trades would automatically fail on the sale
side unless affirmative action were taken. At least three techniques should be
readily available to eliminate this potential problem:
(a) borrowing through Cedel or Euroclear for one day (until the
purchase side of the day trade is reflected in their Cedel or Euroclear
accounts) in accordance with the clearing system's customary procedures;
(b) borrowing the Global Securities in the U.S. from a DTC
Participant no later than one day prior to settlement, which would give
the Global Securities sufficient time to be reflected in their Cedel or
Euroclear account in order to settle the sale side of the trade; or
(c) staggering the value dates for the buy and sell sides of the
trade so that the value date for the purchase from the DTC Participant is
at least one day prior to the value date for the sale to the Cedel
Participant or Euroclear Participant.
CERTAIN U.S. FEDERAL WITHHOLDING TAXES AND DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities through Cedel or Euroclear (or
through DTC if the holder has an address outside the U.S.) will be subject to
30% U.S. withholding tax that generally applies to payments of interest
(including original issue discount) on registered debt issued by U.S. Persons,
unless (i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owners take one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of Global
Securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed Form W-8 (Certificate of Foreign Status). If
the information shown on Form W-8 changes, a new Form W-8 must be filed within
30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty
countries (Form 1001). Non-U.S. Persons that are beneficial owners of Global
Securities residing in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate (depending on the treaty terms) by
filing Form 1001 (Ownership, Exemption or Reduced Rate Certificate). If the
treaty provides for a reduced rate, withholding tax will be imposed at that rate
unless the filer alternatively files Form W-8. Form 1001 may be filed by the
Certificateholder or his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The holder of a Global
Securities or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is includible in gross income for United States tax purposes,
regardless of its source, or (iv) a trust that is not a "Foreign Trust," as such
term is defined in Section 7701(a)(31) of the Internal Revenue Code of 1986, as
amended. This summary of documentation requirements does not deal with all
aspects of U.S. Federal income tax withholding that may be relevant to foreign
holders of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities.
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus and
the pages on which the definitions of such terms may be found.
Accounts.........................................................44
Actuarial Receivables............................................19
Advance......................................................12, 46
Affiliated Purchaser.............................................10
Amortization Period...............................................9
APR..............................................................19
Canadian Securities..............................................75
Cede.............................................................17
Cedel............................................................17
Cedel Participants...............................................38
Certificate Account..............................................18
Certificate Distribution Account.................................44
Certificate Factor...............................................23
Certificate Majority.............................................38
Certificateholders............................................5, 17
Certificates......................................................1
Code.............................................................60
Collection Account.......................................10, 18, 44
Commission........................................................3
Commodity Indexed Securities.....................................36
Cooperative......................................................38
Currency Indexed Securities......................................36
Dealer Agreement.................................................26
Dealers.......................................................7, 25
Definitive Certificates..........................................38
Definitive Notes.................................................38
Depositories.....................................................36
Depository.......................................................29
Distribution Date............................................10, 29
DOL..............................................................71
DTC..............................................................17
due date.........................................................20
Eligible Deposit Account.........................................45
Eligible Institution.............................................45
Eligible Investments.............................................44
ERISA............................................................13
Euroclear........................................................17
Euroclear Operator...............................................38
Euroclear Participants...........................................38
Events of Default................................................32
Exchange Act......................................................3
Excluded Plan....................................................72
Exemption........................................................71
Face Amount......................................................36
Federal Tax Counsel..........................................12, 60
Financed Vehicles.................................................7
FTC Rule.........................................................59
Funding Period....................................................8
Global Securities................................................77
Grantor Trust Certificateholders.................................67
Grantor Trust Certificates.......................................67
Indenture.........................................................1
Indenture Trustee.................................................1
Index............................................................36
Indexed Commodity................................................36
Indexed Currency.................................................36
Indexed Principal Amount.........................................36
Indexed Securities...............................................36
Initial Cutoff Date...............................................7
Initial Financed Vehicles.........................................7
Initial Receivables...............................................7
Insolvency Laws..............................................15, 58
Interest Rate.....................................................6
Investment Earnings..............................................45
IRS..............................................................60
National Credit Rating Agencies..................................72
Note Distribution Account........................................44
Note Factor......................................................23
Note Majority....................................................31
Noteholders...................................................6, 17
Notes.............................................................1
Obligor..........................................................10
Obligors.........................................................18
OID..............................................................61
OID regulations..................................................61
Owner Trustee.....................................................1
Participants.....................................................37
Pass-Through Rate.................................................5
Payahead Account.............................................18, 44
Payaheads........................................................44
Payment Date.....................................................30
Plan Assets Regulation...........................................71
Plans............................................................13
Pooling and Servicing Agreement...................................1
Precomputed Receivables..........................................19
Pre-Funded Amount.................................................8
Pre-Funding Account...............................................4
Pre-Funding Account...............................................8
Prepayment Premium...............................................47
Prospectus Supplement.............................................1
PTCE.............................................................73
Purchase Agreement............................................7, 41
Purchase Amount..................................................43
Rating Agencies..................................................17
Rating Agency................................................13, 74
Receivables....................................................1, 7
Rees-Levering Act................................................57
Registration Statement............................................3
Related Documents................................................34
Representative....................................................1
Restricted Group.................................................72
Retained Interest.................................................9
Revolving Period..............................................9, 47
Rule of 78's Receivables.........................................19
Rules............................................................37
Sale and Servicing Agreement......................................1
SBA..............................................................28
SBA Loans........................................................28
Schedule of Receivables..........................................42
Section 1286 Treasury Regulations................................68
Securities........................................................1
Securityholders...............................................1, 17
Seller............................................................1
Servicer..........................................................1
Servicer Default.................................................50
Servicer Fee.....................................................47
Servicer's Certificate...........................................40
Servicing Fee....................................................46
Servicing Fee Rate...............................................46
Short-Term Note..................................................61
Simple Interest Receivables......................................20
Stock Index......................................................36
Stock Indexed Securities.........................................36
Strip Certificates................................................5
Strip Notes.......................................................6
Stripped Bond....................................................68
Subsequent Cut-Off Date...........................................7
Subsequent Financed Vehicles......................................7
Subsequent Receivables.........................................1, 7
Subsequent Transfer Agreement....................................43
Subsequent Transfer Assignment...................................43
Supplemental Servicing Fee.......................................46
Terms and Conditions.............................................39
The Money Store...............................................4, 28
TMS Auto Finance..................................................7
Trust..........................................................1, 4
Trust Agreement...................................................1
Trust Documents...............................................1, 41
Trust Property....................................................1
U.S. Person......................................................70
UCC..............................................................55
Underwriter......................................................72
Underwriting Agreement...........................................74
(PS) indicates term is primarily defined in the related Prospectus Supplement.
<PAGE>
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED THIS
PROSPECTUS, THE RELATED PROSPECTUS SUPPLEMENT OR THE DOCUMENTS INCORPORATED OR
DEEMED INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE SELLER OR ANY DEALER,
SALESMAN, OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
RELATED PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE INFORMATION HEREIN OR THEREIN SINCE THE DATE HEREOF. THIS PROSPECTUS AND THE
RELATED PROSPECTUS SUPPLEMENT ARE NOT AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
AVAILABLE INFORMATION......................................................3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................3
PROSPECTUS SUMMARY.........................................................4
RISK FACTORS..............................................................15
THE TRUSTS................................................................19
THE RECEIVABLES...........................................................20
YIELD AND PREPAYMENT CONSIDERATIONS.......................................22
CERTIFICATE AND NOTE FACTORS AND TRADING INFORMATION......................24
USE OF PROCEEDS...........................................................24
THE SELLER................................................................24
TMS AUTO FINANCE..........................................................25
THE MONEY STORE...........................................................29
THE CERTIFICATES..........................................................30
THE NOTES.................................................................31
CERTAIN INFORMATION REGARDING THE SECURITIES..............................37
DESCRIPTION OF THE PURCHASE AGREEMENTS AND THE TRUST
DOCUMENTS...........................................................42
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES..................................56
FEDERAL INCOME TAX CONSEQUENCES...........................................61
STATE AND LOCAL TAXATION..................................................74
ERISA CONSIDERATIONS......................................................74
RATINGS...................................................................78
PLAN OF DISTRIBUTION......................................................78
NOTICE TO CANADIAN RESIDENTS..............................................79
LEGAL OPINIONS............................................................80
ANNEX I...................................................................81
INDEX OF TERMS............................................................85
<PAGE>
THE MONEY STORE AUTO TRUSTS
ASSET BACKED CERTIFICATES
ASSET BACKED NOTES
TMS AUTO HOLDINGS, INC.
SELLER
THE MONEY STORE INC.
REPRESENTATIVE
PROSPECTUS
UNTIL 90 DAYS AFTER THE DATE OF EACH PROSPECTUS SUPPLEMENT, ALL
DEALERS EFFECTING TRANSACTIONS IN THE RELATED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION THEREOF, MAY BE REQUIRED TO DELIVER THIS
PROSPECTUS AND THE RELATED PROSPECTUS SUPPLEMENT. THIS DELIVERY REQUIREMENT IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS SUPPLEMENT AND
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Securities and Exchange Commission
Registration Fee.............................$ 333,333.34
Trustee's Fees.................................. 25,000.00
Printing........................................ 50,000.00
Legal Fees and Expenses......................... 125,000.00
Accountings Fees................................ 17,000.00
Blue Sky Qualification Fees and Expenses........ 15,000.00
Rating Agency Fees.............................. 140,000.00
Miscellaneous................................... 9,666.66
----------
Total..........................................$ 715,000.00
==========
- ----------
* All amounts other than the Registration Fee are estimates of expenses
incurred or to be incurred in connection with the issuance and
distribution of a Series of Certificates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14A:3-5 of the New Jersey Business Corporation Act provides that
New Jersey corporations such as The Money Store Inc. may indemnify any director,
officer, employee or agent against expenses and liabilities in connection with
any proceeding involving the director, officer, employee or agent by reason of
him or her acting in such capacity if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, did not have reasonable cause to believe such conduct was unlawful.
Section Fifth of The Money Store Inc.'s Amended and Restated Certificate of
Incorporation and Article VIII of The Money Store Inc.'s Amended and Restated
By-Laws entitle officers, directors, employees and agents to indemnification to
the fullest extent permitted by Section 14A:3-5 of the New Jersey Business
Corporation Act.
Section Sixth of The Money Stores Inc.'s Amended and Restated Certificate
of Incorporation provides that no director or officer shall have any personal
liability to The Money Store Inc. or its shareholders for any damages for breach
of fiduciary duty as a director or officer, except that such provision does not
limit or eliminate the liability of any director or officer (i) for breach of
such director's or officer's duty of loyalty to The Money Store Inc. or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or (iii) for any
transaction from which such director or officer derived an improper personal
benefit.
The Money Store Inc. maintains directors' and officers' liability insurance
which covers the directors and officers of The Money Store Inc. with policy
limits of $5,000,000.
Unless otherwise specified in the related Prospectus Supplement, each of
the Trust Agreement, Sale and Servicing Agreement and the Indenture will provide
that The Money Store Inc. will indemnify and hold the Indenture Trustee and the
Eligible Lender Trustee harmless against any losses that either may sustain by
reason of the failure of The Money Store Inc. or TMS Auto Holdings, Inc. to
perform its respective obligations under these Agreements.
ITEM 16. EXHIBITS.
See the Exhibit Index herein.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the termination of
the offering.
(2) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in that Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may by permitted to directors, officers and controlling persons of
the Registrant pursuant to this provisions described under "Item
15-Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered. The Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Union, State of New Jersey, on the 4th
day of December, 1996.
THE MONEY STORE INC., REPRESENTATIVE
TMS AUTO HOLDINGS, INC., SELLER
By: *
Morton Dear
Executive Vice President of
The Money Store Inc.
and TMS Auto Holdings, Inc.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statements has been signed by the
following person in the capacities indicated on December 4, 1996.
SIGNATURE TITLE
* Chairman of the Board
of Directors of The Money Store
Alan Turtletaub Inc.
* President,
Chief Executive Officer and Director of
Marc Turtletaub The Money Store Inc.
* Executive Vice
President, Chief Financial Officer
Morton Dear (Principal Financial Officer)
and Director of The Money
Store Inc. and President and
Director of TMS Auto
Holdings, Inc.
* Executive Vice President and
Director of The Money
Anthony R. Medici Store Inc.
* Treasurer
and Director
Harry Puglisi (Principal Accounting
Officer) of The Money Store Inc.
Director
of The Money Store Inc.
Alexander C. Schwartz, Jr.
Director
of The Money Store Inc.
Anthony L. Watson
* By: /S/ ERIC R. ELWIN
Eric R. Elwin
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
1.l* Form of Underwriting Agreement.
3.1* Articles of Incorporation of the Seller.
3.2* By-laws of the Seller.
4.1** Form of Indenture between the Trust and the
Indenture Trustee.
4.2* Form of Trust Agreement between the Seller and
the Owner Trustee.
5.1** Opinion of Counsel to the Seller.
10.1* Form of Purchase Agreement between the Servicer
and the Seller.
23.1** Consent of Counsel to the Seller (included as
part of Exhibit 5.1).
25.1** Statement of Eligibility of Trustee
99.1* Form of Sale and Servicing Agreement among the
Seller, the Servicer and the Owner Trustee on behalf of the Trust.
99.2* Form of Pooling and Servicing Agreement among
the Seller, the Servicer and the Trustee.
99.3* Form of The Money Store Auto Trusts Standard Terms
and Conditions of Agreement.
99.4* Form of Prospectus Supplement.
* Filed as exhibit to Registration Statement (No. 33-94518) on
Form S-3
and incorporated herein by reference.
** Filed herewith.
=============================================================
THE MONEY STORE AUTO TRUST 199_-_
CLASS A-1 % Asset Backed Notes
CLASS A-2 % Asset Backed Notes
CLASS A-3 % Asset Backed Notes
[CLASS A-4 % Asset Backed Notes]
--------------------------------
FORM OF
INDENTURE
Dated as of __________ __, 199__
--------------------------------
--------------------------------
-----------------------------
Trustee, and Indenture Collateral Agent
================================================================
<PAGE>
CROSS REFERENCE TABLE1
TIA Indenture
Section Section
310 (a) (1) ........................................ 6.11
(a) (2) ........................................ 6.11
(a) (3) ........................................ 6.10; 6.11
(a) (4) ........................................ N.A.2
(a) (5) ........................................ 6.11
(b) ........................................ 6.8; 6.11
(c) ........................................ N.A.
311 (a) ....................................... 6.12
(b) ....................................... 6.12
(c) ....................................... N.A.
312 (a) ....................................... 7.1
(b) ....................................... 7.2
(c) ....................................... 7.2
313 (a) ....................................... 7.4
(b) (1) ....................................... 7.4
(b) (2) ....................................... 7.4
(c) ....................................... 11.5
(d) ....................................... 7.3
314 (a) ....................................... 3.9; 7.3
(b) ....................................... 11.15
(c) (1) ....................................... 11.1
(c) (2) ....................................... 11.1
(c) (3) ....................................... 11.1
(d) ....................................... 11.1
(e) ....................................... 1.1; 11.1
(f) ........................................ 11.1
315 (a) ........................................ 6.1
(b) ........................................ 6.5; 11.5
(c) ........................................ 6.1
(d) ........................................ 6.1
(e) ........................................ 5.14
316 (a) (last sentence)................................ 1.1
(a) (1) (A)........................................ 5.12
(a) (1) (B)........................................ 5.13
(a) (2) ........................................ N.A.
(b) ........................................ 5.7; 5.8
(c) ......................................... N.A
317 (a) (1) ......................................... 5.3
(a) (2) ......................................... 5.3
(b) ......................................... 3.3
318 (a) ......................................... 11.7
(b) ......................................... N.A.
(c) ......................................... 11.7
- --------
1 Note: This Cross Reference Table shall not, for any purpose,
be deemed to be part of this Indenture.
