<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
REGISTRATION NO. 333-35525
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DAIMLER-BENZ AUTO GRANTOR TRUST 1997-A
(TRUST IN WHICH THE CERTIFICATES REPRESENT UNDIVIDED INTERESTS)
DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 9999 13-3770955
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
1201 NORTH MARKET STREET
SUITE 1406
WILMINGTON, DELAWARE 19801
(302) 426-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HARVEY S. TRAISON C/O DAIMLER-BENZ NORTH AMERICA CORPORATION
375 PARK AVENUE, SUITE 3001
NEW YORK, NEW YORK 10152
(212) 909-9700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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STEVEN J. MOLITOR, ESQ. ANDREW M. FAULKNER, ESQ.
MORGAN, LEWIS & BOCKIUS LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
101 PARK AVENUE 919 THIRD AVENUE
NEW YORK, NEW YORK 10178-0060 NEW YORK, NEW YORK 10022-3897
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
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, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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==============================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER CERTIFICATE* PRICE* FEE**
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<S> <C> <C> <C> <C>
Asset Backed Certificates................. $657,019,404.93 100% $657,019,404.93 $198,793.76
==============================================================================================================
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* Estimated solely for the purpose of calculating the registration fee.
** $303.03 of which has previously been paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT 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> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED OCTOBER , 1997
[DAIMLERBENZ NORTH AMERICA LOGO]
DAIMLER-BENZ AUTO GRANTOR TRUST 1997-A
$ 657,019,404.93
% Asset Backed Certificates, Class A
DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION
Seller
MERCEDES-BENZ CREDIT CORPORATION
Servicer
The % Asset Backed Certificates (the "Certificates") will consist of two
Classes of Certificates, the Class A Certificates and the Class B Certificates.
Only the Class A Certificates are being offered hereby. The Class A Certificates
will evidence in the aggregate an undivided ownership interest of approximately
95.5% of the principal balance of, and a portion of the interest accruing under,
the Receivables in a trust (the "Trust") to be formed pursuant to a Pooling and
Servicing Agreement to be entered into among Daimler-Benz Vehicle Receivables
Corporation, as Seller (the "Seller"), Mercedes-Benz Credit Corporation, in its
individual capacity and as Servicer (the "Servicer"), and Citibank, N.A., as
Trustee, Payahead Agent, Class A Agent and Class B Agent. The Class B
Certificates, which will initially be retained by the Seller, will evidence in
the aggregate an undivided ownership interest of approximately 4.5% of the
principal balance of, and a portion of the interest accruing under, the
Receivables in the Trust. The Class A Certificates and the Class B Certificates
represent in the aggregate an undivided ownership interest of 100% of the Trust,
other than the Retained Yield, which the Seller will retain the right to
receive. The rights of the Class B Certificateholders to receive distributions
with respect to the Receivables are subordinated to the rights of the Class A
Certificateholders, to the extent described herein. To the extent that the
amount of principal collections allocable to the Class A Certificates with
respect to any Distribution Date is less than the amount of principal to be paid
to the Class A Certificateholders on such Distribution Date pursuant to the
Pooling and Servicing Agreement such shortfall may be covered out of available
interest collections after the application of such amounts to the payment of
interest on the Class A Certificates and the Class B Certificates.
(continued on next page)
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK FACTORS"
BEGINNING ON PAGE 11.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT INTERESTS
IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS TO
TO PUBLIC (1) DISCOUNT THE SELLER(1)(2)
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Per Class A
Certificate........... % % %
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Total................... $ $ $
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest at the Pass-Through Rate calculated from October 20,
1997.
(2) Before deducting expenses payable by the Seller estimated to be $639,000.00.
The Class A Certificates are offered by the Underwriters when, as and if issued
and accepted by the Underwriters and subject to their right to reject orders in
whole or in part. It is expected that the Class A Certificates will be delivered
in book-entry form on or about , 1997, through the
facilities of The Depository Trust Company ("DTC") against payment therefor in
immediately available funds.
J.P. MORGAN SECURITIES INC.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
DEUTSCHE MORGAN GRENFELL
GOLDMAN, SACHS & CO.
, 1997.
<PAGE> 3
(continued from previous page)
Principal, and interest at the Pass-Through Rate of % per annum, will
be distributed on the 20th day of each month (or, if the 20th day of any month
is not a business day, the next following business day) beginning November 20,
1997 (each, a "Distribution Date"). The final scheduled Distribution Date on the
Certificates will be March 31, 2005 (the "Final Scheduled Distribution Date").
The Trust Property will include a pool of retail installment contracts
(collectively, the "Receivables"), certain monies due thereunder on or after
October 1, 1997 (the "Cutoff Date"), the Seller's security interests in the new
and used Mercedes-Benz automobiles securing the Receivables, a Shortfall Amount
Agreement between Mercedes-Benz Credit Corporation and the Seller (see "The
Certificates -- Shortfall Amount Agreement") and certain other property. See
"The Trust Property." The aggregate principal balance of the Receivables on the
Cutoff Date was $687,978,434.48.
The Class A Certificates will be represented initially by certificates
registered in the name of Cede & Co., as nominee of DTC. The interests of
beneficial owners of the Class A Certificates will be represented by book
entries on the records of DTC and participating members thereof. Definitive
Class A Certificates will be available only under the limited circumstances
described herein.
There currently is no secondary market for the Class A Certificates and
there is no assurance that one will develop. The Underwriters expect, but are
not obligated, to make a market in the Class A Certificates and may discontinue
market making at any time. Accordingly, no assurance can be given as to the
liquidity of, or trading market for, the Certificates.
AVAILABLE INFORMATION
The Seller has filed with the Securities and Exchange Commission (the
"Commission"), on behalf of the Trust, a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Class A Certificates offered pursuant to this Prospectus. For further
information, reference is made to such Registration Statement, and the exhibits
thereto, which are available for inspection without charge at the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as the Regional Offices of the Commission at 500 West
Madison Street, Chicago, Illinois 60661, and 7 World Trade Center, New York, New
York 10048. Copies of such information can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such reports and other documents may also be obtained from the
web site that the Commission maintains at http://www.sec.gov. The Servicer, on
behalf of the Trust, will also file or cause to be filed with the Commission
such periodic reports as may be required under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the rules and regulations of the
Commission thereunder and the January 6, 1995 "no-action" letter of the
Commission's Division of Corporation Finance regarding Daimler-Benz Vehicle
Trust 1994-A, but only to the extent that the continued registration of the
Class A Certificates under the Exchange Act is required to qualify the Class A
Certificates as "publicly offered securit(ies)" pursuant to the regulations of
the United States Department of Labor promulgated under the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"). See "ERISA Considerations."
REPORTS TO THE CLASS A CERTIFICATEHOLDERS
Unless and until definitive Class A Certificates are issued, monthly and
annual reports concerning the Receivables and the Trust will be prepared by the
Servicer and sent by the Trustee, on behalf of the Trust, only to Cede & Co., as
nominee of DTC and as registered holder of the Class A Certificates, pursuant to
the Agreement (as defined herein). Such reports may be available to beneficial
owners of Certificates ("Certificate Owners") in accordance with the regulations
and procedures of DTC. Such reports will not contain audited financial
statements with respect to the Trust. The Seller does not intend to send any of
its financial reports to Certificateholders or to Certificate Owners. See "The
Certificates -- Book Entry Registration" and "-- Statements to Class A
Certificateholders."
2
<PAGE> 4
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A
CERTIFICATES. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH
THE OFFERING, AND MAY BID FOR, AND PURCHASE, THE CLASS A CERTIFICATES IN THE
OPEN MARKET. SEE "UNDERWRITING."
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE SELLER, THE SERVICER, CITIBANK, N.A. OR THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR
ANY SALE MADE HEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
TABLE OF CONTENTS
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PAGE
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Available Information................................................................. 2
Reports to the Class A Certificateholders............................................. 2
Prospectus Summary.................................................................... 4
Risk Factors.......................................................................... 11
Formation of the Trust................................................................ 14
The Trust Property.................................................................... 14
MBCC's Motor Vehicle Contract Portfolio............................................... 15
The Receivables....................................................................... 18
Yield Considerations.................................................................. 22
Pool Factors and Other Information.................................................... 22
Use of Proceeds....................................................................... 22
The Seller............................................................................ 22
The Servicer.......................................................................... 23
The Certificates...................................................................... 24
Certain Legal Aspects of the Receivables.............................................. 41
Certain Federal Income Tax Consequences............................................... 45
ERISA Considerations.................................................................. 50
Underwriting.......................................................................... 53
Validity of the Certificates.......................................................... 54
Index of Principal Terms.............................................................. 55
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3
<PAGE> 5
PROSPECTUS SUMMARY
This Prospectus Summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. Certain capitalized
terms used in this Prospectus Summary are defined elsewhere in this Prospectus.
See the Index of Principal Terms for the location herein of the definitions of
capitalized terms.
Issuer..................... Daimler-Benz Auto Grantor Trust 1997-A (the
"Trust"), to be formed by the Seller pursuant to a
Pooling and Servicing Agreement to be dated as of
October 1, 1997 (the "Agreement"), among the
Seller, the Servicer, MBCC, the Payahead Agent, the
Class A Agent, the Class B Agent and the Trustee.
Seller..................... Daimler-Benz Vehicle Receivables Corporation, a
wholly-owned subsidiary of Mercedes-Benz Credit
Corporation ("MBCC").
Servicer................... MBCC, a wholly-owned subsidiary of Daimler-Benz
North America Corporation ("DBNA").
The Certificates........... The Certificates consist of two classes, entitled
% Asset Backed Certificates, Class A (the
"Class A Certificates"), and % Asset
Backed Certificates, Class B (the "Class B
Certificates"). Only the Class A Certificates are
being offered hereby. Each Certificate will
represent an undivided ownership interest in
certain assets of the Trust.
Class A Certificates....... The Class A Certificates will evidence, in the
aggregate, an undivided ownership interest of
approximately 95.5% (the "Class A Percentage") of
the principal balance of, and a portion of the
interest accruing under, the Receivables held by
the Trust (which principal initially represents
$657,019,404.93). See "The
Certificates -- Distributions on Certificates." The
Class A Certificates will be offered for purchase
in denominations of $1,000 and integral multiples
thereof. See "The Certificates -- General."
Class B Certificates....... The Class B Certificates will evidence, in the
aggregate, an undivided ownership interest of
approximately 4.5% (the "Class B Percentage") of
the principal balance of, and a portion of the
interest accruing under, the Receivables held by
the Trust (which principal initially represents
$30,959,029.55). The Class B Certificates are
subordinated to the Class A Certificates, to the
extent described herein. The Class B Certificates
are not being offered hereby. The Seller will
initially retain the Class B Certificates but may,
in its discretion, subsequently sell all or part of
the Class B Certificates.
Retained Yield............. The Seller will retain the right to receive
distributions (the "Retained Yield"), with respect
to each Receivable, equal to the interest accrued
on such Receivable, during each period between
payment dates for such Receivable, at a rate equal
to the excess, if any, of (i) the annual percentage
rate of interest ("APR") of such Receivable over
(ii) the sum of the Pass-Through Rate plus the
Servicing Rate.
Trust Property............. The property of the Trust (the "Trust Property")
will include (i) a pool of retail installment
contracts (collectively, the "Receivables") secured
by new and used Mercedes-Benz automobiles, together
with all accessions thereto, (the "Financed
Vehicles"), (ii) all monies due under the
Receivables on or after October 1, 1997 (the
"Cutoff Date") (but excluding Excess Amounts),
(iii) all amounts and property from time to
4
<PAGE> 6
time held in or credited to the Collection Account
and the Certificate Account, (iv) all of the
Seller's security interests in the Financed
Vehicles, (v) all rights to receive payments under
certain circumstances from the Reserve Funds, (vi)
all of the Seller's rights under the Shortfall
Amount Agreement, (vii) all of the Seller's rights
to receive proceeds from claims on physical damage,
credit life and disability insurance policies
covering the Financed Vehicles or from the obligors
under the Receivables (the "Obligors"), (viii) all
of the Seller's right to all documents contained in
the Receivable Files, (ix) certain rights under the
Purchase Agreement, (x) all of the Seller's rights,
if any, of recourse against Dealers arising out of
breaches by Dealers in connection with the
Receivables, (xi) all property (including the right
to receive future Liquidation Proceeds and
Recoveries) that secures a Receivable and that will
have been acquired by or on behalf of the Trustee,
(xii) the Servicing Guaranty Agreement, and (xiii)
all proceeds (within the meaning of Section 9-306
of the Uniform Commercial Code (the "UCC")) of the
foregoing. See "The Trust Property."
The Receivables will be purchased by the Seller
from MBCC pursuant to a Purchase Agreement (the
"Purchase Agreement") between the Seller and MBCC
providing for such purchase on or before the date
of initial issuance of the Certificates (the
"Closing Date").
Pass-Through Rate.......... % per annum, calculated on the basis of a
360-day year consisting of twelve 30-day months
(the "Pass-Through Rate").
Distribution Date.......... The 20th day of each month (or, if such 20th day is
not a business day, the next following business
day) (each, a "Distribution Date") beginning
November 20, 1997.
Interest................... On each Distribution Date, the Trustee will
distribute an amount pro rata to the holders of
record of Class A Certificates (the "Class A
Certificateholders") as of the 19th day of the
current calendar month (or, if Definitive
Certificates are issued, the last day of the
calendar month immediately preceding such
Distribution Date) (the "Record Date"). Such amount
will be equal to 30 days' interest at the
Pass-Through Rate on the Class A Principal Balance
as of the first day of the preceding calendar month
(less principal distributions to be made on the
Distribution Date in such month) generally to the
extent of funds available from (i) the Available
Interest after payment of the Servicing Fee, (ii)
the Class A Reserve Fund and (iii) the Class B
Percentage of the Available Principal.
The "Class A Principal Balance" will initially
equal $657,019,404.93 (the "Original Class A
Principal Balance") and will thereafter be reduced
by all amounts previously distributed to Class A
Certificateholders and allocable to principal. See
"The Certificates -- Distributions on
Certificates."
Principal.................. On each Distribution Date, the Trustee will
distribute pro rata to Class A Certificateholders,
as of the related Record Date, Class A Principal,
generally to the extent of funds available from (i)
Available Principal, (ii) the Class A Reserve Fund
and (iii) Available Interest remaining after
payment of the Servicing Fee, Class A Interest,
Class A Interest Carryover Shortfall, Class B
Interest and Class B Interest Carryover Shortfall.
5
<PAGE> 7
"Class A Principal" will consist of the Class A
Percentage of (a) the principal portion of all
scheduled payments due on Receivables during the
preceding Collection Period; (b) the Principal
Balance of each Receivable that became a Prepaid
Receivable during the preceding Collection Period
(except to the extent included in (a) or (d)); (c)
the Principal Balance of each Receivable that was
purchased by the Servicer or repurchased by the
Seller, in each case, under an obligation that
arose during the preceding Collection Period
(except to the extent included in (a)); and (d) the
Principal Balance of each Receivable which became a
Defaulted Receivable during the preceding
Collection Period (except to the extent included in
(a) or (b)).
A "Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such Distribution Date
occurs. See "The Certificates -- Distributions on
Certificates."
A "Prepaid Receivable" is a Receivable which is
prepaid in full or accelerated under certain
circumstances or with respect to which the related
Financed Vehicle is repossessed and sold or becomes
a total loss. A "Defaulted Receivable" is a
Receivable which by its terms is in default and as
to which the Servicer has determined, in accordance
with its customary standards, policies and
procedures, that payment in full is unlikely or the
Servicer has repossessed and disposed of the
Financed Vehicle.
Registration of
Certificates............... The Class A Certificates will be represented
initially by physical certificates registered in
the name of Cede & Co. as nominee of The Depository
Trust Company ("DTC"). No person acquiring a
beneficial ownership interest in the Class A
Certificates ("Class A Certificate Owners" or
"Certificate Owners") will be entitled to receive a
definitive certificate representing such person's
interest in the Trust except in certain limited
circumstances, as described herein. Under the terms
of the Agreement, unless definitive certificates
are issued, Class A Certificate Owners will not be
recognized as Class A Certificateholders and will
be permitted to exercise the rights of the Class A
Certificateholders only indirectly through DTC. See
"The Certificates -- General," "-- Book Entry
Registration" and "-- Definitive Certificates."
Servicing Fee.............. A monthly fee for servicing the Receivables will be
payable to the Servicer on each Distribution Date
in an amount equal to one-twelfth of the product of
the Servicing Rate and the Pool Balance as of the
first day of the preceding Collection Period, and
will be payable generally out of collections of
interest on the Receivables prior to distributions
to the Certificateholders (the "Servicing Fee").
The "Servicing Rate" will equal 1.00% per annum.
The Servicer will also be entitled to receive other
amounts, including all late payment fees and
charges paid with respect to the Receivables as
additional servicing compensation. If it is
acceptable to each Rating Agency without a
reduction in the rating of the Class A
Certificates, the Servicing Fee in respect of a
Collection Period (together with any portion of the
Servicing Fee that remains unpaid from prior
Collection Periods) will be paid at the beginning
of such Collection Period out of collections for
such Collection Period. See "The
Certificates -- Servicing Compensation."
6
<PAGE> 8
Pool Balance............... The "Pool Balance" means, as of any date, the
aggregate outstanding Principal Balance of the
Receivables (excluding Defaulted Receivables) as of
the close of business on such date.
Subordination.............. The rights of holders of record of the Class B
Certificates (the "Class B Certificateholders" and,
together with the Class A Certificateholders, the
"Certificateholders") to receive distributions to
which they would otherwise be entitled with respect
to the Receivables will be subordinated to the
rights of the Class A Certificateholders to the
extent described herein. See "The
Certificates -- Distributions on Certificates" and
"-- Subordination of the Class B Certificates and
Retained Yield; Reserve Funds."
The Class B Certificateholders generally will not
receive distributions of interest on a Distribution
Date (other than from the Class B Reserve Fund)
unless the Class A Certificateholders receive the
full amount of interest due to them on such
Distribution Date (including from amounts on
deposit in the Class A Reserve Fund), and the Class
B Certificateholders will not receive distributions
of principal on a Distribution Date (other than
from the Class B Reserve Fund) unless the Class A
Certificateholders receive the full amount of
interest and principal due to them on such
Distribution Date (including from amounts on
deposit in the Class A Reserve Fund). However,
distributions of interest on the Class B
Certificates will not be subordinated to
distributions of principal on the Class A
Certificates.
In addition, the rights of the Seller to receive
the Retained Yield will be subordinated to the
rights of the Class A and Class B
Certificateholders to receive amounts due to each
of them. Accordingly, the Seller will not receive
distributions attributable to the Retained Yield on
any Distribution Date unless all interest and
principal due to the Class A Certificateholders and
Class B Certificateholders have been paid and
amounts on deposit in the Class A Reserve Fund and
Class B Reserve Fund are at least equal to the
Specified Class A Reserve Balance and Specified
Class B Reserve Balance, respectively (each as
defined below).
Reserve Funds.............. General. A separate reserve fund will be created
for the Class A Certificates and the Class B
Certificates (the "Class A Reserve Fund" and the
"Class B Reserve Fund," respectively, and
collectively, the "Reserve Funds"). Amounts on
deposit in the Class A Reserve Fund will be
available on any Distribution Date to cover
Shortfall Amounts (as defined below) and shortfalls
in distributions of interest and principal on the
Class A Certificates to the extent attributable to
losses and delinquencies on the Receivables.
Amounts on deposit from time to time in the Class A
Reserve Fund and the Class B Reserve Fund will be
invested, as provided in the Agreement, in Eligible
Investments maturing on or prior to the next
succeeding Distribution Date; provided, however,
that to the extent permitted by the Rating
Agencies, amounts on deposit in the Class A Reserve
Fund and the Class B Reserve Fund may be invested
in Eligible Investments that mature later than the
next succeeding Distribution Date.
Class A Reserve Initial Deposit. The Class A
Reserve Fund will be funded by the Seller with cash
or Eligible Investments maturing on or prior to the
initial Distribution Date and having, on the
Closing Date, a
7
<PAGE> 9
value of approximately $3,439,892.17 (the "Class A
Reserve Initial Deposit"). The Class A Reserve
Initial Deposit will be augmented on each
Distribution Date by the deposit in the Class A
Reserve Fund of cash otherwise distributable to the
Seller as Retained Yield to the extent necessary to
maintain the amount in the Class A Reserve Fund at
an amount equal to the Specified Class A Reserve
Balance (as defined below).
Amounts in the Class A Reserve Fund on any
Distribution Date (reduced by the amount of all
distributions made on such Distribution Date) in
excess of the Specified Class A Reserve Balance for
such Distribution Date generally will be released
for deposit into the Class B Reserve Fund or, to
the extent the amount on deposit therein is equal
to the Specified Class B Reserve Balance (as
defined below), for payment to the Seller.