2 N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions....................................3
SECTION 1.2 Incorporation by Reference of Trust
Indenture Act................................. 15
SECTION 1.3 Rules of Construction......................... 15
ARTICLE II
THE NOTES
SECTION 2.1 Form.............................................. 16
SECTION 2.2 Execution, Authentication and Delivery....... 16
SECTION 2.3 Temporary Notes.............................. 17
SECTION 2.4 Registration; Registration of
Transfer and Exchange.............. 17
SECTION 2.5 Mutilated, Destroyed, Lost or
Stolen Notes....................... 19
SECTION 2.6 Persons Deemed Owner........................ 20
SECTION 2.7 Payment of Principal and Interest;
Defaulted Interest................. 20
SECTION 2.8 Cancellation................................ 21
SECTION 2.9 Release of Collateral....................... 22
SECTION 2.10 Book-Entry Notes............................ 22
SECTION 2.11 Notices to Clearing Agency.................. 23
SECTION 2.12 Definitive Notes............................ 23
ARTICLE III
COVENANTS
SECTION 3.1 Payment of Principal and Interest........... 24
SECTION 3.2 Maintenance of Office or Agency............. 24
SECTION 3.3 Money for Payments To Be Held in Trust...... 24
SECTION 3.4 Existence................................... 26
SECTION 3.5 Protection of Trust Estate.................. 27
SECTION 3.6 Opinions as to Trust Estate................. 27
SECTION 3.7 Performance of Obligations; Servicing
of Receivables..................... 28
SECTION 3.8 Negative Covenants.......................... 29
SECTION 3.9 Annual Statement as to Compliance........... 30
SECTION 3.10 Issuer May Consolidate, Etc. Only
on Certain Terms.................. 30
SECTION 3.11 Successor or Transferee..................... 33
SECTION 3.12 No Other Business........................... 33
SECTION 3.13 No Borrowing................................ 33
SECTION 3.14 Servicer's Obligations...................... 34
SECTION 3.15 Guarantees, Loans, Advances and
Other Liabilities................. 34
SECTION 3.16 Capital Expenditures........................ 34
SECTION 3.17 Compliance with Laws....................... 34
SECTION 3.18 Restricted Payments......................... 34
SECTION 3.19 Notice of Events of Default................. 34
SECTION 3.20 Further Instruments and Acts................ 35
SECTION 3.21 Amendments of Sale and Servicing
Agreement and Trust Agreement...... 35
SECTION 3.22 Income Tax Characterization................. 35
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction and Discharge of Indenture.... 35
SECTION 4.2 Application of Trust Money................. 36
SECTION 4.3 Repayment of Moneys Held by Paying Agent... 37
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default.......................... 37
SECTION 5.2 Rights Upon Event of Default............... 39
SECTION 5.3 Collection of Indebtedness and Suits
for Enforcement by Trustee........ 40
SECTION 5.4 Remedies.................................. 43
SECTION 5.5 Optional Preservation of the Receivables... 45
SECTION 5.6 Priorities................................ 45
SECTION 5.7 Limitation of Suits........................ 46
SECTION 5.8 Unconditional Rights of Noteholders
To Receive Principal and Interest. 47
SECTION 5.9 Restoration of Rights and Remedies......... 47
SECTION 5.10 Rights and Remedies Cumulative............. 48
SECTION 5.11 Delay or Omission Not a Waiver............. 48
SECTION 5.12 Control by Noteholders.................... 48
SECTION 5.14 Undertaking for Costs...................... 49
SECTION 5.15 Waiver of Stay or Extension Laws........... 49
SECTION 5.16 Action on Notes............................ 50
SECTION 5.17 Performance and Enforcement of
Certain Obligations.............. 50
SECTION 5.18 Claims Under Note Policy.................. 51
SECTION 5.19 Preference Claims.......................... 52
ARTICLE VI
THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT
SECTION 6.1 Duties of Trustee......................... 53
SECTION 6.2 Rights of Trustee......................... 55
SECTION 6.3 Individual Rights of Trustee.............. 57
SECTION 6.4 Trustee's Disclaimer...................... 57
SECTION 6.5 Notice of Defaults........................ 57
SECTION 6.6 Reports by Trustee to Holders............. 57
SECTION 6.7 Compensation and Indemnity................ 57
SECTION 6.8 Replacement of Trustee.................... 58
SECTION 6.9 Successor Trustee by Merger............... 60
SECTION 6.10 Appointment of Co-Trustee or
Separate Trustee................. 60
SECTION 6.11 Eligibility; Disqualification............. 62
SECTION 6.12 Preferential Collection of Claims
Against Issuer.................. 62
SECTION 6.13 Appointment and Powers.................... 62
SECTION 6.14 Performance of Duties..................... 63
SECTION 6.15 Limitation on Liability................... 63
SECTION 6.16 Reliance Upon Documents................... 64
SECTION 6.17 Successor Indenture Collateral Agent. .... 64
SECTION 6.18 Compensation.............................. 66
SECTION 6.19 Representations and Warranties of
the Indenture Collateral Agent... 66
SECTION 6.20 Waiver of Setoffs......................... 66
SECTION 6.21 Control by the Controlling Party. ........ 67
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 Issuer To Furnish To Trustee Names
and Addresses of Noteholders..... 67
SECTION 7.2 Preservation of Information;
Communications to Noteholders... 67
SECTION 7.3 Reports by Issuer......................... 68
SECTION 7.4 Reports by Trustee........................ 68
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 Collection of Money....................... 68
SECTION 8.2 Trust Accounts............................ 69
SECTION 8.3 General Provisions Regarding Accounts..... 70
SECTION 8.4 Release of Trust Estate................... 71
SECTION 8.5 Opinion of Counsel........................ 71
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 Supplemental Indentures Without
Consent of Noteholders...........71
SECTION 9.2 Supplemental Indentures with Consent
of Noteholders...................73
SECTION 9.3 Execution of Supplemental Indentures......75
SECTION 9.4 Effect of Supplemental Indenture..........75
SECTION 9.5 Conformity With Trust Indenture Act.......75
SECTION 9.6 Reference in Notes to Supplemental
Indentures.......................75
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 Redemption................................ 76
SECTION 10.2 Form of Redemption Notice................. 76
SECTION 10.3 Notes Payable on Redemption Date.......... 77
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Compliance Certificates and
Opinions, etc................... 77
SECTION 11.2 Form of Documents Delivered to Trustee... 79
SECTION 11.3 Acts of Noteholders...................... 80
SECTION 11.4 Notices, etc., to Trustee, Issuer and
Rating Agencies................. 81
SECTION 11.5 Notices to Noteholders; Waiver........... 82
SECTION 11.6 Alternate Payment and Notice Provisions.. 83
SECTION 11.7 Conflict with Trust Indenture Act........ 83
SECTION 11.8 Effect of Headings and Table of Contents. 83
SECTION 11.9 Successors and Assigns................... 83
SECTION 11.10 Separability............................. 83
SECTION 11.11 Benefits of Indenture.................... 84
SECTION 11.12 Legal Holidays........................... 84
SECTION 11.13 Governing Law............................ 84
SECTION 11.14 Counterparts............................. 84
SECTION 11.15 Recording of Indenture................... 84
SECTION 11.16 Trust Obligation......................... 85
SECTION 11.17 No Petition.............................. 85
SECTION 11.18 Inspection............................... 85
INDENTURE dated as of ________ __, 199_, between THE MONEY
STORE AUTO TRUST 199_-_, a Delaware business trust (the "Issuer"), and
___________________________________, a ____________________________, as trustee
(the "Trustee") and
Indenture Collateral Agent (as defined below).
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Holders of the Issuer's Class
A-1 ____% 1 Asset Backed Notes (the "Class A-1 Notes"), Class A-2 ____% Asset
Backed Notes (the "Class A-2 Notes"), Class A-3 ____% Asset Backed Notes (the
"Class A-3 Notes") [and Class A-4 ____% Asset Backed Notes (the "Class A-4
Notes" and, together with the Class A-1 Notes, Class A-2 Notes and Class A-3
Notes, the "Notes"):
As security for the payment and performance by the Issuer of
its obligations under this Indenture and the Notes, the Issuer has agreed to
assign the Indenture Collateral (as defined below) as collateral to the
Indenture Collateral Agent for the benefit of the Trustee on behalf of the
Noteholders.
[_________________________________ (the "Security Insurer")
has issued and delivered a financial guaranty insurance policy, dated the
Closing Date (with endorsements, the "Note Policy"), pursuant to which the
Security Insurer guarantees Guaranteed Note Distributions, as defined in the
Note Policy.]
[As an inducement to the Security Insurer to issue and deliver
the Note Policy, the Issuer and the Security Insurer have executed and delivered
the Insurance and Indemnity Agreement, dated as of ________ __, 199_ (as amended
from time to time, the "Insurance Agreement"), among the Security Insurer, the
Issuer, The Money Store Inc., The Money Store Auto Finance Inc. and TMS Auto
Holdings Inc.]
[As an additional inducement to the Security Insurer to issue
the Note Policy, and as security for the performance by the Issuer of the
Insurer Issuer Secured Obligations and as security for the performance by the
Issuer of the Trustee Issuer Secured Obligations, the Issuer has agreed to
assign the Indenture Collateral (as defined below) as collateral to the
Indenture Collateral Agent for the benefit of the Issuer Secured Parties, as
their respective interests may appear.]
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Collateral Agent at the Closing
Date, for the benefit of the Issuer Secured Parties to secure the Issuer Secured
Parties, all of the Issuer's right, title and interest in and to (a) the
[Initial] Receivables, and all moneys due thereon after the [Initial] Cutoff
Date and, in the case of Precomputed Receivables, certain moneys received
thereon on or prior to the [Initial] Cutoff Date that relate to Scheduled
Payments due after the [Initial] Cutoff Date; [(b) the Subsequent Receivables
and all moneys due thereon or in respect thereof after the related Subsequent
Cutoff Date and, in the case of Precomputed Receivables, certain moneys received
thereon on or prior to the related Subsequent Cutoff Date that relate to
Scheduled Payments due after the Subsequent Cutoff Date;] (c) an assignment of
the security interests in the Financed Vehicles granted by Obligors pursuant to
the [Initial] Receivables [and any Subsequent Receivables] and any other
interest of the Issuer in the Financed Vehicles; (d) any proceeds with respect
to the [Initial] Receivables [and the Subsequent Receivables] repurchased by a
Dealer, pursuant to a Dealer Agreement, as a result of a breach of
representation or warranty in the related Dealer Agreement; (e) all rights under
any Service Contracts on the related Financed Vehicles; (f) any proceeds with
respect to the [Initial] Receivables [and the Subsequent Receivables] from
claims on any physical damage, theft, credit life or disability insurance
policies covering Financed Vehicles or Obligors; (g) all funds on deposit from
time to time in the Trust Accounts, and in all investments and proceeds thereof
and all rights of the Issuer therein (including all income thereon); (h) the
Issuer's rights and benefits, but none of its obligations or burdens, under the
Purchase Agreement [and each Subsequent Purchase Agreement,] including the
delivery requirements, representations and warranties and the cure and
repurchase obligations of TMS Auto Finance under the Purchase Agreement; (i) all
items contained in the Receivable Files and any and all other documents that TMS
Auto Finance keeps on file in accordance with its customary procedures relating
to the Receivables, the Obligors or the Financed Vehicles, (j) the Issuer's
rights and benefits, but none of its obligations or burdens, under the Sale and
Servicing Agreement (including all rights of the Seller under the Purchase
Agreement, [any Subsequent Purchase Agreement and any Subsequent Transfer
Agreement assigned to the Issuer pursuant to the Sale and Servicing Agreement]);
and (k) all present and future claims, demands, causes and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion, voluntary or involuntary,
into cash or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and every kind
and other forms of obligations and receivables, instruments and other property
which at any time constitute all or part of or are included in the proceeds of
any of the foregoing (collectively, the "Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes, equally
and ratably without prejudice, priority or distinction except as set forth
herein, and to secure compliance with the provisions of this Indenture, all as
provided in this Indenture.
The Indenture Collateral Agent, for the benefit of the Trustee on behalf of
the Holders of the Notes [and for the benefit of the Security Insurer]
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties required
in this Indenture to the best of its ability to the end that the interests of
the Holders of the Notes may be adequately and effectively protected.
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS. Except as otherwise specified herein, the
following terms have the respective meanings set forth below for all purposes of
this Indenture.
"ACT" has the meaning specified in Section 11.3(a).
"AFFILIATE" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing. A Person shall not be
deemed to be an Affiliate of any person solely because such other Person has the
contractual right or obligation to manage such Person unless such other Person
controls such Person through equity ownership or otherwise.
"AUTHORIZED OFFICER" means, with respect to the Issuer and the Servicer,
any officer of the Owner Trustee or the Servicer, as applicable, who is
authorized to act for the Owner Trustee or the Servicer, as applicable, in
matters relating to the Issuer and who is identified on the list of Authorized
Officers delivered by each of the Owner Trustee and the Servicer to the Trustee
on the Closing Date (as such list may be modified or supplemented from time to
time thereafter).
"BASIC DOCUMENTS" means the Certificate of Trust, the Trust Agreement, the
Sale and Servicing Agreement, the Spread Account Agreement, the Depository
Agreements, [the Insurance Agreement] and other documents and certificates
delivered in connection therewith.
"BOOK ENTRY NOTES" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10.
"BUSINESS DAY" means [(i) with respect to the Note Policy, any day other
than a Saturday, Sunday, legal holiday or other day on which commercial banking
institutions in Wilmington, Delaware, the City of New York or Minneapolis,
Minnesota or any other location of any successor Servicer, successor Owner
Trustee or successor Indenture Collateral Agent are authorized or obligated by
law, executive order or governmental decree to be closed and (ii) otherwise,] a
day other than a Saturday, a Sunday or other day on which commercial banks
located in the states of California, Delaware, _________ or New York are
authorized or obligated to be closed.
"CERTIFICATE OF TRUST" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
["CLASS A-1 PREPAYMENT AMOUNT" means, as of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-1 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes and the current Certificate
Balance) of the Pre-Funded Amount as of such Distribution Date.]
"CLASS A-1 NOTES" means the Class A-1 ____% Asset Backed Notes,
substantially in the form of Exhibit D.
"CLASS A-1 INTEREST RATE" means _____% per annum (computed on the basis of
the actual number of days elapsed in a 360-day year).
["CLASS A-2 NOTE PREPAYMENT AMOUNT" means, as of the Distribution Date on
or immediately following the last day of the Funding Period, after giving effect
to any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-2 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes and the current Certificate
Balance) of the Pre-Funded Amount as of such Distribution Date.]
"CLASS A-2 NOTES" means the Class A-2 ____% Asset Backed Notes,
substantially in the form of Exhibit D.
"CLASS A-2 INTEREST RATE" means ____% per annum (computed on the basis of
the actual number of days elapsed in a 360-day year).
["CLASS A-3 PREPAYMENT AMOUNT" means, as of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-3 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes and the current Certificate
Balance) of the Pre-Funded Amount as of such Distribution Date.]
"CLASS A-3 NOTES" means the Class A-3 ____% Asset Backed Notes,
substantially in the form of Exhibit D.
"CLASS A-3 INTEREST RATE" means ____% per annum (computed on the basis of a
360-day year of twelve 30-day months).
["CLASS A-4 PREPAYMENT AMOUNT" means, as of the Distribution Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-4 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes and the current Certificate
Balance) of the Pre-Funded Amount as of such Distribution Date.]
["CLASS A-4 NOTES" means the Class A-4 ____% Asset Backed Notes,
substantially in the form of Exhibit D.]
["CLASS A-4 INTEREST RATE" means ____% per annum (computed on the basis of
a 360-day year of twelve 30-day months).]
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARING AGENCY PARTICIPANT" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"CLOSING DATE" means ________ __, 199_.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"COLLATERAL" has the meaning specified in the Granting Clause of this
Indenture.
"CONTROLLING PARTY" means the [Security Insurer, so long as no Insurer
Default shall have occurred and be continuing, and the] Trustee[, for so long as
an Insurer Default shall have occurred and be continuing].
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered which
office at date of the execution of this Agreement is located at
______________________, Attention: __________________________ or at such other
address as the Trustee may designate from time to time by notice to the
Noteholders, [the Security Insurer,] the Servicer and the Issuer, or the
principal corporate trust office of any successor Trustee (the address of which
the successor Trustee will notify the Noteholders and the Issuer).
"DEFAULT" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"DEFINITIVE NOTES" has the meaning specified in Section 2.10.
"EVENT OF DEFAULT" has the meaning specified in Section 5.1.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTIVE OFFICER" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"GENERAL PARTNER" means each Certificateholder obligated to pay the
expenses of the Issuer pursuant to Section 2.7 of the Trust Agreement.
"GRANT" means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
["GUARANTEED NOTE DISTRIBUTIONS" has the meaning specified in the Note
Policy.]
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Note Register.
"INDEBTEDNESS" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases; (c) current liabilities of such Person in respect of unfunded
vested benefits under plans covered by Title IV of ERISA; (d) obligations issued
for or liabilities incurred on the account of such Person; (e) obligations or
liabilities of such Person arising under acceptance facilities; (f) obligations
of such Person under any guarantees, endorsements (other than for collection or
deposit in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (g) obligations of such Person
secured by any lien on property or assets of such Person, whether or not the
obligations have been assumed by such Person; or (h) obligations of such Person
under any interest rate or currency exchange agreement.
"INDENTURE" means this Indenture as amended and supplemented from time to
time.
"INDENTURE COLLATERAL AGENT" means, initially,
_________________________________, in its capacity as collateral agent on behalf
of the Issuer Secured Parties, including its successors in interest, until and
unless a successor Person shall have become the Indenture Collateral Agent
pursuant to Section 6.17 hereof, and thereafter "Indenture Collateral Agent"
shall mean such successor Person.
"INDEPENDENT" means, when used with respect to any specified Person, that
the person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Seller and any Affiliate of any of the foregoing persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obligor, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"INDEPENDENT CERTIFICATE" means a certificate or opinion to be delivered to
the Indenture Collateral Agent under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1, prepared
by an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Collateral Agent in the exercise of reasonable care,
and such opinion or certificate shall state that the signer has read the
definition of "Independent" in this Indenture and that the signer is Independent
within the meaning thereof.
["INSURANCE AGREEMENT INDENTURE CROSS DEFAULT" has the meaning specified
therefor in the Insurance Agreement.]
["INSURER ISSUER SECURED OBLIGATIONS" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Security Insurer
under this Indenture, the Insurance Agreement or any other Basic Document.]
"INTEREST RATE" means, with respect to the (i) Class A-1 Notes, the Class
A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate, (iii)
Class A-3 Notes, the Class A-3 Interest Rate[, and (iv) Class A-4 Notes, the
Class A-4 Interest rate].
"ISSUER" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"ISSUER ORDER" and "ISSUER REQUEST" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Trustee.
"ISSUER SECURED OBLIGATIONS" means [the Insurer Issuer Secured Obligations
and] the Trustee Issuer Secured Obligations.
"ISSUER SECURED PARTIES" means [each of] the Trustee in respect of the
Trustee Issuer Secured Obligations [and the Security Insurer in respect of the
Insurer Issuer Secured Obligations.]
"LIBOR" means, with respect to any Interest Period, the London interbank
offered rate for deposits in U.S. dollars having a maturity of one month
commencing on the related LIBOR Determination Date (the "Index Maturity") which
appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750, the rate
for that day will be determined on the basis of the rates at which deposits in
U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks. The Trustee will request the principal London office of
each of such Reference Banks to provide a quotation of its rate. If at least two
such quotations are provided, the rate for that day will be the arithmetic mean,
rounded upward, if necessary to the nearest 1/100,000 of 1% (.0000001), with
five one-millionths of a percentage point rounded upward, of all such
quotations. If fewer than two such quotations are provided, the rate for that
day will be the arithmetic mean, rounded upward, if necessary to the nearest
1/100,000 of % (.0000001), with five one-millionths of a percentage point
rounded upward, of the offered per annum rates one or more leading banks in New
York City, selected by the Trustee, are quoting as of approximately 11:00 a.m.,
New York City time, on such LIBOR Determination Date to leading European banks
for United States dollar deposits for the Index Maturity; provided that if the
banks selected as aforesaid are not quoting as mentioned in this sentence, LIBOR
in effect for the applicable Interest Period will be LIBOR in effect for the
previous Interest Period.
"LIBOR DETERMINATION DATE" means, with respect to any Interest Period, the
day that is the second London Business Day prior to the commencement of such
Interest Period (or, in the case of the first Interest Period, with respect to
the period from ________ __, 199_ to but excluding ________ __, 199_, on the
second business day prior to ________ __, 199_.)
"LONDON BUSINESS DAY" means a Business Day and a day on which banking
institutions in the City of London, England are not required or authorized by
law to be closed.
"NOTE" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note [and a
Class A-4 Note].
"NOTE DEPOSITORY AGREEMENT" means the agreement among the Issuer, the
Trustee, the Servicer and The Depository Trust Company, as the initial Clearing
Agency, dated ________ __, 199_ substantially in the form of Exhibit C.
"NOTE PAYING AGENT" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"[NOTE POLICY" means the Financial Guaranty Insurance Policy issued by the
Security Insurer with respect to the Notes, including any endorsements thereto,
in the form of Exhibit E.]
["NOTE POLICY CLAIM AMOUNT" has the meaning specified in Section 5.18.]
"NOTE OWNER" means, with respect to a Book-Entry Note, the person who is
the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"NOTE REGISTER" and "NOTE REGISTRAR" have the respective meanings specified
in Section 2.4.
["NOTICE OF CLAIM" has the meaning specified in Section 5.18.]
"OFFICER'S CERTIFICATE" means a certificate signed by any Authorized
Officer of the Owner Trustee, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
ss. 314, and delivered to the Trustee. Unless otherwise specified, any reference
in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
"OPINION OF COUNSEL" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Trustee [and, if
addressed to the Security Insurer, satisfactory to the Security Insurer,] and
which shall comply with any applicable requirements of Section 11.01, and shall
be in form and substance satisfactory to the Trustee[, and if addressed to the
Security Insurer, satisfactory to the Security Insurer].
"OUTSTANDING" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar
or delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Notes (provided, however,
that if such
Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor, satisfactory to the
Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser;
PROVIDED, [HOWEVER, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Security Insurer has been paid as subrogee hereunder or reimbursed pursuant
to the Insurance Agreement as evidenced by a written notice from the Security
Insurer delivered to the Trustee, and the Security Insurer shall be deemed to be
the Holder thereof to the extent of any payments thereon made by the Security
Insurer; PROVIDED, FURTHER,] that in determining whether the Holders of the
requisite Outstanding Amount of the Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any Basic
Document, Notes owned by the Issuer, any other obligor upon the Notes, the
Seller or any Affiliate of any of the foregoing Persons shall be disregarded and
deemed not to be Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes that a Responsible Officer of
the Trustee either actually knows to be so owned or has received written notice
thereof shall be so disregarded. Notes so owned that have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Notes and that the pledgee is not the Issuer, any other obligor upon the Notes,
the Seller or any Affiliate of any of the foregoing Persons.
"OUTSTANDING AMOUNT" means the aggregate principal amount of all Notes, or
class of Notes, as applicable, Outstanding at the date of determination.
"PAYMENT DATE" means a Distribution Date.
"PREDECESSOR NOTE" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
["PREFERENCE CLAIM" has the meaning specified in Section 5.19.]
"PROCEEDING" means any suit in equity, action at law or other judicial or
administrative proceeding.
"RATING AGENCY" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Notes; and if either Moody's or Standard &
Poor's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Seller [and (so long
as an Insurer Default shall not have occurred and be continuing) acceptable to
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 Security
Insurer,] the Trustee, the Owner Trustee and the Issuer in writing that such
action will not result in a reduction or withdrawal of the then current rating
of the Notes.
"RECORD DATE" means, with respect to a Payment Date or Redemption Date, the
close of business on the last Business Day immediately preceding such Payment
Date or Redemption Date.
"REDEMPTION DATE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section
10.1(b), the Distribution Date specified by the Servicer or the Issuer pursuant
to Section 10.1(a) or (b) as applicable.
"REDEMPTION PRICE" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a), an amount equal to the unpaid principal amount of
the then outstanding principal amount of each class of Notes being redeemed plus
accrued and unpaid interest thereon to but excluding the Redemption Date, or (b)
in the case of a payment made to Noteholders pursuant to Section 10.1(b), the
amount on deposit in the Note Distribution Account, but not in excess of the
amount specified in clause (a) above.
"REFERENCE BANKS" means four major banks in the London interbank market
selected by the Trustee.
"RESPONSIBLE OFFICER" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any Vice President,
Assistant Vice President, Assistant Treasurer, Assistant Secretary, 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.
"SALE AND SERVICING AGREEMENT" means the Sale and Servicing Agreement dated
as of ________ __, 199_, among the Issuer, the Representative, the Seller and
the Servicer, substantially in the form of Exhibit B as the same may be amended
or supplemented from time to time.
"SCHEDULE OF RECEIVABLES" means the listing of the Receivables set forth in
Exhibit A (which Exhibit may be in the form of microfiche)[; as supplemented on
each Subsequent Transfer Date to reflect the sale to the Issuer of Subsequent
Receivables].
"STATE" means any one of the 50 states of the United States of America or
the District of Columbia.
"SUCCESSOR SERVICER" has the meaning specified in Section 3.7(e).
"TERMINATION DATE" means the latest of [(i) the expiration of the Note
Policy and the return of the Note Policy to the Security Insurer for
cancellation, (ii) the date on which the Security Insurer shall have received
payment and performance of all Insurer Issuer Secured Obligations and (iii)] the
date on which the Trustee shall have received payment and performance of all
Trustee Issuer Secured Obligations.
"TRUST ESTATE" means all money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Indenture Collateral Agent), including all proceeds
thereof.
"TRUST INDENTURE ACT" or "TIA" means the Trust Indenture Act of 1939 as in
force on the date hereof, unless otherwise specifically provided.
"TRUSTEE" means _________________________________, a
___________________________, not in its individual capacity but as trustee under
this Indenture, or any successor trustee under this Indenture.
"TRUSTEE ISSUER SECURED OBLIGATIONS" means all amounts and obligations
which the Issuer may at any time owe to or on behalf of the Trustee for the
benefit of the Noteholders under this Indenture or the Notes.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
(a) Except as otherwise specified herein, the following terms
have the respective meanings set forth in the Sale and Servicing Agreement as in
effect on the Closing Date for all purposes of this Indenture, and the
definitions of such terms are equally applicable both to the singular and plural
forms of such terms:
Section of Sale and
TERM SERVICING AGREEMENT
Annual Percentage Rate or APR........................... Section 1.1
Capitalized Interest Account........................... Section 1.1
Certificateholders.................................... Section 1.1
Certificate Policy.................................... Section 1.1
Closing Date ......................................... Section 1.1
Collection Account................................... Section 1.1
Collection Period.................................... Section 1.1
Contract............................................. Section 1.1
Depositor........................................... Section 1.1
Depository Agreements................................ Section 1.1
Distribution Date.................................... Section 1.1
Eligible Deposit Account............................. Section 1.1
Eligible Investments................................ Section 1.1
Final Scheduled Distribution Date ................... Section 1.1
Final Scheduled Maturity Date ....................... Section 1.1
Financed Vehicle..................................... Section 1.1
Funding Period ..................................... Section 1.1
[Initial] Receivables ............................... Section 1.1
Interest Period...................................... Section 1.1
Note Distribution Account ........................... Section 1.1
[Insurance Agreement................................. Section 1.1]
[Insurance Agreement Event of Default................ Section 1.1]
[Insurer Default..................................... Section 1.1]
Interest Period...................................... Section 1.1
Monthly Period....................................... Section 1.1
Note Distribution Account............................ Section 1.1
Noteholders' Distributable Amount ................... Section 1.1
Noteholders' Interest Distributable Amount........... Section 1.1
Noteholders' Percentage.............................. Section 1.1
Noteholders' Principal Distributable Amount......... Section 1.1
Obligor.............................................. Section 1.1
Original Pool Balance................................ Section 1.1
Owner Trustee........................................ Section 1.1
Person .............................................. Section 1.1
Pool Balance......................................... Section 1.1
Precomputed Receivable............................... Section 1.1
[Pre-Funded Amount .................................. Section 1.1]
[Pre-Funding Amount ................................. Section 1.1]
Purchase Agreement .................................. Section 1.1
Purchased Receivable ................................ Section 1.1
Rating Agency ....................................... Section 1.1
Rating Agency Condition ............................. Section 1.1
Receivable........................................... Section 1.1
[Security Insurer.................................... Section 1.1]
Seller............................................... Section 1.1
Servicer............................................. Section 1.1
Servicer Default..................................... Section 1.1
Simple Interest Receivable........................... Section 1.1
Specified Spread Account Balance..................... Section 1.1
Subsequent Purchase Agreement........................ Section 1.1
[Subsequent Receivables ............................. Section 1.1]
Subsequent Transfer Date ............................ Section 1.1
Total Distribution Amount ........................... Section 1.1
Trust Accounts....................................... Section 1.1
Trust Agreement...................................... Section 1.1
(b) Capitalized terms used herein and not otherwise
defined herein or in the Sale and Servicing Agreement have the meanings
assigned to them in the Trust Agreement.
SECTION 1.2 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
SECTION 1.3 RULES OF CONSTRUCTION. Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
and
(v) words in the singular include the plural and
words in the plural include the singular.
ARTICLE II
THE NOTES
SECTION 2.1 FORM. The Class A-1 Notes, the Class A-2 Notes, Class A-3 Notes
[and Class A-4 Notes], in each case together with the Trustee's certificate of
authentication, shall be in substantially the form set forth in Exhibit D, with
such appropriate insertions, omissions, substitutions and other variations as
are required or permitted by this Indenture and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may, consistently herewith, be determined by the officers executing such
Notes, as evidenced by their execution of the Notes. Any portion of the text of
any Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit D is part of the terms of this Indenture.
SECTION 2.2 EXECUTION, AUTHENTICATION AND DELIVERY. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall upon receipt of the Note Policy and Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $___________, Class A-2 Notes for original issue in the
aggregate principal amount of $_________, Class A-3 Notes for original issue in
the aggregate principal amount of $__________ [and Class A-4 Notes for original
issue in an aggregate principal amount of $____________]. The aggregate
principal amount of Class A-1 Notes, Class A-2 Notes, Class A-3 Notes [and Class
A-4 Notes] outstanding at any time may not exceed such amounts except as
provided in Section 2.5.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples thereof (except for one Note of each class which may be
issued in a denomination other than an integral multiple of $1,000).
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
SECTION 2.3 TEMPORARY NOTES. Pending the preparation of Definitive Notes,
the Issuer may execute, and upon receipt of an Issuer Order the Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause Definitive Notes to be
prepared without unreasonable delay. After the preparation of Definitive Notes,
the temporary Notes shall be exchangeable for Definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.2, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of Definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall in all respects be entitled to the same benefits under
this Indenture as Definitive Notes.
SECTION 2.4 REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE. The Issuer
shall cause to be kept a register (the "Note Register") in which, subject to
such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be "Note Registrar" for the purpose of registering Notes and
transfers of Notes as herein provided. Upon any resignation of any Note
Registrar, the Issuer shall promptly appoint a successor or, if it elects not to
make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.2, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute and
upon its request the Trustee shall authenticate and the Noteholder shall obtain
from the Trustee, in the name of the designated transferee or transferees, one
or more new Notes, in any authorized denominations, of the same class and a like
aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes in any
authorized denominations, of the same class and a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met the Issuer shall execute and upon its
request the Trustee shall authenticate and the Noteholder shall obtain from the
Trustee, the Notes which the Noteholder making the exchange is entitled to
receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder thereof or such Holder's attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Trustee may
require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
The preceding provisions of this section notwithstanding, the Issuer shall
not be required to make and the Note Registrar need not register transfers or
exchanges of Notes selected for redemption or of any Note for a period of 15
days preceding the due date for any payment with respect to the Note.
SECTION 2.5 MUTILATED, DESTROYED, LOST OR STOLEN Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee [and the Security Insurer (unless an Insurer
Default shall have occurred and be continuing)] such security or indemnity as
may be required by it to hold the Issuer, the Trustee [and the Security Insurer]
harmless, then, in the absence of notice to the Issuer, the Note Registrar or
the Trustee that such Note has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the UCC are met, the Issuer
shall execute and upon its request the Trustee shall authenticate and deliver,
in exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Note, a replacement Note; PROVIDED, HOWEVER, that if any such destroyed, lost or
stolen Note, but not a mutilated Note, shall have become or within seven days
shall be due and payable, or shall have been called for redemption, instead of
issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer,
the Trustee [and the Security Insurer] shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Trustee)
connected therewith.
Every replacement Note issued pursuant to this Section in replacement of
any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6 PERSONS DEEMED OWNER. Prior to due presentment for registration
of transfer of any Note, the Issuer, the Trustee and any agent of Issuer, the
Trustee[, the Security Insurer] may treat the Person in whose name any Note is
registered (as of the day of determination) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, [the Security Insurer,] the Trustee nor any agent of the
Issuer or the Trustee shall be affected by notice to the contrary.
SECTION 2.7 PAYMENT OF PRINCIPAL AND INTEREST; DEFAULTED INTEREST. (a) The
Notes shall accrue interest as provided in the forms of the Class A-1 Note, the
Class A-2 Note, the Class A-3 Note [and the Class A-4 Note] set forth in Exhibit
D respectively, and such interest shall be payable on each Distribution Date as
specified therein. Any installment of interest or principal, if any, payable on
any Note which is punctually paid or duly provided for by the Issuer on the
applicable Distribution Date shall be paid to the Person in whose name such Note
(or one or more Predecessor Notes) is registered on the Record Date, by check
mailed first-class, postage prepaid, to such Person's address as it appears on
the Note Register on such Record Date, except that, unless Definitive Notes have
been issued pursuant to Section 2.12, with respect to Notes registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee and except for the
final installment of principal payable with respect to such Note on a
Distribution Date or on the Final Scheduled Distribution Date (and except for
the Redemption Price for any Note called for redemption pursuant to Section
10.1(a)) which shall be payable as provided below. The funds represented by any
such checks returned undelivered shall be held in accordance with Section 3.3.
(b) The principal of each Note shall be payable in
installments on each Distribution Date as provided in the forms of the Class A-1
Note, the Class A-2 Note, the Class A-3 Note [and Class A-4 Note] set forth in
Exhibit D, respectively. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
if the Trustee or the Holders of the Notes representing not less than a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.2. All principal payments on
each class of Notes shall be made pro rata to the Noteholders of such class
entitled thereto. The Trustee shall notify the Person in whose name a Note is
registered at the close of business on the Record Date preceding the
Distribution Date on which the Issuer expects that the final installment of
principal of and interest on such Note will be paid. Such notice shall be mailed
or transmitted by facsimile prior to such final Distribution Date and shall
specify that such final installment will be payable only upon presentation and
surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.2.
(c) If the Issuer defaults in a payment of interest on the
Notes, the Issuer shall pay defaulted interest (plus interest on such defaulted
interest to the extent lawful) at the applicable Interest Rate in any lawful
manner. The Issuer may pay such defaulted interest to the Persons who are
Noteholders on a subsequent special record date, which date shall be at least
five Business Days prior to the payment date. The Issuer shall fix or cause to
be fixed any such special record date and payment date, and, at least 15 days
before any such special record date, the Issuer shall mail to each Noteholder
and the Trustee a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
[(d) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been surrendered
to the Trustee, the Trustee shall, if the Security Insurer has paid any amount
in respect of the Notes under the Note Policy or otherwise which has not been
reimbursed to it, deliver such surrendered Notes to the Security Insurer.]
SECTION 2.8 CANCELLATION. [Subject to Section 2.7(d),] all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. [Subject to Section 2.7(d),] the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. [Subject to Section 2.7(d),] all canceled Notes may
be held or disposed of by the Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it; PROVIDED that such Issuer
Order is timely and the Notes have not been previously disposed of by the
Trustee.
SECTION 2.9 RELEASE OF COLLATERAL. The Indenture Collateral Agent shall, on
or after the Termination Date, release any remaining portion of the Trust Estate
from the lien created by this Indenture and deposit in the Collection Account
any funds then on deposit in any other Trust Account. The Indenture Collateral
Agent shall release property from the lien created by this Indenture pursuant to
this Section 2.9 only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA ss.ss. 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.1.
SECTION 2.10 BOOK-ENTRY NOTES. The Notes, upon original issuance, will be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Note Owner will receive a Definitive Note representing such Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to deal
with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and interest on the Notes and the giving of
instructions or directions hereunder) as the sole Holder of the Notes,
and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through the
Clearing Agency and shall be limited to those established by law and
agreements between such Note Owners and the Clearing Agency and/or the
Clearing Agency Participants. Pursuant to the Note Depository
Agreement, unless and until Definitive Notes are issued pursuant to
Section 2.12, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Trustee at the Corporate Trust Office.
SECTION 2.11 NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to the Note Owners.
SECTION 2.12 DEFINITIVE NOTES. If (i) the Servicer advises the Trustee in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Servicer is
unable to locate a qualified successor, (ii) the Servicer at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default, Note
Owners representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Trustee through the Clearing Agency
in writing that the continuation of a book entry system through the Clearing
Agency is no longer in the best interests of the Note Owners, then the Clearing
Agency shall notify all Note Owners and the Trustee of the occurrence of any
such event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
ARTICLE III
COVENANTS
SECTION 3.1 PAYMENT OF PRINCIPAL AND INTEREST. The Issuer will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Indenture. Without limiting the foregoing, subject
to Section 8.2(c), the Issuer will cause to be distributed all amounts on
deposit in the Note Distribution Account on a Distribution Date deposited
therein pursuant to the Sale and Servicing Agreement (i) for the benefit of the
Class A-l Notes, to Class A-1 Note- holders, (ii) for the benefit of the Class
A-2 Notes, to Class A-2 Noteholders (iii) for the benefit of the Class A-3
Notes, to Class A-3 Noteholders [and (iv) for the benefit of the Class A-4
Notes, to Class A-4 Noteholders]. Amounts properly withheld under the Code by
any Person from a payment to any Noteholder of interest and/or principal shall
be considered as having been paid by the Issuer to such Noteholder for all
purposes of this Indenture.