Specified Class A Reserve Balance. The "Specified
Class A Reserve Balance" with respect to any
Distribution Date will equal $6,879,784.34, except
where on any Distribution Date (i) the annualized
average for the preceding three Collection Periods
of the ratios of net losses (that is, the net
balances of all Receivables which are determined to
be uncollectible in the applicable Collection
Period, less any Liquidation Proceeds or Recoveries
received in such Collection Period) to the Pool
Balance as of the first day of each such Collection
Period exceeds 1.50% or (ii) the average for the
preceding three Collection Periods of the ratios of
the balance of Receivables that are delinquent 60
days or more to such outstanding Pool Balance
exceeds 1.50%, then the Specified Class A Reserve
Balance for such Distribution Date will equal
$34,398,921.72. See "The
Certificates -- Subordination of the Class B
Certificates and Retained Yield; Reserve Funds."
The Seller may reduce the Specified Class A Reserve
Balance provided that both Rating Agencies confirm
in writing to the Class A Agent and the Seller
prior to such reduction that such reduction will
not result in a lowering of or a withdrawal of the
then current rating of the Class A Certificates.
Specified Class B Reserve Balance. The "Specified
Class B Reserve Balance" will initially be zero and
remain zero for so long as the Seller retains the
Class B Certificates. At such time, if any, as the
Seller determines to sell the Class B Certificates,
the Specified Class B Reserve Balance will be an
amount determined by the Seller in consultation
with the Rating Agencies in order to achieve the
desired rating for the Class B Certificates.
Shortfall Amount........... The "Shortfall Amount" is the amount calculated by
the Servicer with respect to each Prepaid
Receivable (excluding any Defaulted Receivable)
during a Collection Period equal to the excess, if
any, of (i) the sum of (x) the Principal Balance of
such Receivable on the books of the Trust at the
beginning of the Collection Period in which such
Receivable becomes a Prepaid Receivable plus (y) 15
day's interest on such Principal Balance at the APR
of such Receivable over (ii) the amount received
from the related Obligor in connection with such
prepayment.
Shortfall Amount
Agreement.................. MBCC will enter into a shortfall amount agreement
(the "Shortfall Amount Agreement") with the Seller,
which will assign the Shortfall
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Amount Agreement to the Trust. To the extent that
amounts on deposit in the Class A Reserve Fund are
not sufficient on any Distribution Date to cover
the Shortfall Amounts with respect to such
Distribution Date, pursuant to the Shortfall Amount
Agreement, MBCC will pay to the Certificate Account
the amount of such insufficiency. See "The
Certificates -- Shortfall Amount Agreement."
Advances................... The Servicer each month will advance to the Trust,
in respect of each Receivable, that portion of
scheduled payments that was not timely made (an
"Advance"). The Servicer will be entitled to
reimbursement of Advances from subsequent payments
on or with respect to the Receivables. The Servicer
will not be required to make any Advance to the
extent that it does not expect to recoup the
Advance from subsequent collections or recoveries.
See "The Certificates -- Advances."
Repurchases and Purchases
of Certain Receivables..... The Seller will be obligated to repurchase any
Receivable if the interest of the Trust and the
Certificateholders therein is materially and
adversely affected by a breach of any
representation or warranty made by the Seller with
respect to the Receivable, if the breach has not
been cured by the last day of the Collection
Period, which includes the 60th day after the date
of discovery by or notice to the Seller of the
breach. Simultaneously with the Seller's repurchase
from the Trust, MBCC will be obligated to
repurchase the Receivable from the Seller pursuant
to the Purchase Agreement. See "The
Certificates -- Mandatory Repurchase of
Receivables."
The Servicer will be obligated to purchase any
Receivable if, among other things, the Servicer (i)
extends the date for final payment by the Obligor
of such Receivable beyond the last day of the
Collection Period immediately preceding the Final
Scheduled Distribution Date, (ii) changes the
amount or the number of the scheduled payments of
such Receivable or (iii) fails to maintain a
perfected security interest in the related Financed
Vehicle in accordance with the Servicer's customary
servicing procedures. See "The
Certificates -- Servicing Procedures."
Optional Purchase.......... In the event that the Pool Balance as of the last
day of a Collection Period has declined to 10% or
less of the initial Pool Balance, the Servicer may
purchase all remaining Receivables at a purchase
price equal to the aggregate of the Purchase
Amounts thereof on the Distribution Date occurring
in any subsequent Collection Period which follows
the Collection Period in which appropriate notice
is given to Certificateholders. See "The
Certificates -- Termination."
Trustee.................... Citibank, N.A. (the "Trustee").
Class A Agent, Class B
Agent and Payahead Agent... Citibank, N.A. (the "Class A Agent," the "Class B
Agent" and the "Payahead Agent").
Tax Status................. In the opinion of Morgan, Lewis & Bockius LLP,
special tax counsel to the Seller, the Trust will
be classified for federal income tax purposes as a
grantor trust and not as a partnership or as an
association taxable as a corporation. Class A
Certificateholders must report their respective
allocable shares of income earned on Trust assets
(excluding certain
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amounts retained by the Seller as described herein)
and, subject to certain limitations applicable to
individuals, estates and trusts, may deduct their
respective allocable shares of reasonable servicing
and other fees. See "Certain Federal Income Tax
Consequences."
Rating..................... It is a condition to the issuance of the Class A
Certificates that the Class A Certificates be rated
Aaa by Moody's Investors Service, Inc. ("Moody's")
and AAA by Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc. ("S&P")
(each, a "Rating Agency"). The rating assigned to
the Class A Certificates by a Rating Agency will
reflect such Rating Agency's assessment of the
likelihood that Class A Certificateholders will
receive the payments of interest and principal
required to be made under the Agreement, in the
case of principal, on or prior to the Final
Scheduled Distribution Date, and in the case of
interest, on each Distribution Date. A rating of a
security is not a recommendation to buy, sell or
hold securities and may be revised or withdrawn at
any time by the assigning Rating Agency.
ERISA Considerations....... Under final regulations issued by the Department of
Labor (the "DOL"), the Trust's assets would not be
deemed to be "plan assets" of an employee benefit
plan and certain other retirement plans and
arrangements (all of which are hereinafter referred
to as a "Plan"), subject to ERISA, acquiring a
Class A Certificate if certain conditions are met,
including the condition that the Class A
Certificates be held by at least 100 persons upon
completion of the public offering being made
hereby. The Underwriters expect, although no
assurances can be given, that the Class A
Certificates will be held by at least 100 persons,
and it is anticipated that the other conditions of
the regulations will be met. If the Trust's assets
were deemed to be "plan assets" of a Plan, by
virtue of such Plan's acquisition of a Class A
Certificate, certain transactions concerning the
Trust's assets could result in a prohibited
transaction or other violations of the fiduciary
responsibility provisions of ERISA and Section 4975
of the Internal Revenue Code of 1986, as amended
(the "Code"). Accordingly, the fiduciary
contemplating the purchase of Class A Certificates
should consult its counsel before making a
purchase. See "ERISA Considerations."
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RISK FACTORS
Investors should consider, among other things, the following factors in
connection with the purchase of the Class A Certificates.
LIMITED LIQUIDITY
There currently is no secondary market for the Class A Certificates. The
Underwriters expect, but are not obligated, to make a market in the Class A
Certificates and may discontinue market making at any time. There is no
assurance that any such market will develop or, if one does develop, that it
will provide liquidity of investment or will continue for the life of the Class
A Certificates.
POTENTIAL PRIORITY OF CERTAIN OTHER INTERESTS
The Seller will cause financing statements to be filed with the appropriate
governmental authorities to perfect the interest of the Trust in its purchase of
the Receivables, and the Servicer will hold the Receivables, either directly or
through subservicers, as custodian for the Trustee following the sale and
assignment of the Receivables to the Trust. The Receivables will not be
segregated, stamped or otherwise marked to indicate that they have been sold to
the Trust. If, through inadvertence or otherwise, another party purchases (or
takes a security interest in) the Receivables for new value in the ordinary
course of business and takes possession of the Receivables without actual
knowledge of the Trust's interest, the purchaser (or secured party) will acquire
an interest in the Receivables superior to the interest of the Trust and as a
result reductions in the amounts of distributions to Certificateholders could
result. See "Certain Legal Aspects of the Receivables -- Rights in the
Receivables."
The Seller will assign its security interests in the Financed Vehicles
along with the sale and assignment of the Receivables to the Trustee, and the
Servicer will hold the certificates of title or ownership relating to the
Financed Vehicles, either directly or through subservicers, as custodian for the
Trustee following the sale and assignment of the Receivables to the Trust. The
certificates of title or ownership will not be endorsed or otherwise amended to
identify the Trust as the new secured party. Because the Trust will not be
identified as the secured party on any certificates of title or ownership, the
security interest of the Trust in a Financed Vehicle (i) might be defeated
through fraud, forgery, negligence or error and (ii) may not be perfected in
every state and as a result reductions in the amounts of distributions to
Certificateholders could result. See "Certain Legal Aspects of the
Receivables -- Security Interests in the Financed Vehicles."
POTENTIAL EFFECTS OF INSOLVENCY
The Seller has taken steps in structuring the transactions contemplated
hereby that are intended to ensure that the voluntary or involuntary application
for relief by MBCC under Title 11 of the United States Code (the "Bankruptcy
Code") or similar state laws (collectively, "Insolvency Laws") will not result
in consolidation of the assets and liabilities of the Seller with those of MBCC.
These steps include the creation of the Seller as a separate, limited-purpose
subsidiary of MBCC pursuant to a certificate of incorporation containing certain
limitations (including restrictions on the nature of the Seller's business and a
restriction on the Seller's ability to commence a voluntary case or proceeding
under any Insolvency Law without the prior unanimous affirmative vote of all of
its directors). However, there can be no assurance that the activities of the
Seller would not result in a court concluding that the assets and liabilities of
the Seller should be consolidated with those of MBCC in a proceeding under any
Insolvency Law. If a court were to reach such a conclusion, 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, then delays in distributions on
the Certificates could occur or reductions in the amounts of such distributions
could result. See "The Seller."
It is intended by MBCC and the Seller that the transfer of the Receivables
by MBCC to the Seller under the Purchase Agreement constitute a "true sale" of
the Receivables to the Seller. If the transfer constitutes such a "true sale,"
the Receivables and the proceeds thereof would not be part of MBCC's bankruptcy
estate under Section 541 of the Bankruptcy Code should MBCC become the subject
of a bankruptcy case subsequent to the transfer of the Receivables to the
Seller.