SECTION 3.2 MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain in
the Borough of Manhattan, The City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange, and where notices
and demands to or upon the Issuer in respect of the Notes and this Indenture may
be served. The Issuer hereby initially appoints the Trustee to serve as its
agent for the foregoing purposes. The Issuer will give prompt written notice to
the Trustee of the location, and of any change in the location, of any such
office or agency. If at any time the Issuer shall fail to maintain any such
office or agency or shall fail to furnish the Trustee with the address thereof,
such surrenders, notices and demands may be made or served at the Corporate
Trust Office, and the Issuer hereby appoints the Trustee as its agent to receive
all such surrenders, notices and demands.
SECTION 3.3 MONEY FOR PAYMENTS TO BE HELD IN TRUST. As provided in Sections
8.2(a) and (b), all payments of amounts due and payable with respect to any
Notes that are to be made from amounts withdrawn from the Collection Account and
the Note Distribution Account pursuant to Section 8.2(c) shall be made on behalf
of the Issuer by the Trustee or by another Paying Agent, and no amounts so
withdrawn from the Collection Account and the Note Distribution Account for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
On or before each Payment Date and Redemption Date, the Issuer shall
deposit or cause to be deposited in the Note Distribution Account an aggregate
sum sufficient to pay the amounts then becoming due under the Notes, such sum to
be held in trust for the benefit of the Persons entitled thereto and (unless the
Paying Agent is the Trustee) shall promptly notify the Trustee of its action or
failure so to act.
The Issuer will cause each Note Paying Agent other than the Trustee to
execute and deliver to the Trustee [and the Security Insurer] an instrument in
which such Note Paying Agent shall agree with the Trustee (and if the Trustee
acts as Note Paying Agent, it hereby so agrees), subject to the provisions of
this Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Trustee notice of any default by the Issuer of which
it has actual knowledge (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default, upon
the written request of the Trustee, forthwith pay to the Trustee all
sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which the sums were held by such Paying Agent; and upon such a payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to the escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust and be
paid to the Issuer on Issuer Request [with the consent of the Security Insurer
(unless an Insurer Default shall have occurred and be continuing)] shall be
deposited by the Trustee in the Collection Account; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; PROVIDED, HOWEVER, that if such money or any
portion thereof had been previously deposited by the [Security Insurer or the]
Indenture Collateral Agent with the Trustee for the payment of principal or
interest on the Notes, [to the extent any amounts are owing to the Security
Insurer, such amounts shall be paid promptly to the Security Insurer upon
receipt of a written request by the Security Insurer to such effect,] and
PROVIDED, FURTHER, that the Trustee or such Paying Agent, before being required
to make any such repayment, shall at the expense of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the Issuer.
The Trustee shall also adopt and employ, at the expense of the Issuer, any other
reasonable means of notification of such repayment (including, but not limited
to, mailing notice of such repayment to Holders whose Notes have been called but
have not been surrendered for redemption or whose right to or interest in moneys
due and payable but not claimed is determinable from the records of the Trustee
or of any Paying Agent, at the last address of record for each such Holder).
SECTION 3.4 EXISTENCE. Except as otherwise permitted by the provisions of
Section 3.10, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.
SECTION 3.5 PROTECTION OF TRUST ESTATE. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Issuer Secured
Parties to be prior to all other liens in respect of the Trust Estate, and the
Issuer shall take all actions necessary to obtain and maintain, in favor of the
Indenture Collateral Agent, for the benefit of the Issuer Secured Parties, a
first lien on and a first priority, perfected security interest in the Trust
Estate. The Issuer will from time to time prepare (or shall cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and will take such other action necessary or
advisable to:
(i) Grant more effectively all or any portion of the
Trust Estate;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Indenture Collateral Agent for
the benefit of the Issuer Secured Parties created by this Indenture or
carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the
validity of any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(v) preserve and defend title to the Trust Estate and the rights
of the Indenture Collateral Agent in such Trust Estate against the
claims of all persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Indenture Collateral Agent its agent and
attorney- in-fact to execute any financing statement, continuation statement or
other instrument required by the Indenture Collateral Agent pursuant to this
Section.
SECTION 3.6 OPINIONS AS TO TRUST ESTATE. (a) On the Closing Date, the
Issuer shall furnish to the Trustee, the Indenture Collateral Agent [and the
Security Insurer] an Opinion of Counsel either stating that, in the opinion of
such counsel, such action has been taken with respect to the recording and
filing of this Indenture, any indentures supplemental hereto, and any other
requisite documents, and with respect to the execution and filing of any
financing statements and continuation statements, as are necessary to perfect
and make effective the first priority lien and security interest in favor of the
Indenture Collateral Agent, for the benefit of the Issuer Secured Parties,
created by this Indenture and reciting the details of such action, or stating
that, in the opinion of such counsel, no such action is necessary to make such
lien and security interest effective.
(b) Within 120 days after the beginning of each calendar year,
beginning with the first calendar year beginning more than three months after
the Closing Date, the Issuer shall furnish to the Trustee, Indenture Collateral
Agent [and the Security Insurer] an Opinion of Counsel either stating that, in
the opinion of such counsel, such action has been taken with respect to the
recording, filing, re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect to the
execution and filing of any financing statements and continuation statements as
are necessary to maintain the lien and security interest created by this
Indenture and reciting the details of such action or stating that in the opinion
of such counsel no such action is necessary to maintain such lien and security
interest. Such Opinion of Counsel shall also describe the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and the execution and filing of any financing
statements and continuation statements that will, in the opinion of such
counsel, be required to maintain the lien and security interest of this
Indenture until [January 30] in the following calendar year.
SECTION 3.7 PERFORMANCE OF OBLIGATIONS; SERVICING OF RECEIVABLES. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
ordered by any bankruptcy or other court or as expressly provided in this
Indenture, the Basic Documents or such other instrument or agreement.
(b) The Issuer may contract with other Persons [acceptable to
the Security Insurer (so long as no Insurer Default shall have occurred and be
continuing)] to assist it in performing its duties under this Indenture, and any
performance of such duties by a Person identified to the Trustee [and the
Security Insurer] in an Officer's Certificate of the Issuer shall be deemed to
be action taken by the Issuer. Initially, the Issuer has contracted with the
Servicer to assist the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate, including but
not limited to preparing (or causing to prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Trustee[, the Security Insurer] or the
Holders of at least a majority of the Outstanding Amount of the Notes.
(d) If a responsible officer of the Owner Trustee shall have
actual knowledge of the occurrence of a Servicer Default under the Sale and
Servicing Agreement, the Issuer shall promptly notify the Trustee[, the Security
Insurer] and the Rating Agencies thereof in accordance with Section 11.4, and
shall specify in such notice the action, if any, the Issuer is taking in respect
of such default. If a Servicer Default shall arise from the failure of the
Servicer to perform any of its duties or obligations under the Sale and
Servicing Agreement with respect to the Receivables, the Issuer shall take all
reasonable steps available to it to remedy such failure.
(e) [If an Insurer Default shall have occurred and be
continuing and] if the Issuer has given notice of termination to the Servicer of
the Servicer's rights and powers pursuant to Section 8.2 of the Sale and
Servicing Agreement, as promptly as possible thereafter, the Issuer shall
appoint a successor servicer in accordance with Section 8.3 of the Sale and
Servicing Agreement.
(f) Upon any termination of the Servicer's rights and powers
pursuant to the Sale and Servicing Agreement, the Issuer shall promptly notify
the Trustee. As soon as a Successor Servicer (other than the Trustee) is
appointed, the Issuer shall notify the Trustee of such appointment, specifying
in such notice the name and address of such Successor Servicer.
(g) The Issuer agrees that it will not waive timely
performance or observance by the Servicer, the Seller or the Representative of
their respective duties under the Basic Documents [(x) without the prior consent
of the Security Insurer (unless an Insurer Default shall have occurred and be
controlling) or (y)] if the effect thereof would adversely affect the Holders of
the Notes.
SECTION 3.8 NEGATIVE COVENANTS. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Basic Documents, sell, transfer, exchange or otherwise dispose of any
of the properties or assets of the Issuer, including those included in
the Trust Estate, unless directed to do so by the Controlling Party;
(ii) claim any credit on, or make any deduction from the principal
or interest payable in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any
claim against any present or former Noteholder by reason of the payment
of the taxes levied or assessed upon any part of the Trust Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Indenture Collateral
Agent created by this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to the Notes
under this Indenture except as may be expressly permitted hereby, (B)
permit any lien, charge, excise, claim, security interest, mortgage or
other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Estate or
any part thereof or any interest therein or the proceeds thereof (other
than tax liens, mechanics' liens and other liens that arise by
operation of law, in each case on a Financed Vehicle and arising solely
as a result of an action or omission of the related Obligor), (C)
permit the lien of this Indenture not to constitute a valid first
priority (other than with respect to any such tax, mechanics' or other
lien) security interest in the Trust Estate [or (D) amend, modify or
fail to comply with the provisions of the Basic Documents without the
prior written consent of the Controlling Party].
SECTION 3.9 ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver to
the Trustee [and the Security Insurer,] within 120 days after the end of each
fiscal year of the Issuer (commencing with the fiscal year ended December 31,
199_), and otherwise in compliance with the requirements of TIA Section
314(a)(4) an Officer's Certificate stating, as to the Authorized Officer signing
such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant, specifying
each such default known to such Authorized Officer and the nature and
status thereof.
SECTION 3.10 ISSUER MAY CONSOLIDATE, ETC. ONLY ON CERTAIN TERMS. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee [and the Security Insurer (so long as no Insurer Default shall
have occurred and be continuing)], the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee [and the Security
Insurer (so long as no Insurer Default shall have occurred and be
continuing)] to the effect that such transaction will not have any
material adverse tax consequence to the Trust, [the Security Insurer,]
any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien
and security interest created by this Indenture shall have
been taken;
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
[(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Security Insurer written
notice of such consolidation or merger at least 20 Business Days prior
to the consummation of such action and shall have received the prior
written approval of the Security Insurer of such consolidation or
merger and the Issuer or the Person (if other than the Issuer) formed
by or surviving such consolidation or merger has a net worth,
immediately after such consolidation or merger, that is (a) greater
than zero and (b) not less than the net worth of the Issuer immediately
prior to giving effect to such consolidation or merger.]
(b) The Issuer shall not convey or transfer all or
substantially all of its properties or assets, including those
included in the Trust Estate, to any Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any state, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, [and the Security Insurer (so long as no Insurer Default
shall have occurred and be continuing),] the due and punctual payment
of the principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture and each
of the Basic Documents on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed
or transferred shall be subject and subordinate to the rights of
Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agree to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agree by means of such supplemental indenture that such
Person (or if a group of persons, then one specified Person) shall
prepare (or cause to be prepared) and make all filings with the
Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such trans-
action, no Default or Event of Default shall have occurred
and be continuing;
(iii) the Rating Agency Condition shall have been
satisfied with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee [and the Security
Insurer (so long as no Insurer Default shall have occurred and be
continuing)] to the effect that such transaction will not have any
material adverse tax consequence to the Trust, [the Security Insurer,]
any Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien
and security interest created by this Indenture shall have
been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such conveyance
or transfer and such supplemental indenture comply with this Article
III and that all conditions precedent herein provided for relating to
such transaction have been complied with (including any filing required
by the Exchange Act); and
[(vii) so long as no Insurer Default shall have occurred and
be continuing, the Issuer shall have given the Security Insurer written
notice of such conveyance or transfer at least 20 Business Days prior
to the consummation of such action and shall have received the prior
written approval of the Security Insurer of such consolidation or
merger and the Issuer or the Person (if other than the Issuer) formed
by or surviving such consolidation or merger has a net worth,
immediately after such consolidation or merger, that is (a) greater
than zero and (b) not less than the net worth of the Issuer immediately
prior to giving effect to such consolidation or merger.]
SECTION 3.11 SUCCESSOR OR TRANSFEREE. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and
properties of the Issuer pursuant to Section 3.10 (b), The Money Store Auto
Trust 199_-_ will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer with respect to
the Notes immediately upon the delivery of written notice to the Trustee stating
that The Money Store Auto Trust 199_-_ is to be so released.
SECTION 3.12 NO OTHER BUSINESS. The Issuer shall not engage in any business
other than financing, purchasing, owning, selling and managing the Receivables
in the manner contemplated by this Indenture and the Basic Documents and
activities incidental thereto. [After the Funding Period, the Issuer shall not
fund the purchase of any additional Receivables.]
SECTION 3.13 NO BORROWING. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes, [(ii) obligations owing from time to time
to the Security Insurer under the Insurance Agreement] and (iii) any other
Indebtedness permitted by or arising under the Basic Documents. The proceeds of
the Notes and the Certificates shall be used exclusively to fund the Issuer's
purchase of the Receivables and the other assets specified in the Sale and
Servicing Agreement, to fund [the Pre-Funding Account, the Capitalized Interest
Account and] the Spread Account and to pay the Issuer's organizational,
transactional and start-up expenses.
SECTION 3.14 SERVICER'S OBLIGATIONS. The Issuer shall cause the Servicer to
comply with Sections 4.9, 4.10, 4.11 and 5.8 of the Sale and Servicing
Agreement.
SECTION 3.15 GUARANTEES, LOANS, ADVANCES AND OTHER LIABILITIES. Except as
contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16 CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17 COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Basic Document.
SECTION 3.18 RESTRICTED PAYMENTS. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
PROVIDED, HOWEVER, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Trustee and the Certificateholders as
permitted by, and to the extent funds are available for such purpose under, the
Sale and Servicing Agreement or Trust Agreement. The Issuer will not, directly
or indirectly, make payments to or distributions from the Collection Account
except in accordance with this Indenture and the Basic Documents.
SECTION 3.19 NOTICE OF EVENTS OF DEFAULT. Upon a responsible officer of the
Owner Trustee having actual knowledge thereof, the Issuer agrees to give the
Trustee[, the Security Insurer] and the Rating Agencies prompt written notice of
each Event of Default hereunder and each default on the part of the Servicer or
the Seller of its obligations under the Sale and Servicing Agreement.
SECTION 3.20 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee [or
the Security Insurer], the Issuer will execute and deliver such further
instruments and do such further acts as may be reasonably necessary or proper to
carry out more effectively the purpose of this Indenture.
SECTION 3.21 AMENDMENTS OF SALE AND SERVICING AGREEMENT AND TRUST
AGREEMENT. The Issuer shall not agree to any amendment to Section 11.1 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22 INCOME TAX CHARACTERIZATION. For purposes of federal income,
state and local income and franchise and any other income taxes, the Issuer will
treat the Notes as indebtedness of the Issuer.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 SATISFACTION AND DISCHARGE OF INDENTURE. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the Trustee under
Section 6.7 and the obligations of the Trustee under Section 4.2) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them, and the Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.5
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.3) have been delivered to
the Trustee for cancellation [and the Note Policy has expired
and been returned to the Security Insurer for cancellation;]
or
(2) all Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their
respective Final Scheduled Distribution Dates
within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Indenture Collateral Agent cash or direct obligations
of or obligations guaranteed by the United States of America
(which will mature prior to the date such amounts are
payable), in trust for such purpose, in an amount sufficient
to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation when due
to the Final Scheduled Distribution Date or Redemption Date
(if Notes shall have been called for redemption pursuant to
Section 10.1(a)), as the case may be;
(B) the Issuer has paid or caused to be paid all
[Insurer Issuer Secured Obligations and all] Trustee Issuer
Secured Obligations; and
(C) the Issuer has delivered to the Trustee, the Indenture
Collateral Agent [and the Security Insurer] an Officer's Certificate,
an Opinion of Counsel and (if required by the TIA, the Trustee, the
Indenture Collateral Agent [or the Security Insurer (so long as an
Insurer Default shall not have occurred and be continuing)] an
Independent Certificate from a firm of certified public accountants,
each meeting the applicable requirements of Section 11.1(a) and each
stating that all conditions precedent herein provided for relating to
the satisfaction and discharge of this Indenture have been complied
with.
SECTION 4.2 APPLICATION OF TRUST MONEY. All moneys deposited with the
Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.3 REPAYMENT OF MONEYS HELD BY PAYING AGENT. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Trustee under the provisions
of this Indenture with respect to such Notes shall, upon demand of the Issuer,
be paid to the Trustee to be held and applied according to Section 3.3 and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
ARTICLE V
REMEDIES
SECTION 5.1 EVENTS OF DEFAULT. "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for a
period of five days [(solely for purposes of this clause, a payment on
the Notes funded by the Security Insurer or the Collateral Agent
pursuant to the Spread Account Agreement shall be deemed to be a
payment made by the Issuer)]; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable [(solely for purposes of this clause, a payment on the Notes
funded by the Security
Insurer or the Collateral Agent pursuant to the Spread Account
Agreement, shall be deemed to be a payment made by the Issuer)]; or
[(iii) so long as an Insurer Default shall not have occurred
and be continuing, an Insurance Agreement Indenture Cross Default shall
have occurred; provided, however, that the occurrence of an Insurance
Agreement Indenture Cross Default may not form the basis of an Event of
Default unless the Security Insurer shall, upon prior written notice to
the Rating Agencies, have delivered to the Issuer and the Trustee and
not rescinded a written notice specifying that such Insurance Agreement
Indenture Cross Default constitutes an Event of Default under the
Indenture]; or
(iv) [so long as an Insurer Default shall have occurred and be
continuing,] default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days (or for such longer period, not in excess of 90 days,
as may be reasonably necessary to remedy such default; provided that
such default is capable of remedy within 90 days or less and the
Servicer on behalf of the Owner Trustee delivers an Officer's
Certificate to the Trustee to the effect that the Issuer has commenced,
or will promptly commence and diligently pursue, all reasonable efforts
to remedy such default) after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee or to the
Issuer and the Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(v) [so long as an Insurer Default shall have occurred and be
continuing,] the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(vi) [so long as an Insurer Default shall have occurred and be
continuing,] the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust
Estate, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by the Issuer
in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee [and the Security
Insurer,] within five days after the occurrence thereof, written notice in the
form of an Officer's Certificate of any event which with the giving of notice
and the lapse of time would become an Event of Default under clause (iii), its
status and what action the Issuer is taking or proposes to take with respect
thereto.