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In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied, 114 S. Ct. 554 (1993), the United States Court of Appeals for the
10th Circuit suggested that even where a transfer of accounts from a seller to a
buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's estate in a bankruptcy of the seller. If MBCC or the
Seller were to become subject to a bankruptcy proceeding and a court were to
follow the Octagon court's reasoning, Certificateholders might experience delays
in payment or possibly losses on their investment in the Certificates. As part
of the opinion of Seller's special counsel regarding the "true sale" of the
Receivables by MBCC to the Seller described herein, such counsel will advise the
Seller that the reasoning of the Octagon case appears to be inconsistent with
precedent and the UCC. See "The Seller."
PREPAYMENT CONSIDERATIONS
The weighted average life of the Class A Certificates may be reduced by
prepayments in full on Receivables. The Receivables are prepayable at any time.
Prepayments may also result from liquidations due to default, the receipt of
proceeds from physical damage insurance, repurchases by the Seller as a result
of certain uncured breaches of the warranties made by it in the Agreement with
respect to the Receivables, purchases by the Servicer as a result of certain
uncured breaches of the covenants made by it in the Agreement with respect to
the Receivables, or the Servicer exercising its optional purchase right. The
rate of prepayments on the Receivables may be influenced by a variety of
economic, social, and other factors, including the fact that if an Obligor sells
or transfers a Financed Vehicle, the related Receivable must be repaid in full.
MBCC does not generally maintain records of the historical prepayment
experience of its Motor Vehicle Contract portfolio. MBCC believes that its
prepayment experience is consistent with that generally found in the consumer
automobile finance industry. However, no assurance can be given that prepayments
on the Receivables will conform to historical experience and no prediction can
be made as to the actual prepayment experience on the Receivables. See "The
Receivables -- Maturity and Prepayment Assumptions." Any reinvestment risk
resulting from the rate of prepayments of the Receivables and the distribution
of such prepayments to Class A Certificateholders will be borne entirely by the
Class A Certificateholders. There can be no assurance that the
Certificateholders will be able to reinvest funds in an instrument with a
comparable interest rate in the event the Certificates are prepaid.
LIMITED ASSETS; SUBORDINATION
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and other
Trust Property, including the right to receive payments under certain
circumstances pursuant to the Shortfall Amount Agreement and from the Reserve
Funds. The Class A Certificates represent interests solely in the Trust and the
Class A Certificates are not obligations of, and will not be insured or
guaranteed by, the Seller, the Servicer, DBNA, the Trustee or any other person
or entity. Consequently, Class A Certificateholders must rely for payment upon
payments on or on account of the Receivables (to the extent described herein),
payments under the Shortfall Amount Agreement and, if and to the extent
available, amounts on deposit in the Class A Reserve Fund.
Amounts on deposit in the Class A Reserve Fund will be available on any
Distribution Date to cover Shortfall Amounts and shortfalls in distributions of
interest and principal on the Class A Certificates to the extent attributable to
losses and delinquencies on the Receivables. If the Class A Reserve Fund is
exhausted, the Trust will depend solely on current payments on the Receivables
(to the extent available to make payments to the Class A Certificateholders) and
payments under the Shortfall Amount Agreement to make distributions on the Class
A Certificates. See "The Certificates -- Shortfall Amount Agreement" and
"-- Distributions on Certificates." Although the Class B Certificates will be
subordinate to the Class A Certificates to the extent described herein,
distributions of interest due to the Class B Certificateholders will not be
subordinate to distributions of principal due to the Class A Certificateholders.
Moreover, the Class A Certificateholders will not be entitled to distributions
from amounts on deposit in the Class B Reserve Fund.
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RISK OF DELINQUENCIES, REPOSSESSIONS AND LOSSES; SOCIAL, LEGAL AND ECONOMIC
FACTORS
Delinquencies, repossessions and losses on Motor Vehicle Contracts are
sensitive to a variety of social, legal and economic factors. Economic factors
include the rate of inflation, unemployment levels and relative interest rates.
Social, legal and economic factors in the States of California, Florida and
Texas may have a disproportionate effect on the Trust because of the
concentration of Receivables in such states. See "The Receivables -- Geographic
Distribution of the Receivables." The Seller is unable to determine and has no
basis to predict whether, or to what extent, social, legal or economic factors
will affect future payment patterns.
LIMITED NATURE OF CERTIFICATE RATING
It is a condition to the issuance of the Class A Certificates that the
Class A Certificates be rated Aaa by Moody's and AAA by S&P. The rating is based
primarily on the credit quality of the Receivables and the level of
subordination of the Class B Certificates. There is no assurance that the rating
will remain for any given period of time or that the rating will not be lowered
or withdrawn entirely by the assigning Rating Agency, if in its judgment
circumstances in the future so warrant. The rating assigned to the Class A
Certificates by a Rating Agency will reflect such Rating Agency's assessment of
the likelihood that Class A Certificateholders will receive the payments of
interest and principal required to be made under the Agreement, in the case of
principal, on or prior to the Final Scheduled Distribution Date, and in the case
of interest, on each Distribution Date. The rating is not a recommendation to
purchase, hold or sell Class A Certificates, inasmuch as rating does not comment
as to market price or suitability for a particular investor.
NEWLY FORMED TRUST
The Seller will establish the Trust by selling and assigning the
Receivables and certain other Trust Property to the Trustee in exchange for the
Certificates. The Trust will have no operating history and will not acquire any
assets other than the Trust Property, nor will the Trust engage in any business
activity other than acquiring and holding Trust Property and proceeds therefrom,
issuing Certificates, making payments thereon and related activities. See
"Formation of the Trust."
EFFECTS OF BOOK-ENTRY REGISTRATION OF THE CLASS A CERTIFICATES
The Class A Certificates will be represented initially by physical
certificates registered in the name of Cede & Co. as nominee of DTC, and will
not be registered in the names of the Certificate Owners or their nominees. No
Class A Certificate Owner will be entitled to receive a definitive certificate
representing such person's interest in the Trust except in certain limited
circumstances, as described herein. Under the terms of the Agreement, unless
definitive certificates are issued, Class A Certificate Owners will not be
recognized as Certificateholders, and will be permitted to exercise the rights
of the Certificateholders only indirectly through DTC. See "The
Certificates -- General," "-- Book Entry Registration" and "-- Definitive
Certificates." Unless and until Definitive Certificates are issued, monthly and
annual reports concerning the Trust will be sent to Cede & Co., as nominee of
DTC, and registered holder of the Class A Certificates and not directly to
Certificate Owners who may obtain such reports through DTC and its Indirect
Participants. See "Reports to the Class A Certificateholders."
TAX ACCOUNTING ISSUES
There is uncertainty with respect to a number of issues that could affect
the amount, character and timing of income required to be reported by Class A
Certificate Owners for federal income tax purposes because there are no judicial
or administrative authorities addressing substantially similar facts. In
general, these issues include whether the Internal Revenue Service will view the
Class A Certificate Owners as owning undivided interests in each Receivable and
each other asset of the Trust or, alternatively, as owning an undivided interest
in a single debt obligation of the Seller; the allocation of tax basis among
various items, including the Shortfall Amount Agreement; the methodology and
assumptions relating to the calculation of original issue discount; and the
treatment and characterization of certain payments, including whether any
portion of the Servicing
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Fees would be treated as "stripped coupons" under Section 1286 of the Code.
Furthermore, for administrative convenience, the Servicer intends to adopt
certain conventions for calculating income on the Receivables which include
estimation of accrued amounts on and calculating income from all of the
Receivables and the Shortfall Amount Agreement on an aggregate basis. The use of
such methods could result in the income reported to Class A Certificate Owners
for any period being different from the income that would be reported if income
were reported on a Receivable-by-Receivable basis over the period during which
income accrues on each Receivable. If reporting on such basis results in
under-reporting of income, or if the Internal Revenue Service were to take a
position different from that adopted by the Trust with respect to any issue, a
Class A Certificate Owner could be required to pay interest on underpayments of
tax and could be subject to penalties for under-reporting of income. For a
further discussion of the foregoing, see "Certain Federal Income Tax
Consequences -- Tax Accounting Issues" herein.
FORMATION OF THE TRUST
The Seller will establish the Trust by selling and assigning the
Receivables and certain other Trust Property to the Trustee in exchange for the
Certificates. Prior to such sale and assignment, the Trust will have no assets
or obligations or any operating history. The Trust will not engage in any
activity other than acquiring and holding Trust Property and proceeds therefrom,
issuing Certificates, making payments thereon and related activities.
The Servicer will service the Receivables, either directly or through
subservicers, and will be paid the Servicing Fee out of collections from the
Receivables, prior to distributions to Certificateholders. Certain other
expenses of the Trust will be paid by or on behalf of the Servicer or the Seller
as provided in the Agreement. See "The Certificates -- Servicing Procedures,"
"-- Servicing Compensation" and "-- Distributions on Certificates."
The Servicer will hold the Receivables and the certificates of title or
ownership relating to the Financed Vehicles as custodian for the Trustee.
However, the Receivables will not be marked or stamped to indicate that they
have been sold to the Trust, and the certificates of title or ownership for the
Financed Vehicles will not be endorsed or otherwise amended to identify the
Trust as the new secured party. Under such circumstances and in certain
jurisdictions, the Trust's interest in the Receivables and the Financed Vehicles
may be defeated. See "Certain Legal Aspects of the Receivables."
The Trust will not acquire any assets other than the Trust Property, and it
is not anticipated that the Trust will have any need for additional capital
resources. Because the Trust will have no operating history upon its
establishment and will not engage in any business other than acquiring and
holding the Trust Property, issuing the Certificates and distributing payments
on the Certificates, no historical or pro forma financial statements or ratios
of earnings to fixed charges with respect to the Trust have been included
herein.
THE TRUST PROPERTY
Each Certificate will represent a fractional undivided interest in certain
assets of the Trust. The Trust Property will include (i) the Receivables, (ii)
all monies due thereunder on or after the Cutoff Date (but excluding Excess
Amounts), (iii) all amounts and property from time to time held in or credited
to the Collection Account and the Certificate Account, (iv) all of the Seller's
security interests in the Financed Vehicles, (v) all rights to receive payments
under certain circumstances from the Reserve Funds, (vi) all of the Seller's
rights under the Shortfall Amount Agreement, (vii) all of the Seller's rights to
receive proceeds from claims on physical damage, credit life and disability
insurance policies covering the Financed Vehicles or the Obligors, (viii) all of
the Seller's right to all documents contained in the Receivable Files, (ix)
certain rights under the Purchase Agreement, including the right of the Seller
to cause MBCC to repurchase Receivables from time to time from the Seller under
certain circumstances specified therein, (x) all of the Seller's rights, if any,
of recourse against Dealers arising out of breaches by Dealers in connection
with the Receivables, (xi) all property (including the right to receive future
Liquidation Proceeds and Recoveries) that secures a Receivable and that will
have been acquired by or on behalf of the Trustee, (xii) the Servicing
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Guaranty Agreement, and (xiii) all proceeds (within the meaning of Section 9-306
of the UCC) of the foregoing.