SECTION 5.2 RIGHTS UPON EVENT OF DEFAULT. (a) If [an Insurer Default shall
not have occurred and be continuing and] an Event of Default shall have occurred
and be continuing, the Notes shall become immediately due and payable at par,
together with accrued interest thereon. If an Event of Default shall have
occurred and be continuing, the Controlling Party may exercise any of the
remedies specified in Section 5.4(a). [In the event of any acceleration of any
Notes by operation of this Section 5.2, the Trustee shall continue to be
entitled to make claims under the Note Policy pursuant to Section 5.18 hereof
for Guaranteed Note Distributions on the Notes. Payments under the Note Policy
following acceleration of any Notes shall be applied by the Trustee:
FIRST: to Noteholders for amounts due and unpaid on
the Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for interest; and
SECOND: to Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for principal.]
[(b) In the event any Notes are accelerated due to an Event of
Default, the Security Insurer shall have the right (in addition to its
obligation to pay Guaranteed Note Distributions on the Notes in accordance with
the Note Policy), but not the obligation, to make payments under the Note Policy
or otherwise of interest and principal due on such Notes, in whole or in part,
on any date or dates following such acceleration as the Security Insurer, in its
sole discretion, shall elect.]
(c) If [an Insurer Default shall have occurred and be
continuing and] an Event of Default shall have occurred and be continuing, the
Trustee in its discretion may, or if so requested in writing by Holders holding
Notes representing not less than a majority of the Outstanding Amount of the
Notes, declare by written notice to the Issuer that the Notes become, whereupon
they shall become, immediately due and payable at par, together with accrued
interest thereon.
(d) If an Insurer Default shall have occurred and be
continuing, then at any time after such declaration of acceleration of maturity
has been made and before a judgment or decree for payment of the money due has
been obtained by the Trustee as hereinafter in this Article V provided, the
Holders of Notes representing a majority of the Outstanding Amount of the Notes,
by written notice to the Issuer and the Trustee, may rescind and annul such
declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee
a sum sufficient to pay
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due hereunder
or upon such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee and its
agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or
impair any right consequent thereto.
SECTION 5.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY
TRUSTEE. (a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of the Notes, the whole amount then due and
payable on such Notes for principal and interest, with interest upon the overdue
principal, and, to the extent payment at such rate of interest shall be legally
enforceable, upon overdue installments of interest, at the applicable Interest
Rate and in addition thereto such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and
unconditionally appoints the Controlling Party as the true and lawful
attorney-in-fact of such Issuer Secured Party for so long as such Issuer Secured
Party is not the Controlling Party, with full power of substitution, to execute,
acknowledge and deliver any notice, document, certificate, paper, pleading or
instrument and to do in the name of the Controlling Party as well as in the
name, place and stead of such Issuer Secured Party such acts, things and deeds
for or on behalf of and in the name of such Issuer Secured Party under this
Indenture (including specifically under Section 5.4) and under the Basic
Documents which such Issuer Secured Party could or might do or which may be
necessary, desirable or convenient in such Controlling Party's sole discretion
to effect the purposes contemplated hereunder and under the Related Documents
and, without limitation, following the occurrence of an Event of Default,
exercise full right, power and authority to take, or defer from taking, any and
all acts with respect to the administration, maintenance or disposition of the
Trust Estate.
(c) If an Event of Default occurs and is continuing, the
Trustee may in its discretion [but with the consent of the Controlling Party and
shall, at the direction of the Controlling Party (except as provided in Section
5.3(d) below),] proceed to protect and enforce its rights and the rights of the
Noteholders by such appropriate Proceedings as the Trustee or the Controlling
Party shall deem most effective to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture or
in aid of the exercise of any power granted herein, or to enforce any other
proper remedy or legal or equitable right vested in the Trustee by this
Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including without limitation Sections 5.4(a), 5.12, 5.13 and 5.17)
[and regardless of whether an Insurer Default shall have occurred and be
continuing,] if the Issuer fails to perform its obligations under Section
10.1(b) hereof when and as due, the Trustee may in its discretion [(and without
the consent of the Controlling Party)] proceed to protect and enforce its rights
and the rights of the Noteholders by such appropriate proceedings as the Trustee
shall deem most effective to protect and enforce any such rights, whether for
specific performance of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy
or legal or equitable right vested in the Trustee by this Indenture or by law;
[provided that the Trustee shall only be entitled to take any such actions
without the consent of the Controlling Party to the extent such actions (x) are
taken only to enforce to Issuer's obligations to redeem the principal amount of
Notes and (y) are taken only against the portion of the Collateral, if any,
consisting of the Pre-Funding Account, the Capitalized Interest Account, any
investments therein and any proceeds thereof].
(e) In case there shall be pending, relative to the Issuer or
any other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Estate, proceedings under Title 11 of the United States
Code or any other applicable Federal or state bankruptcy, insolvency or other
similar law, or in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in case of any other comparable judicial proceedings
relative to the Issuer or other obligor upon the Notes, or to the creditors or
property of the Issuer or such other obligor, the Trustee, irrespective of
whether the principal of any Notes shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or person performing similar functions in any such
proceedings;
(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received
with respect to the claims of the Noteholders and of the Trustee on
their behalf; and
(iv) to file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilitieS incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(f) Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or vote for or accept or adopt on behalf of
any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such proceeding except, as aforesaid, to vote for the election of a trustee in
bankruptcy or similar person.
(g) All rights of action and of asserting claims under this
Indenture, the Spread Account Agreement or under any of the Notes, may be
enforced by the Trustee without the possession of any of the Notes or the
production thereof in any trial or other proceedings relative thereto, and any
such action or proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment, subject to
the payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this Indenture or
the Spread Account Agreement), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such proceedings.
SECTION 5.4 REMEDIES. (a) If an Event of Default shall have occurred and be
continuing, the Controlling Party may do one or more of the following (subject
to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with
respect to the Trust Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Trustee and the Holders of the Notes; and
(iv) direct the Indenture Collateral Agent to sell the Trust
Estate or any portion thereof or rights or interest therein, at one or
more public or private sales called and conducted in any manner
permitted by law; PROVIDED, however, that
[(A) if the Security Insurer is the Controlling
Party, the Security Insurer may not sell or otherwise
liquidate the Trust Estate following an Insurance Agreement
Indenture Cross Default unless
(I) such Insurance Agreement Indenture Cross
Default arises from a claim being made on the Note
Policy or from the insolvency of the Trust or the
Seller, or
(II) the proceeds of such sale or
liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due
and unpaid upon such Notes for principal and
interest; or
(B) if the Trustee is the Controlling Party,]
the Trustee may not sell or otherwise liquidate the Trust
Estate following an Event of Default unless
(I) such Event of Default is of the type
described in Section 5.01(i) or (ii), or
(II) either
(x) the Holders of 100% of the
Outstanding Amount of the Notes consent
thereto,
(y) the proceeds of such sale or
liquidation distributable to the Noteholders
are sufficient to discharge in full all
amounts then due and unpaid upon such Notes
for principal and interest, or
(z) the Trustee determines that the
Trust Estate will not continue to provide
sufficient funds for the payment of
principal of and interest on the Notes as
they would have become due if the Notes had
not been declared due and payable, and the
Trustee provides prior written notice to the
Rating Agencies and obtains the consent of
Holders of 66-2/3% of the Outstanding Amount
of the Notes.
In determining such sufficiency or insufficiency with respect
to clause (y) and (z), the Trustee may, but need not, obtain and rely upon an
opinion of an Independent investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
SECTION 5.5 OPTIONAL PRESERVATION OF THE RECEIVABLES. If [the Trustee is
the Controlling Party and if] the Notes have been declared to be due and payable
under Section 5.2 following an Event of Default and such declaration and its
consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to maintain possession of the Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest on the Notes, and the Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession of
the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.6 PRIORITIES.
(a) Following (1) the acceleration of the Notes pursuant to
Section 5.2 or (2) [if an Insurer Default shall have occurred and be
continuing,] the occurrence of an Event of Default pursuant to Section 5.1(i),
5.1(ii), 5.1(iii), 5.1(v) or 5.1(vi) of the Indenture or (3) the receipt of
Insolvency Proceeds pursuant to Section 9.1(b) of the Sale and Servicing
Agreement, the Distribution Amount, including any money or property collected
pursuant to Section 5.4 of the Indenture any such Insolvency Proceeds, shall be
applied by the Trustee on the related Distribution Date in the following order
of priority:
FIRST: amounts due and owing and required to be distributed to
the Servicer, the Owner Trustee, the Trustee, the Collateral Agent and
the Indenture Collateral Agent, respectively, pursuant to priorities
(i), (ii) and (iii) of Section 5.6 of the Sale and Servicing Agreement
and not previously distributed, in the order of such priorities and
without preference or priority of any kind within such priorities;
SECOND: to Noteholders for amounts due and unpaid on
the Notes for interest, ratably, without preference or
priority of any kind, according to the amounts due and
payable on the Notes for interest;
THIRD: to Noteholders for amounts due and unpaid on
the Notes for principal and premium, ratably, without
preference or priority of any kind, according to the
amounts due and payable on the Notes for principal;
FOURTH: amounts due and unpaid on the Certificates
for interest, principal and premium, to the Owner Trustee for
distribution to Certificateholders in accordance with
Section 5.2(d) of the Trust Agreement;
[FIFTH: amounts due and owing and required to be
distributed to the Security Insurer pursuant to priority
(viii) of Section 5.6 of the Sale and Servicing Agreement
and not previously distributed; and
SIXTH: to the Collateral Agent to be applied as
provided in the Spread Account Agreement;
provided that any amounts collected from the Pre-Funding Account or the
Capitalized Interest Account shall be paid, FIRST, for amounts due and unpaid on
the Notes for principal and premium, if any, for distribution to Noteholders in
accordance with Section 10.1(b) and, SECOND, for amounts due and unpaid on the
Certificates for principal and premium, if any, in accordance with Section
5.6(b) of the Sale and Servicing Agreement and, THIRD in accordance with
priorities ONE through [SIXTH] above.]
(b) The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section. At least 15 days before such
record date the Issuer shall mail to each Noteholder and the Trustee a notice
that states the record date, the payment date and the amount to be paid.
SECTION 5.7 LIMITATION OF SUITS. No Holder of any Note shall have any right
to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice
to the Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of
the Notes have made written request to the Trustee to institute such
proceeding in respect of such Event of Default in its own name as
Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee indemnity
reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceedings;
(v) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes; [and
(vi) an Insurer Default shall have occurred and be
continuing;]
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Notes,
each representing less than a majority of the Outstanding Amount of the Notes,
the Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
SECTION 5.8 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL AND
INTEREST. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.9 RESTORATION OF RIGHTS AND REMEDIES. If [the Controlling Party]
or any Noteholder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Trustee or to such
Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 DELAY OR OMISSION NOT A WAIVER. No delay or omission of the
Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12 CONTROL BY NOTEHOLDERS. [If the Trustee is the Controlling
Party,] the Holders of a majority of the Outstanding Amount of the Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Notes or exercising
any trust or power conferred on the Trustee; PROVIDED that
(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any direction to
the Trustee to sell or liquidate the Trust Estate shall be by the
Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have been satisfied
and the Trustee elects to retain the Trust Estate pursuant to such
Section, then any direction to the trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate the Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such
direction;
PROVIDED, HOWEVER, that, subject to Section 6.1, the Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Section 5.13 WAIVER OF PAST DEFAULTS. [If an Insurer Default shall occurred
and be continuing,] prior to the declaration of the acceleration of the maturity
of the Notes as provided in Section 5.4, the Holders of Notes of not less than a
majority of the Outstanding Amount of the Notes may waive any past Default or
Event of Default and its consequences except a Default (a) in payment of
principal of or interest on any of the Notes or (b) in respect of a covenant or
provision hereof which cannot be modified or amended without the consent of the
Holder of each Note. In the case of any such waiver, the Issuer, the Trustee and
the Holders of the Notes shall be restored to their former positions and rights
hereunder, respectively; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.14 UNDERTAKING FOR COSTS. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
any suit instituted by the Trustee, (b) any suit instituted by any Note- holder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15 WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the
extent that it may lawfully do so) that it will not at any time insist upon, or
plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 5.16 ACTION ON NOTES. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer.
SECTION 5.17 PERFORMANCE AND ENFORCEMENT OF CERTAIN OBLIGATIONS. (a)
Promptly following a request from the Trustee to do so and at the Servicer's
expense, the Issuer agrees to take all such lawful action as the Trustee may
request to compel or secure the performance and observance by the
Representative, the Seller and the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement in accordance with the terms thereof, and to exercise any and all
rights, remedies, powers and privileges lawfully available to the Issuer under
or in connection with the Sale and Servicing Agreement to the extent and in the
manner directed by the Trustee, including the transmission of notices of default
on the part of the Seller or the Servicer thereunder and the institution of
legal or administrative actions or proceedings to compel or secure performance
by the Seller or the Servicer of each of their obligations under the Sale and
Servicing Agreement.
(b) If [the Trustee is a Controlling Party and if] an Event of
Default has occurred and is continuing, the Trustee may, and, at the direction
(which direction shall be in writing or by telephone (confirmed in writing
promptly thereafter)) of the Holders of 66-2/3% of the Outstanding Amount of the
Notes shall, exercise all rights, remedies, powers, privileges and claims of the
Issuer against the Seller or the Servicer under or in connection with the Sale
and Servicing Agreement, including the right or power to take any action to
compel or secure performance or observance by the Seller or the Servicer of each
of their obligations to the Issuer thereunder and to give any consent, request,
notice, direction, approval, extension or waiver under the Sale and Servicing
Agreement, and any right of the Issuer to take such action shall be suspended.
[SECTION 5.18 CLAIMS UNDER NOTE POLICY.
(a) In the event that the Trustee has delivered a Deficiency
Notice with respect to any Determination Date pursuant to Section 5.4 of the
Sale and Servicing Agreement, the Trustee shall on the related Draw Date
determine the Note Policy Claim Amount (as defined below) for the related
Payment Date. If the Note Policy Claim Amount for such Payment Date is greater
than zero, the Trustee shall furnish to the Security Insurer no later than 12:00
noon New York City time on the related Draw Date a completed Notice of Claim in
the amount of the Note Policy Claim Amount. Amounts paid by the Security Insurer
pursuant to a claim submitted under this Section 5.18(a) shall be deposited by
the Trustee into the Note Distribution Account for payment to Noteholders on the
related Payment Date. The "Note Policy Claim Amount" for any Payment Date other
than the Class A-1 Final Scheduled Distribution Date shall equal the lesser of
(i) the sum of the Noteholders' Interest Distributable Amount and the
Noteholders' Principal Distributable Amount for such Payment Date, and (ii) the
excess, if any, of the amount required to be distributed pursuant to clauses (i)
- - (iv) of Section 5.6(b)of the Sale and Servicing Agreement (without giving
effect to the limitation of the Distribution Amount specified in each such
clause) over the Distribution Amount with respect to such Payment Date. The
"Note Policy Claim Amount" with respect to the Class A-1 Final Scheduled
Distribution Date shall equal the excess, if any, of (i) the amount required to
be distributed pursuant to clauses (i) - (ii) of Section 5.6(c) of the Sale and
Servicing Agreement (without giving effect to the limitation of the Distribution
Amount specified in each such clause) over (ii) the Class A-1 Distribution
Amount with respect to such Payment Date.
(b) Any notice delivered by the Trustee to the Security
Insurer pursuant to subsection 5.18(a) shall specify the Note Policy Claim
Amount claimed under the Note Policy and shall constitute a "Notice of Claim"
under the Note Policy. In accordance with the provisions of the Note Policy, the
Security Insurer is required to pay to the Trustee the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day following receipt on a Business Day of the Notice of
Claim, and (ii) the applicable Payment Date. Any payment made by the Security
Insurer under the Note Policy shall be applied solely to the payment of the
Notes, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each
Noteholder any Note Policy Claim Amount from the Security Insurer and (ii)
deposit the same in the Note Distribution Account for distribution to
Noteholders as provided in Section 3.1 or Section 5.2 of this Indenture. Any and
all Note Policy Claim Amounts disbursed by the Trustee from claims made under
the Note Policy shall not be considered payment by the Trust or from the Spread
Account with respect to such Notes, and shall not discharge the obligations of
the Trust with respect thereto. The Security Insurer shall, to the extent it
makes any payment with respect to the Notes, become subrogated to the rights of
the recipients of such payments to the extent of such payments. Subject to and
conditioned upon any payment with respect to the Notes by or on behalf of the
Security Insurer, the Trustee shall assign to the Security Insurer all rights to
the payment of interest or principal with respect to the Notes which are then
due for payment to the extent of all payments made by the Security Insurer, and
the Security Insurer may exercise any option, vote, right, power or the like
with respect to the Notes to the extent that it has made payment pursuant to the
Note Policy. To evidence such subrogation, the Note Registrar shall note the
Security Insurer's rights as subrogee upon the register of Noteholders upon
receipt from the Security Insurer of proof of payment by the Security Insurer of
any Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. [The foregoing subrogation shall in all cases be subject
to the rights of the Noteholders to receive all Guaranteed Note Distributions in
respect of the Notes.
(d) The Trustee shall keep a complete and accurate record of
all funds deposited by the Security Insurer into the Collection Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Note. The Security Insurer shall have the right to inspect such records
at reasonable times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the
Noteholders the obligations of the Security Insurer under the Note Policy.
Notwithstanding any other provision of this Agreement or any Related Document,
the Noteholders are not entitled to institute proceedings directly against the
Security Insurer.]
[SECTION 5.19 PREFERENCE CLAIMS. (a) In the event that the Trustee has
received a certified copy of an order of the appropriate court that any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount paid on a Note has been avoided in whole or in part as a
preference payment under applicable bankruptcy law, the Trustee shall so notify
the Security Insurer, shall comply with the provisions of the Note Policy to
obtain payment by the Security Insurer of such avoided payment, and shall, at
the time it provides notice to the Security Insurer, notify Holders of the Notes
by mail that, in the event that any Noteholder's payment is so recoverable, such
Noteholder will be entitled to payment pursuant to the terms of the Note Policy.
The Trustee shall furnish to the Security Insurer its records evidencing the
payments of principal of and interest on Notes, if any, which have been made by
the Trustee and subsequently recovered from Noteholders, and the dates on which
such payments were made. Pursuant to the terms of the Note Policy, the Security
Insurer will make such payment on behalf of the Noteholder to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Order
(as defined in the Note Policy) and not to the Trustee or any Noteholder
directly (unless a Noteholder has previously paid such payment to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy, in which case the
Security Insurer will make such payment to the Trustee for distribution to such
Noteholder upon proof of such payment reasonably satisfactory to the Security
Insurer).
(b) The Trustee shall promptly notify the Security Insurer of
any proceeding or the institution of any action (of which the Trustee has actual
knowledge) seeking the avoidance as a preferential transfer under applicable
bankruptcy, insolvency, receivership, rehabilitation or similar law (a
"Preference Claim") of any distribution made with respect to the Notes. Each
Holder, by its purchase of Notes, and the Trustee hereby agree that so long as
an Insurer Default shall not have occurred and be continuing, the Security
Insurer may at any time during the continuation of any proceeding relating to a
Preference Claim direct all matters relating to such Preference Claim including,
without limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal at the expense of the Security Insurer, but subject
to reimbursement as provided in the Insurance Agreement. In addition, and
without limitation of the foregoing, as set forth in Section 5.18(c), the
Security Insurer shall be subrogated to, and each Noteholder and the Trustee
hereby delegate and assign, to the fullest extent permitted by law, the rights
of the Trustee and each Noteholder in the conduct of any proceeding with respect
to a Preference Claim, including, without limitation, all rights of any party to
an adversary proceeding action with respect to any court order issued in
connection with any such Preference Claim.]
ARTICLE VI
THE TRUSTEE AND THE INDENTURE COLLATERAL AGENT
SECTION 6.1 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and
is continuing, the Trustee shall exercise the rights and powers vested in it by
this Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of
Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture; however, the Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements
of this Indenture and, if applicable, the Spread Account Agreement and
the Trustee's other Basic Documents.
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or
its own wilful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may agree in
writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law or the terms of this
Indenture or the Sale and Servicing Agreement.
(f) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(g) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
[(h) The Trustee shall, upon one Business Day's prior notice
to the Trustee, permit any representative of the Security Insurer, during the
Trustee's normal business hours, to examine all books of account, records,
reports and other papers of the Trustee relating to the Notes, to make copies
and extracts therefrom and to discuss the Trustee's affairs and actions, as such
affairs and actions relate to the Trustee's duties with respect to the Notes,
with the Trustee's officers and employees responsible for carrying out the
Trustee's duties with respect to the Notes.]
(i) The Trustee shall, and hereby agrees that it will, perform
all of the obligations and duties required of it under the Sale and Servicing
Agreement.
[(j) The Trustee shall, and hereby agrees that it will, hold
the Note Policy in trust, and will hold any proceeds of any claim on the Note
Policy in trust solely for the use and benefit of the Noteholders.]
(k) Without limiting the generality of this Section 6.1, the
Trustee shall have no duty (i) to see to any recording, filing or depositing of
this Indenture or any agreement referred to herein or any financing statement
evidencing a security interest in the Financed Vehicles, or to see to the
maintenance of any such recording or filing or depositing or to any recording,
refiling or redepositing of any thereof, (ii) to see to any insurance of the
Financed Vehicles or Obligors or to effect or maintain any such insurance, (iii)
to see to the payment or discharge of any tax, assessment or other governmental
charge or any Lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust, (iv) to confirm or verify the contents of
any reports or certificates delivered to the Trustee pursuant to this Indenture
or the Sale and Servicing Agreement believed by the Trustee to be genuine and to
have been signed or presented by the proper party or parties, or (v) to inspect
the Financed Vehicles at any time or ascertain or inquire as to the performance
of observance of any of the Issuer's, the Seller's or the Servicer's
representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Receivable Files under the Sale
and Servicing Agreement.
SECTION 6.2 RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document
believed by it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officer's Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
the Officer's Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee, and the Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, The Money Store Auto Finance Inc., or any other such agent,
attorney, custodian or nominee appointed with due care by it hereunder.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers; PROVIDED, HOWEVER, that the Trustee's conduct does not
constitute wilful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or
opinion of counsel with respect to legal matters relating to this Indenture and
the Notes shall be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it hereunder in good
faith and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute,
conduct or defend any litigation under this Indenture or in relation to this
Indenture, at the request, order or direction of any of the Holders of Notes [or
the Controlling Party,] pursuant to the provisions of this Indenture, unless
such Holders of Notes [or the Controlling Party] shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; PROVIDED, HOWEVER, that the
Trustee shall, upon the occurrence of an Event of Default (that has not been
cured), exercise the rights and powers vested in it by this Indenture with
reasonable care and skill.
(g) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval, bond or
other paper or document, unless requested in writing to do so [by the Security
Insurer (so long as no Insurer Default shall have occurred and be continuing) or
(if an Insurer Default shall have occurred and be continuing)] by the Holders of
Notes evidencing not less than 25% of the Outstanding Amount thereof; PROVIDED,
HOWEVER, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to so proceeding; the
reasonable expense of every such examination shall be paid by the Person making
such request, or, if paid by the Trustee, shall be reimbursed by the Person
making such request upon demand.
SECTION 6.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or
any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its Affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Note Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 6.11 and 6.12.
SECTION 6.4 TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture,
the Trustee's Estate or the Notes, it shall not be accountable for the Issuer's
use of the proceeds from the Notes, and it shall not be responsible for any
statement of the Issuer in the Indenture or in any document issued in connection
with the sale of the Notes or in the Notes other than the Trustee's certificate
of authentication.
SECTION 6.5 NOTICE OF DEFAULTS. If a Default occurs and is continuing and
if it is either known by, or written notice of the existence thereof has been
delivered to, a Responsible Officer of the Trustee, the Trustee shall mail to
each Noteholder notice of the Default within 90 days after such knowledge or
notice occurs. Except in the case of a Default in payment of principal of or
interest on any Note (including payments pursuant to the mandatory redemption
provisions of such Note), the Trustee may withhold the notice if and so long as
a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Noteholders.
SECTION 6.6 REPORTS BY TRUSTEE TO HOLDERS. The Trustee shall deliver to
each Noteholder such information as may be reasonably required to enable such
Holder to prepare its Federal and state income tax returns.
SECTION 6.7 COMPENSATION AND INDEMNITY. (a) Pursuant to Section 5.6(b) of
the Sale and Servicing Agreement, the Issuer shall, or shall cause the Servicer
to, pay to the Trustee from time to time compensation for its services in
accordance with a separate agreement between the Servicer and the Trustee. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall or shall cause the Servicer to
reimburse the Trustee for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuer shall or shall cause the Servicer to indemnify the Trustee,
the Indenture Collateral Agent and their respective officers, directors,
employees and agents against any and all loss, liability or expense (including
attorneys' fees and expenses) incurred by it in connection with the acceptance
or the administration of this trust and the performance of its duties hereunder.
The Trustee shall notify the Issuer and the Servicer promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Issuer and
the Servicer shall not relieve the Issuer of its obligations hereunder or the
Servicer of its obligations under Article X of the Sale and Servicing Agreement.
The Issuer shall or shall cause the Servicer to defend the claim, the Trustee
may have separate counsel and the Issuer shall or shall cause the Servicer to
pay the fees and expenses of such counsel. Neither the Issuer nor the Servicer
need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith.
(b) The Issuer's payment obligations to the Trustee pursuant
to this Section shall survive the discharge of this Indenture subject to a
satisfaction of the Rating Agency Condition. When the Trustee incurs expenses
after the occurrence of a Default specified in Section 5.1(iv) or (v) with
respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything
else set forth in this Indenture or the Basic Documents, the Trustee agrees that
the obligations of the Issuer (but not the Servicer) to the Trustee hereunder
and under the Basic Documents shall be recourse to the Trust Estate only and
specifically shall not be recourse to the assets of the General Partner of the
Issuer or any Certificateholder. In addition, the Trustee agrees that its
recourse to the Issuer, the Trust Estate, the Seller and amounts held pursuant
of the Spread Account Agreement shall be limited to the right to receive the
distributions referred to in Section 5.6(b) of the Sale and Servicing Agreement.
SECTION 6.8 REPLACEMENT OF TRUSTEE. The Trustee may resign at any time by
so notifying the Issuer [and the Security Insurer.] The Issuer may [and, at the
request of the Security Insurer (unless an Insurer Default shall have occurred
and be continuing) shall,] remove the Trustee, if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of
the Trustee in an involuntary case or proceeding under federal or state
banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trustee or for
any substantial part of the Trustee's property, or ordering the
winding-up or liquidation of the Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Trustee and such case is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal
or state banking or bankruptcy laws, as now or hereafter constituted,
or any other applicable federal or state bankruptcy, insolvency or
other similar law, or consents to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) for the Trustee
or for any substantial part of the Trustee's property, or makes any
assignment for the benefit of creditors or fails generally to pay its
debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing; or
(v) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee
[acceptable to the Security Insurer (so long as an Insurer Default shall not
have occurred and be continuing). If the Issuer fails to appoint such a
successor Trustee, the Security Insurer may appoint a successor Trustee.]
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture
subject to satisfaction of the Rating Agency Condition. The successor Trustee
shall mail a notice of its succession to Noteholders. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in Outstanding Amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee pursuant to
Section 6.8 and payment of all fees and expenses owed to the outgoing Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Issuer's and the Servicer's obligations under Section 6.7 shall continue for
the benefit of the retiring Trustee.
SECTION 6.9 SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation without any further act shall be
the successor Trustee. The Trustee shall provide the Rating Agencies prior
written notice of any such transaction.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 6.10 APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee [with the consent of the
Security Insurer (so long as an Insurer Default shall not have occurred and be
continuing)] shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Trustee may consider necessary or desirable. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder, including acts or
omissions of predecessor or successor trustees; and
(iii) the Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Trustee or separately, as may be provided therein, subject to all the provisions
of this Indenture, specifically including every provision of this Indenture
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, dissolve, become insolvent, become incapable of acting,
resign or be removed, all of its estates, properties, rights, remedies and
trusts shall invest in and be exercised by the Trustee, to the extent permitted
by law, without the appointment of a new or successor trustee.
SECTION 6.11 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times
satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and it shall have a long term debt rating
of BBB- or better by the Rating Agencies. [The Trustee shall provide copies of
such reports to the Security Insurer upon request.] The Trustee shall comply
with TIA ss. 310 (b), including the optional provision permitted by the second
sentence of TIA ss. 310(b)(9); PROVIDED, HOWEVER, that there shall be excluded
from the operation of TIA ss. 310(b)(1) any indenture or indentures under which
other securities of the Issuer are outstanding if the requirements for such
exclusion set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12 PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER. The Trustee
shall comply with TIA ss. 311(a), excluding any creditor relationship listed in
TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to
TIA ss. 311(a) to the extent indicated.
SECTION 6.13 APPOINTMENT AND POWERS. Subject to the terms and conditions
hereof, each of the Issuer Secured Parties hereby appoints
_________________________________ as the Indenture Collateral Agent with respect
to the Indenture Collateral, and _________________________________ hereby
accepts such appointment and agrees to act as Indenture Collateral Agent with
respect to the Indenture Collateral for the Issuer Secured Parties, to maintain
custody and possession of such Indenture Collateral (except as otherwise
provided hereunder) and to perform the other duties of the Indenture Collateral
Agent in accordance with the provisions of this Indenture. Each Issuer Secured
Party hereby authorizes the Indenture Collateral Agent to take such action on
its behalf, and to exercise such rights, remedies, powers and privileges
hereunder, as the Controlling Party may direct and as are specifically
authorized to be exercised by the Indenture Collateral Agent by the terms
hereof, together with such actions, rights, remedies, powers and privileges as
are reasonably incidental thereto. The Indenture Collateral Agent shall act upon
and in compliance with the written instructions of the Controlling Party
delivered pursuant to this Indenture promptly following receipt of such written
instructions; provided that the Indenture Collateral Agent shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Indenture, (ii) which are in violation of
any applicable law, rule or regulation or (iii) for which the Indenture
Collateral Agent has not received reasonable indemnity. Receipt of such
instructions shall not be a condition to the exercise by the Indenture
Collateral Agent of its express duties hereunder, except where this Indenture
provides that the Indenture Collateral Agent is permitted to act only following
and in accordance with such instructions.
SECTION 6.14 PERFORMANCE OF DUTIES. The Indenture Collateral Agent shall
have no duties or responsibilities except those expressly set forth in this
Indenture and the other Basic Documents to which the Indenture Collateral Agent
is a party or as directed by the Controlling Party in accordance with this
Indenture. The Indenture Collateral Agent shall not be required to take any
discretionary actions hereunder except at the written direction and with the
indemnification of the Controlling Party. The Indenture Collateral Agent shall,
and hereby agrees that it will, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.
SECTION 6.15 LIMITATION ON LIABILITY. Neither the Indenture Collateral
Agent nor any of its directors, officers or employees shall be liable for any
action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Indenture Collateral Agent shall be liable for its
negligence, bad faith or willful misconduct; nor shall the Indenture Collateral
Agent be responsible for the validity, effectiveness, value, sufficiency or
enforceability against the Issuer of this Indenture or any of the Indenture
Collateral (or any part thereof). Notwithstanding any term or provision of this
Indenture, the Indenture Collateral Agent shall incur no liability to Issuer or
the Issuer Secured Parties for any action taken or omitted by the Indenture
Collateral Agent in connection with the Indenture Collateral, except for the
negligence, bad faith or willful misconduct on the part of the Indenture
Collateral Agent, and, further, shall incur no liability to the Issuer Secured
Parties except for negligence, bad faith or willful misconduct in carrying out
its duties to the Issuer Secured Parties. Subject to Section 6.16, the Indenture
Collateral Agent shall be protected and shall incur no liability to any such
party in relying upon the accuracy, acting in reliance upon the contents, and
assuming the genuineness of any notice, demand, certificate, signature,
instrument or other document reasonably believed by the Indenture Collateral
Agent to be genuine and to have been duly executed by the appropriate signatory,
and (absent actual knowledge to the contrary) the Indenture Collateral Agent
shall not be required to make any independent investigation with respect
thereto. The Indenture Collateral Agent shall at all times be free independently
to establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Related Documents. The Indenture Collateral Agent may consult
with counsel, and shall not be liable for any action taken or omitted to be
taken by it hereunder in good faith and in accordance with the written advice of
such counsel. The Indenture Collateral Agent shall not be under any obligation
to exercise any of the remedial rights or powers vested in it by this Indenture
or to follow any direction from the Controlling Party unless it shall have
received reasonable security or indemnity satisfactory to the Indenture
Collateral Agent against the costs, expenses and liabilities which might be
incurred by it.
SECTION 6.16 RELIANCE UPON DOCUMENTS. In the absence of negligence, bad
faith or willful misconduct on its part, the Indenture Collateral Agent shall be
entitled to rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or
sent by the proper Person or Persons and shall have no liability in acting, or
omitting to act, where such action or omission to act is in reasonable reliance
upon any statement or opinion contained in any such document or instrument.
SECTION 6.17 SUCCESSOR INDENTURE COLLATERAL AGENT.
(a) MERGER. Any Person into which the Indenture Collateral
Agent may be converted or merged, or with which it may be consolidated, or to
which it may sell or transfer its trust business and assets as a whole or
substantially as a whole, or any Person resulting from any such conversion,
merger, consolidation, sale or transfer to which the Indenture Collateral Agent
is a party, shall (provided it is otherwise qualified to serve as the Indenture
Collateral Agent hereunder) be and become a successor Indenture Collateral Agent
hereunder and be vested with all of the title to and interest in the Indenture
Collateral and all of the trusts, powers, discretions, immunities, privileges
and other matters as was its predecessor without the execution or filing of any
instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding, except to the
extent, if any, that any such action is necessary to perfect, or continue the
perfection of, the security interest of the Issuer Secured Parties in the
Indenture Collateral; provided that any such successor shall also be the
successor Trustee under Section 6.9.
(b) RESIGNATION. The Indenture Collateral Agent and any
successor Indenture Collateral Agent may resign at any time by so notifying the
Issuer [and the Security Insurer]; provided that the Indenture Collateral Agent
shall not so resign unless it shall also resign as Trustee hereunder.
(c) REMOVAL. The Indenture Collateral Agent may be removed by
the Controlling Party at any time (and should be removed at any time that the
Trustee has been removed), with or without cause, by an instrument or concurrent
instruments in writing delivered to the Indenture Collateral Agent, [the other
Issuer Secured Party] and the Issuer. A temporary successor may be removed at
any time to allow a successor Indenture Collateral Agent to be appointed
pursuant to subsection (d) below. Any removal pursuant to the provisions of this
subsection (c) shall take effect only upon the date which is the latest of (i)
the effective date of the appointment of a successor Indenture Collateral Agent
and the acceptance in writing by such successor Indenture Collateral Agent of
such appointment and of its obligation to perform its duties hereunder in
accordance with the provisions hereof, [and (ii) receipt by the Controlling
Party of an Opinion of Counsel to the effect described in Section 3.6].