MBCC'S MOTOR VEHICLE CONTRACT PORTFOLIO
GENERAL
MBCC currently purchases motor vehicle retail installment contracts (the
"Motor Vehicle Contracts") directly from authorized Mercedes-Benz motor vehicle
dealers ("Dealers") throughout the United States. The Motor Vehicle Contracts
are originated by the Dealers who regularly sell such contracts to MBCC as well
as to other finance sources. MBCC purchases Motor Vehicle Contracts in
accordance with its established underwriting procedures, subject to the terms of
an agreement with a Dealer (the "Dealer Agreement").
The Dealer Agreement, among other things, obligates the Dealer to
repurchase any Motor Vehicle Contract for the outstanding principal balance if
the Dealer breaches certain representations and warranties. Each Dealer warrants
that (i) all Motor Vehicle Contracts are genuine and the only instruments
executed for the related motor vehicle (a "Motor Vehicle") described therein,
and are and will continue free from defenses and off-sets; (ii) all statements
contained therein will be true, and unpaid balances shown therein correct; (iii)
all amounts and numbers submitted to MBCC will be correct and accurately reflect
the true nature of the agreement between the obligor and the Dealer; (iv) the
transactions conform to all applicable laws and regulations; (v) the contents of
any form used other than MBCC's will be legally sufficient and enforceable; (vi)
the automobile(s) shall have been delivered and accepted and the Dealer will
comply with all of its obligations with respect thereto; (vii) each instrument
will evidence a valid reservation of title to, or first lien upon, the Motor
Vehicle and will have been so filed and recorded, if permitted or required by
law, as to be effective against all persons and to preserve the priority of such
lien; and (viii) such Motor Vehicle shall be insured for fire, theft, combined
additional coverage, and collision in a manner and with insurance carriers
satisfactory to MBCC. Upon breach of any representation or warranty made by a
Dealer with respect to a Motor Vehicle Contract, MBCC has a right of recourse
against such Dealer to require it to repurchase such contract. Generally, in
determining whether to exercise such right, MBCC considers the prior performance
of the Dealer and other business and commercial considerations. MBCC, as
Servicer, is obligated to enforce such rights with respect to Dealer Agreements
relating to the Receivables in accordance with such customary practices, and the
right to any proceeds received upon such enforcement will be conveyed to the
Trust under the Agreement. All terms of the Dealer Agreements which are material
to the Certificateholders are described in this Prospectus.
MBCC purchases Motor Vehicle Contracts relating to new Motor Vehicles
manufactured by Daimler-Benz and Motor Vehicle Contracts relating to used Motor
Vehicles manufactured by Daimler-Benz and other automobile manufacturers. MBCC
applies the same underwriting standards to its purchase of Motor Vehicle
Contracts whether or not the Motor Vehicle Contract relates to a Motor Vehicle
manufactured by Daimler-Benz. See "-- Underwriting" below.
UNDERWRITING
MBCC's National Car Office (NCO), which is located in Atlanta, Georgia,
oversees and coordinates the activities of the car financing operations
throughout the United States. The NCO maintains three regional offices that are
dedicated to supporting and servicing Dealers and customers throughout the
United States. Through these regional offices, which are located in Atlanta,
Georgia, Wilmington, Delaware and Portland, Oregon, MBCC purchases Motor Vehicle
Contracts from Dealers using consistent underwriting policies and procedures.
The Receivables were originated by Dealers in accordance with MBCC's
requirements under existing agreements with such Dealers and were purchased in
accordance with MBCC's underwriting standards which emphasize, among other
factors, the applicant's willingness and ability to repay according to the terms
of the Receivable.
Applications received from Dealers must be signed by the applicant and must
contain, among other information, the applicant's name, address, residential
status, source and amount of monthly income and the
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amount of monthly rent or mortgage payment. All applications are checked for
completeness and entered into MBCC's on-line credit applications system. In
conjunction with the entering of the application information, credit bureau
reports on the customer are collected and attached electronically to the
application form. Credit bureau reports utilized most often include TRW, Trans
Union and Equifax.
A preliminary review of the application is then performed and, if deemed
necessary, additional information is requested from the Dealer. When all
relevant information is obtained the credit analysis commences. At a minimum,
this analysis includes (i) a review of credit bureau reports, including the
timeliness of payment history and the amount of payments; (ii) budget analysis,
including such ratios as Motor Vehicle Contract payment to income and total debt
payment to total income; (iii) verification of the value of the Motor Vehicle if
the credit request is for a used vehicle; and (iv) analysis of employment
history, with particular attention to time spent with current employer. The
credit decision is based upon the information described above as well as the
applicant's credit score as obtained from a statistically derived credit scoring
process and other qualitative considerations. The final credit decision is made
based upon the degree of credit risk perceived and the amount of credit
requested.
After analysis the credit decision is communicated to the Dealer. If the
credit is accepted, and the applicant agrees to the terms of the contract, the
contract is funded.
SERVICING AND COLLECTION
MBCC measures delinquency by the number of days elapsed from the date a
payment is due under the Motor Vehicle Contract (the "Due Date"). MBCC considers
a payment to be past due or delinquent when the obligor fails to pay $50 or more
of a scheduled payment by the related Due Date. MBCC generally begins collection
activities with respect to delinquent Motor Vehicle Contracts on the 11th day
after the Due Date if payment has not been received. MBCC also uses an automated
system of monitoring delinquency, which categorizes delinquent accounts into
different priorities of collection activity, based on the level of delinquency
of each account.
MBCC's collectors are assigned to specific obligors and attempt to contact
the delinquent obligor by telephone or by letter based on the term of
delinquency and the history of the account. Repossession procedures typically
begin when a Motor Vehicle Contract becomes between 60 to 90 days delinquent.
Repossession is carried out pursuant to specific procedures adopted by MBCC.
Any deficiencies remaining after repossession and sale of the related Motor
Vehicle or after the full charge-off of the related Motor Vehicle Contract are
pursued by MBCC to the extent practicable and legally permitted. Obligors are
contacted, and when warranted by individual circumstances, repayment schedules
are established and monitored until the deficiencies are either paid in full or
become impractical to pursue.
PHYSICAL DAMAGE INSURANCE
MBCC's Motor Vehicle Contracts require obligors to maintain specific levels
of physical damage insurance during the term of the contract. At the time of
purchase, the Dealer and the obligor sign a statement indicating that the level
of insurance required by MBCC is in place as well as providing the name and
address of the insurance company. However, on an ongoing basis, MBCC does not
monitor the insurance coverage on the Motor Vehicles to ensure that such
coverage is maintained. In the event that the Servicer is notified that such
insurance coverage is not maintained, the Servicer has the right, but is not
obligated, to declare the contract to be in default. The Servicer is not
obligated, and does not intend, to purchase required insurance on any Financed
Vehicle and charge the Obligor for the cost of such insurance if the Obligor
fails to do so.
16
<PAGE> 18
DELINQUENCY AND LOSS EXPERIENCE
Set forth below is certain information concerning MBCC's entire portfolio
of Motor Vehicle Contracts, including Motor Vehicle Contracts previously sold
which MBCC continues to service. There is no assurance that the delinquency and
loss experience of the Receivables will be comparable to MBCC's experience shown
in the following tables.
DELINQUENCY EXPERIENCE OF THE PORTFOLIO(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AT AUGUST 31, AT DECEMBER 31,
------------------------ ------------------------------------------------
1997 1996 1996 1995 1994 1993
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Gross Balance
Outstanding at end of
period............... $1,660,555 $1,269,520 $1,402,642 $1,086,082 $961,463 $890,742
Gross Balance Past Due
as a Percentage of
Gross Balance
31 - 60 Days......... 2.22% 1.64% 2.20% 2.05% 1.62% 1.54%
61 - 90 Days......... 0.53% 0.19% 0.27% 0.22% 0.34% 0.33%
91 Days or More...... 0.53% 0.24% 0.28% 0.25% 0.23% 0.24%
---------- ---------- ---------- ---------- ---------- ----------
Total........ 3.28% 2.07% 2.75% 2.52% 2.19% 2.11%
==== ==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) The period of delinquency is based on the number of days payments are
contractually past due. Percentages are calculated by dividing the gross
remaining balance past due by the gross balances of the portfolio at the end
of the period.
NET CREDIT LOSS AND REPOSSESSION EXPERIENCE OF THE PORTFOLIO(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
AUGUST 31, YEARS ENDED DECEMBER 31,
------------------------ ----------------------------------------------
1997 1996 1996 1995 1994 1993
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Principal Amount Outstanding....... $1,338,351 $1,046,294 $1,148,024 $906,045 $820,045 $761,156
Average Principal Amount
Outstanding...................... $1,236,070 $ 953,647 $1,004,975 $849,791 $794,985 $704,337
Number of Contracts Outstanding.... 61,237 50,081 53,714 44,867 40,962 35,950
Average Number of Contracts
Outstanding...................... 57,070 46,528 48,275 43,092 38,618 32,725
Net Losses(2)...................... $ 5,700 $ 3,850 $ 6,815 $ 5,920 $ 4,599 $ 3,457
Number of Repossessions as a
Percent of the Average Number of
Contracts Outstanding(3)......... 1.61%(4) 1.36%(4) 1.43% 1.17% 1.15% 1.38%
Net Losses as a Percentage of
Principal Outstanding............ 0.64%(4) 0.55%(4) 0.59% 0.65% 0.56% 0.45%
Net Losses as a Percentage of
Average Principal Outstanding.... 0.69%(4) 0.61%(4) 0.68% 0.70% 0.58% 0.49%
</TABLE>
- ---------------
(1) All amounts and percentages except as indicated are based on the principal
balances of the Motor Vehicle Contracts net of unearned finance and other
charges. Averages are computed by taking a simple average of month-end
outstandings for each period presented.