(d) ACCEPTANCE BY SUCCESSOR. The Controlling Party shall have
the sole right to appoint each successor Indenture Collateral Agent. Every
temporary or permanent successor Indenture Collateral Agent appointed hereunder
shall execute, acknowledge and deliver to its predecessor and to the Trustee,
each Issuer Secured Party and the Issuer an instrument in writing accepting such
appointment hereunder and the relevant predecessor shall execute, acknowledge
and deliver such other documents and instruments as will effectuate the delivery
of all Indenture Collateral to the successor Indenture Collateral Agent,
whereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all the estates, properties, rights, powers, duties and
obligations of its predecessor. Such predecessor shall, nevertheless, on the
written request of either Issuer Secured Party or the Issuer, execute and
deliver an instrument transferring to such successor all the estates,
properties, rights and powers of such predecessor hereunder. In the event that
any instrument in writing from the Issuer or an Issuer Secured Party is
reasonably required by a successor Indenture Collateral Agent to more fully and
certainly vest in such successor the estates, properties, rights, powers, duties
and obligations vested or intended to be vested hereunder in the Indenture
Collateral Agent, any and all such written instruments shall, at the request of
the temporary or permanent successor Indenture Collateral Agent, be forthwith
executed, acknowledged and delivered by the Trustee or the Issuer, as the case
may be. The designation of any successor Indenture Collateral Agent and the
instrument or instruments removing any Indenture Collateral Agent and appointing
a successor hereunder, together with all other instruments provided for herein,
shall be maintained with the records relating to the Indenture Collateral and,
to the extent required by applicable law, filed or recorded by the successor
Indenture Collateral Agent in each place where such filing or recording is
necessary to effect the transfer of the Indenture Collateral to the successor
Indenture Collateral Agent or to protect or continue the perfection of the
security interests granted hereunder.
SECTION 6.18 COMPENSATION. The Indenture Collateral Agent shall not
entitled to any compensation for the performance of its duties hereunder other
than the compensation it is entitled to receive in its capacity as Trustee.
SECTION 6.19 REPRESENTATIONS AND WARRANTIES OF THE INDENTURE COLLATERAL
AGENT. The Indenture Collateral Agent represents and warrants to the Issuer and
to each Issuer Secured Party as follows:
(a) DUE ORGANIZATION. The Indenture Collateral Agent is a
national banking association, duly organized, validly existing and in good
standing under the laws of the United States and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Indenture Collateral Agent
has all requisite right, power and authority to execute and
deliver this Indenture and to perform all of its duties as
Indenture Collateral Agent hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Indenture Collateral Agent of this Indenture and the other Transaction Documents
to which it is a party, and the performance by the Indenture Collateral Agent of
its duties hereunder and thereunder, have been duly authorized by all necessary
corporate proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and delivery by the
Indenture Collateral Agent, or the performance by the Indenture Collateral
Agent, of this Indenture and such other Related Documents.
(d) VALID AND BINDING INDENTURE. The Indenture Collateral
Agent has duly executed and delivered this Indenture and each other Related
Document to which it is a party, and each of this Indenture and each such other
Related Document constitutes the legal, valid and binding obligation of the
Indenture Collateral Agent, enforceable against the Indenture Collateral Agent
in accordance with its terms, except as (i) such enforceability may be limited
by bankruptcy, insolvency, reorganization and similar laws relating to or
affecting the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
SECTION 6.20 WAIVER OF SETOFFS. The Indenture Collateral Agent hereby
expressly waives any and all rights of setoff that the Indenture Collateral
Agent may otherwise at any time have under applicable law with respect to any
Trust Account and agrees that amounts in the Trust Accounts shall at all times
be held and applied solely in accordance with the provisions hereof.
SECTION 6.21 CONTROL BY THE CONTROLLING PARTY. The Indenture Collateral
Agent shall comply with notices and instructions given by the Issuer only if
accompanied by the written consent of the Controlling Party, except that if any
Event of Default shall have occurred and be continuing, the Indenture Collateral
Agent shall act upon and comply with notices and instructions given by the
Controlling Party alone in the place and stead of the Issuer.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1 ISSUER TO FURNISH TO TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; PROVIDED, HOWEVER, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished. [The Trustee or, if the Trustee
is not the Note Registrar, the Issuer shall furnish to the Security Insurer in
writing on an annual basis on each March 31 and at such other times as the
Security Insurer may request a copy of the list.]
SECTION 7.2 PRESERVATION OF INFORMATION; COMMUNICATIONS TO NOTEHOLDERS. (a)
The Trustee shall preserve, in as current a form as is reasonably practicable,
the names and addresses of the Holders contained in the most recent list
furnished to the Trustee as provided in Section 7.1 and the names and addresses
of Holders received by the Trustee in its capacity as Note Registrar. The
Trustee may destroy any list furnished to it as provided in such Section 7.1
upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Trustee and the Note Registrar
shall have the protection of TIA ss. 312(c).
SECTION 7.3 REPORTS BY ISSUER. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may
be required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by mail
to all Noteholders described in TIA ss. 313(c)) such summaries of any
information, documents and reports required to be filed by the Issuer
pursuant to clauses (i) and (ii) of this Section 7.3(a) as may be
required by rules and regulations prescribed from time to time by the
Commission.
(b) Unless the Issuer otherwise determines, the
fiscal year of the Issuer shall end on December 31 of each year.
SECTION 7.4 REPORTS BY TRUSTEE. If required by TIA ss. 313(a), within 60
days after each __________ __, beginning with _________ __, 199_, the Trustee
shall mail to each Noteholder as required by TIA ss. 313(c) a brief report dated
as of such date that complies with TIA ss. 313(a). The Trustee also shall comply
with TIA ss. 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed. The Issuer shall notify the Trustee if and when the
Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1 COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture. The Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.
SECTION 8.2 TRUST ACCOUNTS. (a) On or prior to the Closing Date, the Issuer
shall cause the Servicer to establish and maintain, in the name of the Trustee,
for the benefit of the Noteholders and the Certificateholders, the Trust
Accounts as provided in Section 5.1 of the Sale and Servicing Agreement.
(b) Subject to Section 5.6, on each Payment Date and
Redemption Date, the Trustee shall distribute all amounts on deposit in the Note
Distribution Account to Noteholders in respect of the Notes to the extent of
amounts due and unpaid on the Notes for principal and interest in the following
amounts and in the following order of priority (except as otherwise provided in
Section 5.6):
(i) accrued and unpaid interest on the Notes; provided that if
there are not sufficient funds in the Note Distribution Account to pay
the entire amount of accrued and unpaid interest then due on each class
of Notes, the amount in the Note Distribution Account shall be applied
to the payment of such interest on each class of Notes pro rata on the
basis of the amount of accrued and unpaid interest due on each class of
Notes;
[(ii) any amounts deposited in the Note Distribution Account
with respect to the Class A-1 Note Prepayment Amount, the Class A-2
Note Prepayment Amount, the Class A-3 Prepayment Amount [and the Class
A-4 Prepayment Amount], shall be distributed to the Holders of the
Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes [and Class
A-4 Notes], respectively;]
(iii) to the Holders of the Class A-1 Notes until the
Outstanding Amount of the Class A-1 Notes is reduced to
zero;
(iv) to the Holders of the Class A-2 Notes until the
Outstanding Amount of the Class A-2 Notes is reduced to
zero;
(v) to the Holders of the Class A-3 Notes until the
Outstanding Amount of the Class A-3 Notes is reduced to
zero[; and
(vi) to the Holders of the Class A-4 Notes until the
Outstanding Amount of the Class A-4 Notes is reduced to
zero.]
SECTION 8.3 GENERAL PROVISIONS REGARDING ACCOUNTS. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Trust Accounts shall be invested in Eligible
Investments and reinvested by the Trustee upon Issuer Order, subject to the
provisions of Section 5.1(b) of the Sale and Servicing Agreement. All income or
other gain from investments of moneys deposited in the Trust Accounts shall be
deposited (or caused to be deposited) by the Trustee in the Collection Account,
and any loss resulting from such investments shall be charged to such account.
The Issuer will not direct the Trustee to make any investment of any funds or to
sell any investment held in any of the Trust Accounts unless the security
interest Granted and perfected in such account will continue to be perfected in
such investment or the proceeds of such sale, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment or sale, if requested by the Trustee, the Issuer shall
deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such
effect.
(b) [Reserved]
(c) Subject to Section 6.1(c), the Trustee shall not in any
way be held liable by reason of any insufficiency in any of the Trust Accounts
resulting from any loss on any Eligible Investment included therein except for
losses attributable to the Trustee's failure to make payments on such Eligible
Investments issued by the Trustee, in its commercial capacity as principal
obligor and not as trustee, in accordance with their terms.
(d) If (i) the Issuer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Trustee by 2:00
p.m. Eastern Time (or such other time as may be agreed by the Issuer and
Trustee) on any Business Day; or (ii) a Default or Event of Default shall have
occurred and be continuing with respect to the Notes but the Notes shall not
have been declared due and payable pursuant to Section 5.2, or, if such Notes
shall have been declared due and payable following an Event of Default, amounts
collected or receivable from the Trust Estate are being applied in accordance
with Section 5.5 as if there had not been such a declaration; then the Trustee
shall, to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments.
SECTION 8.4 RELEASE OF TRUST ESTATE. (a) Subject to the payment of its fees
and expenses pursuant to Section 6.7, the Indenture Collateral Agent may, and
when required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Indenture
Collateral Agent's interest in the same, in a manner and under circumstances
that are not inconsistent with the provisions of this Indenture. No party
relying upon an instrument executed by the Indenture Collateral Agent as
provided in this Article VIII shall be bound to ascertain the Indenture
Collateral Agent's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(b) The Indenture Collateral Agent shall, at such time as
there are no Notes outstanding and all sums due the Trustee pursuant to Section
6.7 have been paid, release any remaining portion of the Trust Estate that
secured the Notes from the lien of this Indenture and release to the Issuer or
any other Person entitled thereto any funds then on deposit in the Trust
Accounts. The Trustee shall release property from the lien of this Indenture
pursuant to this Section 8.4(b) only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and (if required
by the TIA) Independent Certificates in accordance with TIA ss.ss. 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.1.
SECTION 8.5 OPINION OF COUNSEL. The Indenture Collateral Agent shall
receive at least seven days' notice when requested by the Issuer to take any
action pursuant to Section 8.4(a), accompanied by copies of any instruments
involved, and the Trustee shall also require as a condition to such action, an
Opinion of Counsel, in form and substance satisfactory to the Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; PROVIDED, HOWEVER, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. Counsel rendering any such opinion may rely, without
independent investigation, on the accuracy and validity of any certificate or
other instrument delivered to the Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF NOTEHOLDERS. (a)
Without the consent of the Holders of any Notes but with [the consent of the
Security Insurer (unless an Insurer Default shall have occurred and be
continuing) and with] prior notice to the Rating Agencies by the Issuer, as
evidenced to the Trustee, the Issuer and the Trustee, when authorized by an
Issuer Order, at any time and from time to time, may enter into one or more
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act as in force at the date of the execution thereof), in form
satisfactory to the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Indenture Collateral Agent any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any
right or power herein conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge
any property to or with the Indenture Collateral Agent;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; PROVIDED that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer
Order, may, also without the consent of any of the Holders of the Notes but with
prior notice to the Rating Agencies by the Issuer, as evidenced to the Trustee,
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture or of modifying in any manner the rights of the
Holders of the Notes under this Indenture; PROVIDED, HOWEVER, that such action
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
SECTION 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The Issuer
and the Trustee, when authorized by an Issuer Order, also may, with prior notice
to the Rating Agencies, with the consent of the [Security Insurer (unless an
Insurer Default shall have occurred and be continuing) and with the consent of
the] Holders of not less than a majority of the outstanding Amount of the Notes,
by Act of such Holders delivered to the Issuer and the Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; PROVIDED, HOWEVER, that, [subject to the express
rights of the Security Insurer under the Basic Documents,] no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of the
provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iv) modify or alter the provisions of the proviso to
the definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Distribution Date
(including the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior to or on
a parity with the lien of this Indenture with respect to any part of
the Trust Estate or, except as otherwise permitted or contemplated
herein or in any of the Basic Documents, terminate the lien of this
Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security provided by the lien of this
Indenture.
The Trustee may determine whether or not any Notes would be affected by any
supplemental indenture and any such determination shall be conclusive upon the
Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Trustee shall not be liable for any such determination
made in good faith.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.3 EXECUTION OF SUPPLEMENTAL INDENTURES. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4 EFFECT OF SUPPLEMENTAL INDENTURE. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
SECTION 9.5 CONFORMITY WITH TRUST INDENTURE ACT. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.6 REFERENCE IN NOTES TO SUPPLEMENTAL INDENTURES. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1 REDEMPTION. (a) The Notes are subject to redemption in whole,
but not in part, at the direction of the Seller pursuant to Section 9.1(a) of
the Sale and Servicing Agreement, on any Distribution Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section
9.1(a), for a purchase price equal to the Redemption Price; PROVIDED, HOWEVER,
that the Issuer has available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the [Security Insurer and the] Rating
Agencies notice of such redemption. If the Notes are to be redeemed pursuant to
this Section 10.1(a), the Servicer or the Issuer shall furnish notice of such
election to the Trustee not later than 35 days prior to the Redemption Date and
the Issuer shall deposit with the Trustee in the Note Distribution Account the
Redemption Price of the Notes to be redeemed whereupon all such Notes shall be
due and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.2 to each Holder of Notes.
[(b) In the event that on the Payment Date on which the
Funding Period ends (or on the Distribution Date on or immediately following the
last day of the Funding Period, if the Funding Period does not end on a Payment
Date), the Pre-Funded Amount after giving effect to the purchase of all
Subsequent Receivables, including any such purchase on such Redemption Date, the
Notes will be redeemed in part, on a pro rata basis, in an aggregate principal
amount equal to the Class A-1 Prepayment Amount, the Class A-2 Prepayment
Amount, the Class A-3 Prepayment Amount [and the Class A-4 Prepayment Amount.]
(c) In the event that the assets of the Trust are sold
pursuant to Section 9.2 of the Trust Agreement, all amounts on deposit in the
Note Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.1(c), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Trustee not later than 45 days prior to the Redemption Date whereupon all such
amounts shall be payable on the Redemption Date.
SECTION 10.2 FORM OF REDEMPTION NOTICE. (a) Notice of redemption under
Section 10.1(a) shall be given by the Trustee by facsimile or by first-class
mail, postage prepaid, transmitted or mailed prior to the applicable Redemption
Date to each Holder of Notes, as of the close of business on the Record Date
preceding the applicable Redemption Date, at such Holder's address appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such Redemption
Date is not applicable and that payments shall be made only upon
presentation and surrender of such Notes and the place where such Notes
are to be surrendered for payment of the Redemption Price (which shall
be the office or agency of the Issuer to be maintained as provided in
Section 3.2); and
(iv) that interest on the Notes shall cease to accrue
on the Redemption Date.
Notice of redemption of the Notes shall be given by the Trustee in the name
and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Sections 10.1(b)
is not required to be given to Noteholders.
SECTION 10.3 NOTES PAYABLE ON REDEMPTION DATE. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.2 (in the case
of redemption pursuant to Section 10.1(a)), on the Redemption Date become due
and payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 COMPLIANCE CERTIFICATES AND OPINIONS, etc. (a) Upon any
application or request by the Issuer to the Trustee or the Indenture Collateral
Agent to take any action under any provision of this Indenture, the Issuer shall
furnish to the Trustee or the Indenture Collateral Agent, as the case may be,
[and to the Security Insurer if the application or request is made to the
Indenture Collateral Agent] (i) an Officer's Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with, (ii) an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with and (iii) (if required by the TIA) an Independent Certificate from
a firm of certified public accountants meeting the applicable requirements of
this Section, except that, in the case of any such application or request as to
which the furnishing of such documents is specifically required by any provision
of this Indenture, no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other
property or securities with the Indenture Collateral Agent that is to be made
the basis for the release of any property or securities subject to the lien of
this Indenture, the Issuer shall, in addition to any obligation imposed in
Section 11.1(a) or elsewhere in this Indenture, furnish to the Indenture
Collateral Agent [and the Security Insurer] an Officer's Certificate certifying
or stating the opinion of each person signing such certificate as to the fair
value (within 90 days of such deposit) to the Issuer of the Collateral or other
property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Collateral Agent [and the Security Insurer] an Officer's
Certificate certifying or stating the opinion of any signer thereof as
to the matters described in clause (i) above, the Issuer shall also
deliver to the Indenture Collateral Agent [and the Security Insurer] an
Independent Certificate as to the same matters, if the fair value to
the Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and
this clause (ii), is 10% or more of the Outstanding Amount of the
Notes, but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set
forth in the related Officer's Certificate is less than $25,000 or less
than 1% percent of the Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or
securities are to be released from the lien of this Indenture, the
Issuer shall also furnish to the Indenture Collateral Agent [and the
Security Insurer] an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed
to be released and stating that in the opinion of such person the
proposed release will not impair the security under this Indenture in
contravention of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
[and the Security Insurer] an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters described
in clause (iii) above, the Issuer shall also furnish to the Indenture
Collateral Agent [and the Security Insurer] an Independent Certificate
as to the same matters if the fair value of the property or securities
and of all other property other than Purchased Receivables and
Defaulted Receivables, or securities released from the lien of this
Indenture since the commencement of the then current calendar year, as
set forth in the certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the Notes,
but such certificate need not be furnished in the case of any release
of property or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $25,000 or less than 1%
percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.9 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise
dispose of Receivables as and to the extent permitted or required by
the Basic Documents and (B) make cash payments out of the Trust
Accounts as and to the extent permitted or required by the Basic
Documents.
SECTION 11.2 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his or her certificate or opinion is
based are erroneous. Any such certificate of an Authorized Officer or Opinion of
Counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Servicer, the Seller or the Issuer, stating that the information with respect to
such factual matters is in the possession of the Servicer, the Seller or the
Issuer, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
SECTION 11.3 ACTS OF NOTEHOLDERS. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person
of any such instrument or writing may be proved in any customary
manner of the Trustee.
(c) The ownership of Notes shall be proved by the
Note Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.4 NOTICES, ETC., TO TRUSTEE, ISSUER AND RATING AGENCIES. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(a) The Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested and shall be deemed to have been duly given upon receipt to
the Trustee at its Corporate Trust Office, or
(b) The Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested and shall be deemed to have been duly given upon receipt to
the Issuer addressed to: The Money Store Auto Trust 199_-_, in care of
_______________________________________, with a copy to
________________________________________, or at any other address
previously furnished in writing to the Trustee by Issuer. The Issuer
shall promptly transmit any notice received by it from the Noteholders
to the Trustee.