(2) Net Losses are equal to the total aggregate principal balance (including
accrued interest up to the time of repossession) determined to be
uncollectible in the period plus all costs of repossession and disposal less
recoveries received.
(3) Number of Repossessions means the number of repossessed Motor Vehicles in a
given period.
(4) Annualized rate. The eight-month period ending August 31, 1997, is not
necessarily indicative of a full year's actual results.
17
<PAGE> 19
MBCC's retail loss experience is dependent upon receivables levels, the
number of repossessions, the amount outstanding at the time of repossession, and
the resale value of repossessed vehicles.
THE RECEIVABLES
SELECTION CRITERIA
The Receivables were purchased by MBCC from Dealers in the ordinary course
of business in accordance with MBCC's underwriting standards. The Receivables
were selected from the MBCC portfolio by several criteria, including the
following: (i) each Receivable was secured by a new or used Mercedes-Benz
automobile; (ii) each Receivable had an annual percentage rate of interest
("APR") of at least 7.25% and not more than 28.24%; (iii) each Receivable had a
remaining maturity, as of the Cutoff Date, of not more than 84 months, and an
original maturity of not more than 85 months; (iv) each Receivable had a
remaining balance (net of unearned precomputed finance charges, as of the Cutoff
Date) of not more than $155,043.08 and not less than $260.40 ; (v) no Receivable
was more than 30 days delinquent as of the Cutoff Date; (vi) no Financed Vehicle
had been repossessed as of the Cutoff Date; (vii) each Receivable was a Fully
Amortizing Receivable; (viii) no Obligor under a Receivable was, as of the
Cutoff Date, to the knowledge of MBCC the subject of a proceeding under the
Bankruptcy Code; (ix) each Receivable was originated in the United States by a
Dealer in connection with the retail sale of a Financed Vehicle in the ordinary
course of such Dealer's business; and (x) the Obligor under each Receivable had
a current billing address in the United States as of the Cutoff Date. The
Receivables are believed by MBCC to be representative of all the Motor Vehicle
Contracts in MBCC's portfolio that meet the above criteria.
CERTAIN CHARACTERISTICS
The composition, geographical distribution and distribution by APR of the
Receivables as of the Cutoff Date are set forth in the following tables:
COMPOSITION OF THE RECEIVABLES
<TABLE>
<S> <C>
Aggregate Principal Balance......................... $687,978,434.48
Number of Receivables............................... 28,354
Average Remaining Principal Balance................. $ 24,263.89
Average Original Amount Financed.................... $ 28,948.24
(Range)........................................... $1,667.46 to $157,166.23
Weighted Average APR................................ 9.95%
(Range)........................................... 7.25% to 28.24%
Weighted Average Original Term to Maturity.......... 56.13 months
(Range)........................................... 6 to 85 months
Weighted Average Remaining Term to Maturity......... 46.47 months
(Range)........................................... 1 to 84 months
</TABLE>
18
<PAGE> 20
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES(1)
<TABLE>
<CAPTION>
PERCENTAGE
OF AGGREGATE
PRINCIPAL
STATE BALANCE
- ------------------------------- ------------
<S> <C>
Arizona........................ 1.32%
California..................... 27.01
Connecticut.................... 1.87
Florida........................ 8.66
Georgia........................ 4.62
Illinois....................... 3.58
Maryland....................... 3.98
Massachusetts.................. 2.53
Michigan....................... 1.86
Missouri....................... 1.11
New Jersey..................... 5.35
<CAPTION>
PERCENTAGE
OF AGGREGATE
PRINCIPAL
STATE BALANCE
- ------------------------------- ------------
<S> <C>
New York....................... 6.57%
North Carolina................. 2.74
Pennsylvania................... 2.78
South Carolina................. 1.23
Tennessee...................... 1.67
Texas.......................... 9.09
Virginia....................... 2.36
All Other(2)................... 11.66
-----
Total(3).................. 100.00%
=====
</TABLE>
- ---------------
(1) Based on the addresses of the Obligors as reflected on the records of MBCC.
(2) No other state accounts for more than 1% of the initial outstanding Pool
Balance.
(3) Percentages may not add to 100.00% due to rounding.
DISTRIBUTION BY APR OF THE RECEIVABLES
<TABLE>
<CAPTION>
PERCENTAGE
OF
TOTAL AGGREGATE TOTAL AGGREGATE
NUMBER OF PRINCIPAL PRINCIPAL
APR RANGE (%) RECEIVABLES BALANCE BALANCE
- ------------------------------------------------- ----------- --------------- ---------------
<S> <C> <C> <C>
7.25 to 8.00................................... 2,657 $ 58,840,127.93 8.55%
8.01 to 9.00................................... 8,537 250,754,634.40 36.45
9.01 to 10.00................................... 6,458 166,556,798.91 24.21
10.01 to 11.00................................... 3,575 74,481,514.59 10.83
11.01 to 12.00................................... 2,347 46,915,599.54 6.82
12.01 to 13.00................................... 1,934 38,641,175.72 5.62
13.01 to 14.00................................... 1,126 20,524,514.92 2.98
14.01 to 15.00................................... 606 10,824,396.16 1.57
15.01 to 16.00................................... 261 4,722,223.22 0.69
16.01 to 17.00................................... 142 2,833,528.98 0.41
17.01 to 18.00................................... 123 2,457,990.06 0.36
18.01 to 19.00................................... 111 1,852,061.78 0.27
19.01 to 20.00................................... 268 4,916,658.93 0.71
20.01 to 21.00................................... 169 3,139,401.80 0.46
21.01 to 29.00................................... 40 517,807.54 0.08
------ ---------- -----
Total(1)............................... 28,354 $687,978,434.48 100.00%
====== ========== =====
</TABLE>
- ---------------
(1) Percentages may not add to 100.00% due to rounding.
Approximately 42.16% of the total number of Receivables included in the
Trust, and approximately 55.73% by principal balance of the Receivables included
in the Trust, relate to new Mercedes-Benz automobiles. Approximately 57.84% of
the total number of Receivables included in the Trust, and approximately 44.27%
by principal balance of the Receivables included in the Trust, relate to used
Mercedes-Benz automobiles.
19
<PAGE> 21
PAYMENTS ON THE RECEIVABLES
MBCC generally allocates payments received on all of the Receivables
according to the "actuarial" method. The actuarial method provides for
amortization of the loan over a series of fixed level monthly installments. Each
monthly installment is deemed to consist of an amount of interest equal to a
percentage of the stated APR of the loan multiplied by the scheduled principal
balance. The remainder of the scheduled payment is applied to principal.
Generally, no adjustment is made in the event of early or late payments,
although in the latter case the obligor is subject to a late payment penalty.
Notwithstanding that scheduled payments are allocated by MBCC on the
actuarial method, in the event of a Prepaid Receivable, the amount owing by the
Obligor will be determined by considering that previous payments on the
Receivable were allocated according to the "simple interest" method. Unlike the
actuarial method, the simple interest method treats each monthly payment as
including 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, the
simple interest method provides that 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, under the simple interest method, if an
obligor pays a fixed monthly installment before its scheduled due date, the
portion of the payment allocable to interest for the period since the preceding
payment was made will be less than it would have been had the payment been made
as scheduled, and the portion of the payment applied to reduce the unpaid
principal balance will be correspondingly greater. Conversely, under the simple
interest method, if an obligor pays a fixed monthly installment after its
scheduled due date, the portion of the payment allocable to interest for the
period since the preceding payment was made will be greater than it would have
been had the payment been made as scheduled, and the portion of the payment
applied to reduce the unpaid principal balance will be correspondingly less.
Many of the Receivables generally also provide that, in the event of a
Prepaid Receivable, if the amount owing by the Obligor determined by the "Rule
of 78's" would be more favorable to the Obligor, the amount owing may be
determined in accordance with such Rule.
Because of the method of determining the amount owing by the Obligor in the
event of a Prepaid Receivable, the amount received or receivable from the
Obligor upon such Receivable might not in certain cases be equal to the full
Principal Balance of the Receivable as reflected on the books of the Trust
together with a full month's interest on such Principal Balance at the APR of
the Receivable. Such cases would generally be limited to circumstances in which
the Obligor had been making payments of the monthly amount owed on the
Receivable earlier than the date scheduled for such monthly payment.
"Principal Balance" means, with respect to any Receivable as of any date,
the Amount Financed minus the sum of: (i) that portion of all scheduled payments
due on or prior to such date and, with respect to periods prior to the initial
Collection Period, the amount indicated in such Receivable as required to be
paid by the Obligor in each such period, whether or not paid, allocable to
principal in accordance with the actuarial method, and (ii) any prepayment in
full applied by the Servicer to reduce the unpaid principal balance of such
Receivable. The Principal Balance of any Receivable for any Collection Period
after the Collection Period in which it becomes a Defaulted Receivable will be
zero. "Pool Balance" means, as of any date, the aggregate outstanding Principal
Balance of the Receivables (excluding Defaulted Receivables) as of the close of
business on such date. The "Amount Financed" in respect of a Receivable means
the amount originally advanced under such Receivable toward the purchase price
of the related Financed Vehicle and related costs.
MBCC has agreed in the Shortfall Amount Agreement to pay to the Seller (and
the Seller has assigned its rights to such payment to the Trust), to the extent
there are insufficient funds in the Class A Reserve Fund, the amount (the
"Shortfall Amount") for each Receivable representing the excess of (i) the sum
of (x) the Principal Balance on the books of the Trust at the beginning of the
Collection Period in which the Receivable becomes a Prepaid Receivable plus (y)
15 day's interest on such Principal Balance at the APR of such Receivable over
(ii) the amount received from the related Obligor in connection with such
prepayment.
20
<PAGE> 22
In the event that the amount received from an Obligor on a Prepaid
Receivable exceeds the Principal Balance of such Receivable on the books of the
Trust at the beginning of the Collection Period in which such Receivable becomes
a Prepaid Receivable plus 15 day's interest on such Principal Balance at the APR
of such Receivable, the excess (the "Excess Amount") will be payable to MBCC and
will not be an asset of the Trust. To the extent that the funds on deposit in
the Class A Reserve Fund on any Distribution Date are less than the Specified
Class A Reserve Balance, the Servicer will be required to deposit investment
earnings on the amounts on deposit in the Collection Account and the Payahead
Account and MBCC will be required to deposit Excess Amounts in the Class A
Reserve Fund in an aggregate amount not greater than the excess of the aggregate
Shortfall Amount for the related Collection Period over the amount deposited
therein by MBCC with respect to such Shortfall Amounts on such Distribution
Date.
The Receivables are prepayable by the Obligors at any time. Prepayments may
also result from liquidations due to default, the receipt of proceeds from
physical damage or other insurance, repurchases by the Seller as a result of
certain uncured breaches of the warranties made by it in the Agreement with
respect to the Receivables, purchases by the Servicer as a result of certain
uncured breaches of the covenants made by it in the Agreement with respect to
the Receivables, or the Servicer exercising its option to purchase all of the
remaining Receivables. The rate of prepayments on the Receivables may be
influenced by a variety of economic, social, and other factors, including the
fact that if an Obligor sells or transfers a Financed Vehicle, the related
Receivable must be repaid in full.
MATURITY AND PREPAYMENT ASSUMPTIONS
Prepayments in full on Receivables will have the effect of reducing the
weighted average life of the Certificates, while delinquencies by Obligors under
the Receivables, as well as extensions on the Receivables, will have the effect
of increasing the weighted average life of the Certificates except to the extent
that the Servicer has made Advances with respect to such delinquent Receivables.
The Receivables may be prepaid at any time and mandatory prepayments of a
Receivable may result from, among other things, the sale, insured loss or other
disposition of the Financed Vehicle or the Receivable becoming a Defaulted
Receivable. MBCC does not generally maintain records of the historical
prepayment experience of its Motor Vehicle Contract portfolio. No assurance can
be given as to the rate of prepayments or as to whether there will be a
substantial amount of prepayments, nor can any assurance be given as to the
level or timing of prepayments, because prepayments are affected by numerous
social, economic and other factors. Certificateholders will bear all
reinvestment risk resulting from the rate of prepayment of the Receivables.
It is generally recognized by the consumer automobile finance industry that
the average actual maturity of a motor vehicle loan portfolio tends to be less
than the average stated contractual maturity. In general, based on industry
experience, in each month approximately 1.1% to 1.7% of the installment sale
contracts in motor vehicle portfolios similar to the Receivables are prepaid in
full. MBCC believes that its prepayment experience (including the Servicer's
experience with respect to Daimler-Benz Auto Grantor Trust 1993-A and
Daimler-Benz Auto Grantor Trust 1995-A) has been consistent with that generally
found in the consumer automobile finance industry. However, no assurance can be
given that prepayments on the Receivables will conform to historical experience
and no prediction can be made as to the actual prepayment experience on the
Receivables. 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 unless the Obligor prepays in full. Any reinvestment risk resulting
from the rate of prepayments of the Receivables and the distribution of such
prepayments to Class A Certificateholders will be borne entirely by the Class A
Certificateholders. In addition, early retirement of the Certificates may be
effected by the exercise of the option of the Servicer, or any successor to the
Servicer, to purchase all of the Receivables remaining in the Trust when the
Pool Balance is 10% or less of the initial Pool Balance. See "The
Certificates -- Termination."
21
<PAGE> 23
YIELD CONSIDERATIONS
Interest on the Receivables will be passed through to Class A
Certificateholders on each Distribution Date to the extent of the Pass-Through
Rate, applied to the Class A Principal Balance on the first day of the preceding
Collection Period (reduced by the amount of distributions of principal to be
made on the Distribution Date occurring in such Collection Period). In the event
of prepayments on Receivables, Class A Certificateholders will receive an amount
equal to thirty (30) days' interest on such Class A Principal Balance to the
extent that amounts, including amounts otherwise allocable to the Class B
Certificates or the Seller, are available from the Available Interest (after
reduction of the Servicing Fee), the Class A Reserve Fund and the Class B
Percentage of the Available Principal and are sufficient for such purpose. If
such amounts are insufficient, the amount of interest distributed to the Class A
Certificateholders may be less than that described above. See "The
Certificates -- Distributions on Certificates."
Although the Receivables have different APRs, disproportionate rates of
prepayments between Receivables with APRs greater than or less than a rate equal
to the sum of the Pass-Through Rate and the Servicing Rate will generally not
affect the yield to Certificateholders. However, higher rates of prepayments of
Receivables with higher APRs will decrease the amount available to cover
delinquencies and defaults on the Receivables and may decrease the amount
available to and from the Reserve Funds. See "The Certificates -- Distributions
on Certificates" and "-- Subordination of the Class B Certificates and Retained
Yield; Reserve Funds."
POOL FACTORS AND OTHER INFORMATION
The "Class A Pool Factor" will be a seven-digit decimal which the Servicer
will compute each month equal to the Class A Principal Balance as of the close
of business on the Distribution Date in that month, divided by the original
Class A Principal Balance. The Class A Pool Factor will be l.0000000 as of the
date of the initial issuance of the Certificates (the "Closing Date"), and
thereafter will decline to reflect reductions in the Class A Principal Balance.
A Class A Certificate Owner's portion of the Class A Principal Balance is
the product of (i) the original principal balance of the beneficial interest in
the Class A Certificates purchased by such Class A Certificate Owner and (ii)
the Class A Pool Factor.
Pursuant to the Agreement, the Class A Certificateholders will receive from
the Trustee monthly reports concerning the payments received on the Receivables,
the Pool Balance, the Class A Pool Factor and various other items of
information. Class A Certificateholders of record during any calendar year will
be furnished information by the Trustee for tax reporting purposes not later
than the latest date permitted by law. See "The Certificates -- Statements to
Class A Certificateholders." Such monthly reports and annual tax information may
be available to Certificate Owners in accordance with the regulations and
procedures of DTC. See "Reports to the Class A Certificateholders."
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the Class A
Certificates will be applied to the purchase of the Receivables from MBCC.
THE SELLER
Corporate Formation and Existence. The Seller, a wholly-owned subsidiary
of MBCC, was incorporated in the State of Delaware on May 24, 1994. The Seller
was organized for limited purposes, which include purchasing receivables from
MBCC 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 1201
North Market Street, Suite 1406, Wilmington, Delaware 19801. The telephone
number of such offices is (302) 426-1900.
22
<PAGE> 24
Bankruptcy Considerations. The Seller has taken steps in structuring the
transactions contemplated hereby that are intended to prevent any voluntary or
involuntary application for relief by MBCC under any Insolvency Law from
resulting in consolidation of the assets and liabilities of the Seller with
those of MBCC. These steps include the creation of the Seller as a separate,
limited-purpose subsidiary pursuant to a certificate of incorporation containing
certain limitations (including restrictions on the nature of the Seller's
business and a restriction on the Seller's ability to commence a voluntary case
or proceeding under any Insolvency Law without the prior unanimous affirmative
vote of all of its directors). However, there can be no assurance that the
activities of the Seller would not result in a court concluding that the assets
and liabilities of the Seller should be consolidated with those of MBCC in a
proceeding under any Insolvency Law.
The Seller will receive the opinion of its special counsel, Morgan, Lewis &
Bockius LLP ("Special Counsel"), to the effect that, subject to certain facts,
assumptions and qualifications, it would not be a proper exercise by a court of
its equitable discretion to disregard the separate corporate existence of the
Seller and to require the consolidation of the assets and liabilities of the
Seller with the assets and liabilities of MBCC in the event of the application
of the federal bankruptcy laws to MBCC. Among other things, it will be assumed
by Special Counsel that the Seller will follow certain procedures in the conduct
of its affairs, including maintaining records and books of account separate from
those of MBCC, refraining from commingling its assets with those of MBCC and
refraining from holding itself out as having agreed to pay, or being liable for,
the debts of MBCC. The Seller intends to follow and has represented to such
counsel that it will follow these and other procedures related to maintaining
its separate corporate identity. However, there can be no assurance that a court
would not conclude that the assets and liabilities of the Seller should be
consolidated with those of MBCC. If a court were to reach such a conclusion, 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, then delays in
distributions on the Certificates could occur or reductions in the amounts of
such distributions could result.
"True Sale" Considerations. It is intended by MBCC and the Seller that the
transfer of the Receivables by MBCC to the Seller under the Purchase Agreement
constitute a "true sale" of the Receivables to the Seller. If the transfer
constitutes such a "true sale," the Receivables and the proceeds thereof would
not be part of MBCC's bankruptcy estate under Section 541 of the Bankruptcy Code
should MBCC become the subject of a bankruptcy case subsequent to the transfer
of the Receivables to the Seller.
The Seller will receive the opinion of its Special Counsel to the effect
that, subject to certain facts, assumptions and qualifications, in the event
MBCC were to become the subject of a voluntary or involuntary case under the
Bankruptcy Code subsequent to the transfer of the Receivables to the Seller, the
transfer of the Receivables by MBCC to the Seller pursuant to the Purchase
Agreement would be characterized as a "true sale" of the Receivables from MBCC
to the Seller and the Receivables and the proceeds thereof would not form part
of MBCC's bankruptcy estate pursuant to Section 541 of the Bankruptcy Code.
In Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th Cir. 1993),
cert. denied, 114 S. Ct. 554 (1993), the United States Court of Appeals for the
10th Circuit suggested that even where a transfer of accounts from a seller to a
buyer constitutes a "true sale," the accounts would nevertheless constitute
property of the seller's bankruptcy estate in a bankruptcy of the seller. If
MBCC or the Seller were to become subject to a bankruptcy proceeding and a court
were to follow the Octagon court's reasoning, Certificateholders might
experience delays in payment or possibly losses on their investment in the
Certificates. As part of the opinion of Special Counsel described above, such
counsel will advise the Seller that the reasoning of the Octagon case appears to
be inconsistent with precedent and the UCC.
THE SERVICER
MBCC was incorporated in the State of Delaware on April 14, 1981 and is a
wholly-owned subsidiary of DBNA. DBNA, based in New York City, was established
as a holding company in 1982 to achieve synergies and financial benefits through
the consolidation of certain Daimler-Benz activities in North America.
MBCC and its subsidiaries comprise the captive finance company for the
Daimler-Benz group in North America. The Company provides a variety of
comprehensive financial services to dealers and customers of
23
<PAGE> 25
products manufactured or distributed by Daimler-Benz companies in North America.
MBCC and certain of its subsidiaries primarily provide retail and wholesale
financing, leasing, and other financial services to authorized Mercedes-Benz
automobile and Freightliner commercial vehicle dealers and their customers.
Additionally, a wholly-owned subsidiary provides financing for both Daimler-Benz
and other manufacturers' products. The headquarters of MBCC are located at 201
Merritt 7, Suite 700, Norwalk, Connecticut, 06856-5425. Its telephone number is
(203) 847-4500.