[(c) the Security Insurer by the Issuer or the Trustee shall
be sufficient for any purpose hereunder if in writing and mailed by registered
mail or personally delivered or telexed or telecopied to the recipient as
follows:
To the Security Insurer:
Attention:
Telex No.:
Confirmation:
Telecopy Nos.:
[(In each case in which notice or other communication to the Security Insurer
refers to an Event of Default, a claim on the Note Policy or with respect to
which failure on the part of the Security Insurer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head--Financial Guaranty Group "URGENT MATERIAL ENCLOSED.")]
Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or the Owner Trustee shall be in writing, personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York, New York 10004 and (ii) in
the case of S&P, at the following address: Standard & Poor's Ratings Services,
26 Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 11.5 NOTICES TO NOTEHOLDERS; WAIVER. Where this Indenture provides
for notice to Noteholders of any event, such notice shall be sufficiently given
(unless otherwise herein expressly provided) if in writing and mailed,
first-class, postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Noteholders is given by mail, neither the failure to
mail such notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with respect to other
Noteholders, and any notice that is mailed in the manner here in provided shall
conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Trustee but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder, and shall not under any circumstance constitute a Default or Event of
Default.
SECTION 11.6 ALTERNATE PAYMENT AND NOTICE PROVISIONS. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices, provided that such methods are reasonable and consented to by the
Trustee (which consent shall not be unreasonably withheld). The Issuer will
furnish to the Trustee a copy of each such agreement and the Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.7 CONFLICT WITH TRUST INDENTURE ACT. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this indenture by any of the provisions of the Trust Indenture
Act, such required provision shall control.
The provisions of TIA ss.ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.8 EFFECT OF HEADINGS AND TABLE OF Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture
shall bind its successors. All agreements of the Indenture Collateral Agent in
this Indenture shall bind its successors.
SECTION 11.10 SEPARABILITY. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11 BENEFITS OF INDENTURE. [The Security Insurer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing.] Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an Ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. [The Security Insurer may disclaim any of its rights and powers
under this Indenture (in which case the Indenture Trustee may exercise such
right or power hereunder), but not its duties and obligations under the Note
Policy, upon delivery of a written notice to the Trustee.]
SECTION 11.12 LEGAL HOLIDAYS. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date an which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13 GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14 COUNTERPARTS. This Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
SECTION 11.15 RECORDING OF INDENTURE. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee [and the Security Insurer]) to the effect that such recording is
necessary either for the protection of the Noteholders or any other person
secured hereunder or for the enforcement of any right or remedy granted to the
Trustee or the Indenture Collateral Agent under this Indenture [or the
Collateral Agent under the Spread Account Agreement.]
SECTION 11.16 TRUST OBLIGATION. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Seller, the
Servicer, the General Partner, the Owner Trustee or the Trustee on the Notes or
under this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Seller, the Servicer, the General
Partner, the Trustee or the Owner Trustee in its individual capacity, (ii) any
owner of a beneficial interest in the Issuer or (iii) any partner, owner,
beneficiary, agent, officer, director, employee or agent of the Seller, the
Servicer, the General Partner, the Trustee or the Owner Trustee in its
individual capacity, any holder of a beneficial interest in the Issuer, the
Seller, the Servicer, the General Partner, the Owner Trustee or the Trustee or
of any successor or assign of the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, except as any such
Person may have expressly agreed (it being understood that the Trustee and the
Owner Trustee have no such obligations in their individual capacity) and except
that any such partner, owner or beneficiary shall be fully liable, to the extent
provided by applicable law, for any unpaid consideration for stock, unpaid
capital contribution or failure to pay any installment or call owing to such
entity. For all purposes of this Indenture, in the performance of any duties or
obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Article VI, VII and
VIII of the Trust Agreement.
SECTION 11.17 NO PETITION. The Trustee and the Indenture Collateral Agent,
by entering into this Indenture, and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Seller, the General Partner, or the Issuer, or join in any institution against
the Seller, the General Partner, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
SECTION 11.18 INSPECTION. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee [or of the Security
Insurer], during the Issuer's normal business hours, to examine all the books of
account, records, reports, and other papers of the Issuer, to make copies and
extracts therefrom, to cause such books to be audited by Independent certified
public accountants, and to discuss the Issuer's affairs, finances and accounts
with the Issuer's officers, employees, and independent certified public
accountants, all at such reasonable times and as often as may be reasonably
requested. The Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Trustee may reasonably determine
that such disclosure is consistent with its Obligations hereunder.
[THIS SPACE LEFT INTENTIONALLY BLANK]
IN WITNESS WHEREOF, the Issuer and the Trustee have caused
this Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
THE MONEY STORE AUTO TRUST 199_-_,
By: ____________________, not in its
individual capacity but solely as
Owner Trustee,
By:_____________________________
Name:
Title:
_________________________________, not
in its individual capacity but solely as
Trustee and Indenture Collateral Agent,
By:_____________________________
Name:
Title:
[Form of Note] EXHIBIT D
REGISTERED $_____________
No. R
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
[Unless this Note is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer
or its agent for registration of transfer, exchange or payment, and any Note
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS
AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL
AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT
SHOWN ON THE FACE HEREOF.
THE MONEY STORE AUTO TRUST 199_-_
CLASS A-__ ____% ASSET BACKED NOTES
The Money Store Auto Trust 199_-_, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of [ ] DOLLARS payable on each Distribution Date in an amount
equal to the result obtained by multiplying (i) a fraction the numerator of
which is $[INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the denominator of which
is $ by (ii) the aggregate amount, if any, payable from the Note Distribution
Account in respect of principal on the Class A-1 Notes pursuant to Section 3.1
of the Indenture; PROVIDED, HOWEVER, that the entire unpaid principal amount of
this Note shall be due and payable on the _________ __, 199_ Distribution Date
(the "Class A-_ Final Scheduled Payment Date"). The Issuer will pay interest on
this Note at the rate per annum shown above on each Payment Date until the
principal of this Note is paid or made available for payment, on the principal
amount of this Note outstanding on the preceding Payment Date (after giving
effect to all payments of principal made on the preceding Payment Date).
Interest on this Note will accrue for each Payment Date from the most recent
Payment Date on which interest has been paid to but excluding such Payment Date
or, if no interest has yet been paid, from ________ __, 199_. Interest will be
computed on the basis of the actual number of days elapsed in a 360-day year.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
[The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by _________________________________ (the
"Security Insurer"), pursuant to which the Security Insurer has unconditionally
guaranteed payments of the Noteholders' Interest Distributable Amount and the
Noteholders' Principle Distributable Amount on each Payment Date, all as more
fully set forth in the Indenture.]
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
THE MONEY STORE AUTO TRUST 199_-_
by
--------------------,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement,
by
--------------------------
Name:
Title:
Date:
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date:
--------------------------------,
not in its individual capacity but
solely as Trustee,
by______________________
Authorized Signatory
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-__ % Asset Backed Notes (herein called the "Class A-1
Notes"), all issued under an Indenture dated as of ________ __, 199_ (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and _________________________, as trustee (the "Trustee",
which term includes any successor Trustee under the Indenture, and the
"Indenture Collateral Agent", which term includes any successor Indenture
Collateral Agent under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights and obligations thereunder of the Issuer, the Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture. All terms used
in this Note that are defined in the Indenture, as supplemented or amended,
shall have the meanings assigned to them in or pursuant to the Indenture, as so
supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes [and the
Class A-4 Notes] (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-__ Notes will be payable on each Payment Date in
an amount described on the face hereof. "Payment Date" means the twentieth day
of each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing ________ __, 199_.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Final Scheduled Distribution Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(c) of the
Indenture. As described above, a portion of the unpaid principal balance of this
Note shall be due and payable on the Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing [so long as an
Insurer Default shall not have occurred and be continuing] or (ii) [if an
Insurer Default shall have occurred and be continuing,] on the date on which an
Event of Default shall have occurred and be continuing and the Trustee or the
Holders of the Notes representing at least 66-2/3 % of the Outstanding Amount of
the Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-__ Notes shall be made pro rata to the Class A-__ Noteholders entitled
thereto.
Payments of interest on this Note due and payable on each Distribution
Date, together with the installment of principal, if any, to the extent not in
full payment of this Note, shall be made by check mailed to the Person whose
name appears as the Holder of this Note (or one or more Predecessor Notes) on
the Note Register as of the close of business on each Record Date, except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Distribution
Date shall be binding upon all future Holders of this Note and of any Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Distribution Date, then the Trustee, in the
name of and on behalf of the Issuer, will notify the Person who was the Holder
hereof as of the Record Date preceding such Distribution Date by notice mailed
prior to such Distribution Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the Trustee's
principal Corporate Trust Office or at the office of the Trustee's agent
appointed for such purposes located in The City of New York.
The Issuer shall pay interest on overdue installments of interest at the
Class A-__ Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer [(with the consent of the Security Insurer under certain
circumstances)], on any Payment Date on or after the date on which the Pool
Balance is less than or equal to 10% of the Original Pool Balance[, and (b)
pursuant to Section 10.1(b) of the Indenture, in part, on a pro rata basis, on
the Payment Date on or immediately following the last day of the Funding Period
in the event that any Pre-Funded Amount remains on deposit in the Pre-Funding
Account after giving effect to the purchase of all Subsequent Receivables,
including any such purchase on such Redemption Date].
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("Stamp") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, Stamp, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the General Partner, the Trustee or the
Owner Trustee in its individual capacity, (ii) any owner of a beneficial
interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer,
director or employee of the Seller, the Servicer, the General Partner, the
Trustee or the Owner Trustee in its individual capacity, any holder of a
beneficial interest in the Issuer, the Seller, the Servicer, the General
Partner, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the General Partner, the Trustee or the Owner Trustee in
its individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, the General Partner, or the Issuer or join
in any institution against the Depositor, the General Partner, or the Issuer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings, under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and [the Security Insurer and] any agent of the Issuer, the
Trustee [or the Security Insurer] may treat the Person in whose name this Note
(as of the day of determination or as of such other date as may be specified in
the Indenture) is registered as the owner hereof for all purposes, whether or
not this Note be overdue, and neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the [Security Insurer and of the] Holders
of Notes representing a majority of the Outstanding Amount of all Notes at the
time Outstanding. The Indenture also contains provisions permitting the Holders
of Notes representing specified percentages of the Outstanding Amount of the
Notes, on behalf of the Holders of all the Notes, to waive compliance by the
Issuer with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Holder
of this Note (or any one of more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Note and of any
Note issued upon the registration of transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent or waiver is made upon this
Note. The Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither ___________________ in
its individual capacity, any owner of a beneficial interest in the Issuer, nor
any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; PROVIDED, HOWEVER, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto _______________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________, attorney, to transfer said Note on the books kept
for registration thereof, with full power of substitution in the premises.
Dated: ___________ _______________________2
Signature Guaranteed:
- --------
2 NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
December 4, 1996
TMS Auto Holdings, Inc.
601 University Avenue
Sacramento, California 95825
The Money Store Inc.
2840 Morris Avenue
Union, New Jersey 07083
Re: REGISTRATION STATEMENT ON FORM S-3 (FILE NO. 333-14075)
Ladies and Gentlemen:
We have acted as counsel to TMS Auto Holdings, Inc., a Delaware corporation (the
"Company") and The Money Store Inc., a New Jersey corporation (the
"Representative"), in connection with the preparation of the registration
statement on Form S-3 (No. 333-14075)(the "Registration Statement") relating to
the proposed offering from time to time in one or more series (each, a "Series")
by one or more trusts of up to $1,100,000,000 aggregate principal amount of
asset backed notes (the "Notes") and asset backed certificates (the
"Certificates," and, together with the Notes, the "Securities"). The
Registration Statement has been filed with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). As set forth in the Registration Statement, each Series of Securities is
to be issued under and pursuant to the terms of a separate pooling and servicing
agreement, or sale and servicing agreement, trust agreement and indenture (each,
an "Agreement") among the Company, The Money Store Auto Finance Inc., as
servicer (the "Servicer"), and an independent trustee (the "Trustee") to be
identified in the prospectus supplement for such Series of Securities.
As such counsel, we have examined copies of the Certificate of Incorporation and
By-Laws of each of the Company and the Representative, the Registration
Statement, the base Prospectus and form of Prospectus Supplement included
therein, the form of each Agreement, and originals or copies of such other
corporate minutes, records, agreements and other instruments of the Company and
the Representative, certificates of public officials and other documents and
have made such examinations of law, as we have deemed necessary to form the
basis for the opinions hereinafter expressed. In our examination of such
materials, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals and the conformity to original
documents of all copies submitted to us. As to various questions of fact
material to such opinion, we have relied, to the extent we deemed appropriate,
upon representations, statements and certificates of officers and
representatives of the Company, the Representative and others.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein concerning
any law other than the federal laws of the United States of America, the laws of
the State of New York and the General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. When the issuance, execution and delivery of each Series of Notes have been
authorized by all necessary corporate action of the Company in accordance with
the provisions of the related Agreement or Agreements, and when such Notes have
been duly executed and delivered, authenticated by the Trustee and sold as
described in the Registration Statement, assuming that the terms of such Notes
are otherwise in compliance with applicable law at such time, such Notes will
constitute valid and binding obligations of the issuer thereof in accordance
with their terms and the terms of such Agreement or Agreements. This opinion is
subject to the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance and similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto and we express no opinion with respect
to the application of equitable principles or remedies in any proceeding,
whether at law or in equity.
2. When the issuance, execution and delivery of each Series of Certificates have
been authorized by all necessary corporate action of the Company in accordance
with the provisions of the related Agreement or Agreements, and when such
Certificates have been duly executed and delivered, authenticated by the Trustee
and sold as described in the Registration Statement, assuming that the terms of
such Certificates are otherwise in compliance with applicable law at such time,
such Certificates will be legally issued, fully paid and non-assessable.
3. The statements set forth in the Prospectus under the heading "Federal Income
Tax Considerations," to the extent they constitute matters of law or legal
conclusions with respect thereto, are correct.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the captions
"Federal Income Tax Considerations" and "Legal Matters" in the Prospectus and
the related Prospectus Supplements which form a part of the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons whose consent is required under Section 7 of the Act or
the Rules and Regulations of the Commission thereunder.
Very truly yours,
/s/ Stroock & Stroock & Lavan
STROOCK & STROOCK & LAVAN
Securities Act of 1933 File Number 333-14075
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)
------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
13-4994650
(I.R.S. Employer Identification Number)
270 PARK AVENUE, NEW YORK, NEW YORK
(Address of principal executive offices)
10017
(Zip Code)
---------------
The Money Store Inc.
TMS Auto Holdings, Inc.
(Exact name of obligor as specified in its charter)
NEW JERSEY 22-2293022
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
DELAWARE 22-3405381
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2840 MORRIS AVENUE
UNION, NEW JERSEY 07083
(908) 686-2000
(Address, including zip code, and telephone number,
including area code of obligor's principal executive offices)
---------------------------------
ASSET BACKED SECURITIES
(Title of the securities)
- ------------------------------------------------------------------------
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a)Name and address of each examining or supervising authority to which it
is subject.
New York State Banking Department, State House, Albany, New York 12110.
Board of Governors of the Federal Reserve System,
Washington, D.C., 20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b)Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank.)
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank.)
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
(On July 14, 1996, in connection with the merger of Chemical Bank and The Chase
Manhattan Bank (National Association), Chemical Bank, the surviving corporation,
was renamed The Chase Manhattan Bank.)
8. Not applicable.
9. Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 3rd day of December, 1996.
THE CHASE MANHATTAN BANK
By:/s/ DENIS KELLY
Denis Kelly
Corporate Trust Officer
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business June 30, 1996, in
accordance with a call made by the Federal Reserve
Bank of this
District pursuant to the provisions of the Federal
Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ..................... $ 4,167
Interest-bearing balances ............. 5,094
Securities: .............................
Held to maturity securities............... 3,367
Available for sale securities............. 27,786
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold .................... 7,204
Securities purchased under agreements to resell 136
Loans and lease financing receivables:
Loans and leases, net of unearned income $67,215
Less: Allowance for loan and lease losses 1,768
Less: Allocated transfer risk reserve 75
--------
Loans and leases, net of unearned income,
allowance, and reserve ................ 65,372
Trading Assets ........................... 28,610
Premises and fixed assets (including capitalized
leases) ............................... 1,326
Other real estate owned .................. 26
Investments in unconsolidated subsidiaries and
associated companies................... 68
Customer's liability to this bank on acceptances
outstanding ........................... 995
Intangible assets ........................ 309
Other assets ............................. 6,993
TOTAL ASSETS ............................. $151,453
=========
LIABILITIES
Deposits
In domestic offices ................... $46,917
Noninterest-bearing ........... $16,711
Interest-bearing .............. 30,206
------
In foreign offices, Edge and Agreement
subsidiaries,
and IBF's ............................. 31,577
Noninterest-bearing ........... $ 2,197
Interest-bearing .............. 29,380
------
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge and Agreement subsidiaries, and in
IBF's
Federal funds purchased ............... 12,155
Securities sold under agreements to repurchase
8,536
Demand notes issued to the U.S. Treasury . 1,000
Trading liabilities ...................... 20,914
Other Borrowed money:
With a remaining maturity of one year or less 10,018
With a remaining maturity of more than one year 192
Mortgage indebtedness and
obligations under capitalized
leases ................................ 12
Bank's liability on acceptances executed and
outstanding............................... 1,001
Subordinated notes and debentures ........ 3,411
Other liabilities ........................ 8,091
TOTAL LIABILITIES ........................ 143,824
-------
EQUITY CAPITAL
Common stock ............................. 620
Surplus .................................. 4,664
Undivided profits and capital reserves ... 2,970
Net unrealized holding gains (Losses)
on available-for-sale securities ......... (633)
Cumulative foreign currency translation adjustments 8
TOTAL EQUITY CAPITAL ..................... 7,629
----------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL .............. $151,453
==========
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS G. LABRECQUE )