DBNA is a wholly-owned subsidiary of Daimler-Benz AG, which is
headquartered in Stuttgart, Germany. Daimler-Benz AG and its consolidated
subsidiaries (collectively "Daimler-Benz") is the largest industrial group in
Germany and a leading provider of traffic and transportation products and
services worldwide. Daimler-Benz business units include passenger cars and
commercial vehicles (Mercedes-Benz), aircraft, space systems, defense and civil
systems, propulsion systems (Daimler-Benz Aerospace), IT services and mobile
communications services, trading, insurance brokerage, and financial services to
primarily support the sale of Daimler-Benz products (Daimler-Benz
InterServices -- debis), as well as rail systems (Adtranz) and microelectronics
(Temic). For the year ended December 31, 1996, Daimler-Benz AG reported
consolidated revenues of U.S. $69 billion and net income of U.S. $844 million,
according to United States generally accepted accounting principles.
THE CERTIFICATES
The Class A Certificates will be issued pursuant to the Agreement. Copies
of the Agreement may be obtained by the Class A Certificateholders upon written
request to the Trustee and may be available to Certificate Owners in accordance
with the regulations and procedures of DTC. The following summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, the Agreement.
GENERAL
The Class A Certificates will be offered for purchase in denominations of
$1,000 and integral multiples thereof and will be represented initially by
physical certificates registered in the name of Cede & Co. as nominee of DTC. No
Class A Certificate Owner will be entitled to receive a definitive certificate
representing such person's interest in the Trust except in the event that
Definitive Certificates are issued under the limited circumstances described
herein. Unless and until Definitive Certificates are issued, all references to
actions by Class A Certificateholders will refer to actions taken by DTC upon
instructions from its Direct Participants and all references to distributions,
notices, reports, and statements to Class A Certificateholders will refer to
distributions, notices, reports, and statements to DTC which distributions,
notices, reports and statements may be available to Certificate Owners in
accordance with the regulations and procedures of DTC. See "Reports to the Class
A Certificateholders," "-- Book Entry Registration" and "-- Definitive
Certificates."
In general, it is intended that Class A Certificateholders receive, on each
Distribution Date, the Class A Percentage of the aggregate scheduled payments of
principal (including Advances) and the aggregate prepayments in full of
principal on the Receivables made during or with respect to the preceding
calendar month (the "Collection Period"), plus an amount equal to 30 days'
interest at the Pass-Through Rate on the Class A Principal Balance. See
"-- Distributions on Certificates." Principal and interest to be distributed to
Class A Certificateholders may be provided by payments made by or on behalf of
Obligors (to the extent available for payment to the Class A
Certificateholders), the payment of Purchase Amounts by the Seller or the
Servicer, Advances made by the Servicer, draws from the Class A Reserve Fund,
payments under the Shortfall Amount Agreement, proceeds from physical damage
insurance, net liquidation proceeds upon the repossession and sale of Financed
Vehicles or net recoveries of deficiencies from Obligors after the repossession
and sale of Financed Vehicles. See "-- Sale and Assignment of the Receivables"
and "-- Servicing Procedures." In the event that, on any Distribution Date,
funds available from the foregoing sources are insufficient to provide for such
distributions, any shortfall will be payable on the subsequent Distribution
Date, to the extent funds are available therefor.
The Certificates will evidence interests in the Trust created pursuant to
the Agreement. The Class A Certificates will evidence in the aggregate an
undivided ownership interest (the "Class A Percentage") of
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approximately 95.5% of the initial Principal Balance of, and a portion of the
interest accruing under, the Receivables held by the Trust and the Class B
Certificates will evidence in the aggregate an undivided ownership interest (the
"Class B Percentage") of approximately 4.5% of the initial Principal Balance of,
and a portion of the interest accruing under, the Receivables held by the Trust.
The Class B Certificates, which are not being offered hereby, will be retained
initially by the Seller, but the Seller may, at its discretion, subsequently
sell all or part of the Class B Certificates.
BOOK ENTRY REGISTRATION
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York UCC, and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Direct Participants") and to
facilitate the clearance and settlement of securities transactions between
Direct Participants through electronic book-entries, thereby eliminating the
need for physical movement of certificates. Direct Participants include
securities brokers and dealers, banks, 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
Direct Participant, either directly or indirectly ("Indirect Participants").
Class A Certificate Owners that are not Direct Participants or Indirect
Participants but desire to purchase, sell, or otherwise transfer ownership of,
or other interests in, Class A Certificates may do so only through Direct
Participants or Indirect Participants. In addition, Class A Certificate Owners
will receive all distributions from the Trustee through Direct Participants or
Indirect Participants. DTC will forward such payments to its Direct Participants
which thereafter will forward them to Indirect Participants or Class A
Certificate Owners. It is anticipated that the only "Class A Certificateholder"
will be Cede & Co. as nominee of DTC. Class A Certificate Owners will not be
recognized by the Trustee as Class A Certificateholders, as such term is used in
the Agreement, and Class A Certificate Owners will be permitted to exercise the
rights of Class A Certificateholders only indirectly through DTC and its Direct
Participants and Indirect Participants.
Under the rules, regulations, and procedures creating and affecting DTC and
its operations (the "Rules"), DTC will be required to make book-entry transfers
of Class A Certificates among Direct Participants and to receive and transmit
payments with respect to the Class A Certificates. Direct Participants and
Indirect Participants with which Class A Certificate Owners have accounts with
respect to the Class A Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Class A Certificate Owners.
Because DTC can only act on behalf of Direct Participants, who in turn act
on behalf of Indirect Participants, and on behalf of certain banks, trust
companies, and other persons approved by it, the ability of a Class A
Certificate Owner to pledge Class A Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Class A Certificates, may be limited due to the absence of physical certificates
for such Certificates.
DTC has advised the Seller that it will take any action permitted to be
taken by a Class A Certificateholder under the Agreement only at the direction
of one or more Direct Participants to whose accounts with DTC the Class A
Certificates are credited. Additionally, DTC has advised the Seller that to the
extent that the Agreement requires that any action may be taken only by holders
of Class A Certificates representing specified percentages of the aggregate
outstanding principal balance thereof, DTC will take such action only at the
direction of and on behalf of Direct Participants whose holdings include
undivided interests that satisfy such specified percentages. DTC may take
conflicting actions with respect to other undivided interests to the extent that
such actions are taken on behalf of Direct Participants whose holdings include
such undivided interests.
None of the Seller, the Servicer or the Trustee will have any liability for
any aspect of the records relating to or payment made on account of beneficial
ownership interests of the Class A Certificates held by Cede &
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Co., as nominee of DTC, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
DEFINITIVE CERTIFICATES
The Class A Certificates will be issued in fully registered, certificated
form ("Definitive Certificates") to Class A Certificate Owners or their
nominees, rather than to DTC or its nominee, only if (i) the Seller advises the
Trustee in writing that DTC is no longer willing or able to discharge properly
its responsibilities as depository with respect to the Class A Certificates and
the Trustee or the Seller is unable to locate a qualified successor, (ii) the
Seller, at its option, elects to terminate the book-entry system through DTC, or
(iii) after the occurrence of an Event of Servicing Termination, with respect to
the Class A Certificates, Class A Certificate Owners representing in the
aggregate not less than a majority of the aggregate outstanding Class A
Principal Balance advise the Trustee and DTC through Direct Participants in
writing, and DTC will so notify the Trustee, that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the Class
A Certificate Owners' best interests.
Upon the occurrence of any event described in the immediately preceding
paragraph, the Trustee is required to notify all Direct Participants through DTC
of the availability of Definitive Certificates. Upon surrender by DTC of the
physical certificates representing the Class A Certificates and receipt by the
Trustee of instructions from DTC for re-registration, the Trustee will reissue
the Class A Certificates as Definitive Certificates, and thereafter the Trustee
will recognize the registered holders of such Definitive Certificates as Class A
Certificateholders under the Agreement ("Holders").
Distributions of principal of, and interest on, the Definitive Certificates
will be made by the Trustee directly to Holders in accordance with the
procedures set forth herein and in the Agreement. Distributions of principal and
interest on each Distribution Date will be made to Holders in whose names the
Definitive Certificates were registered at the close of business on the
preceding Record Date. Such distributions will be made by check mailed to the
address of such Holder as it appears on the register maintained by the Trustee.
The final payment on any Definitive Certificate, however, will be made only upon
presentation and surrender of such Definitive Certificate at the office or
agency specified in the notice of final distribution mailed to Holders.
Definitive Certificates will be transferable and exchangeable at the
offices of the Trustee. No service charge will be imposed for any registration
of transfer or exchange, but the Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
SALE AND ASSIGNMENT OF THE RECEIVABLES
At or prior to the time of issuance of the Class A Certificates, pursuant
to the Purchase Agreement MBCC will sell and assign to the Seller, without
recourse, its entire interest in the Receivables (other than payments with
respect to Excess Amounts), including its security interests in the Financed
Vehicles. At the time of issuance of the Class A Certificates, the Seller will
sell and assign to the Trustee, without recourse, the Seller's entire interest
in the Receivables, including its security interests in the Financed Vehicles.
Each Receivable conveyed by the Seller to the Trust will be identified in a
schedule incorporated by reference into the Agreement. The Trustee will,
concurrently with such sale and assignment, execute, authenticate and deliver
the Certificates to the Seller in exchange for the Receivables. The Seller will
sell the Class A Certificates to the Underwriters. See "Underwriting."
In the Purchase Agreement, MBCC will represent and warrant to the Seller,
and in the Agreement, the Seller will represent and warrant to the Trustee,
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 obtain physical damage insurance in accordance with
MBCC's normal requirements; (iii) at the date of issuance of the Certificates,
the Receivables are free and clear of all security interests, liens, charges,
and encumbrances and no setoffs, defenses, or counterclaims against it have been
asserted or, to the best of MBCC's or the Seller's knowledge, as relevant,
threatened (other than the interest of the Trustee); (iv) to the best of MBCC's
or the Seller's knowledge, as relevant, at the date of issuance of the
Certificates, each of the
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Receivables is or will be secured by a first perfected security interest in the
Financed Vehicle in favor of MBCC; and (v) each Receivable, at the time it was
originated, complied, and at the date of issuance of the Certificates complies,
in all material respects, with applicable federal and state laws, including
consumer credit, truth in lending, equal credit opportunity, and disclosure
laws.
The only recourse the Trustee and the Certificateholders will have against
the Seller for breach or failure to be true of any of the foregoing
representations and warranties with respect to a Receivable will be to require
the Seller to repurchase the Receivable. See "-- Mandatory Repurchase of
Receivables."
To assure uniform quality in servicing the Receivables and to reduce
administrative costs, the Trustee will appoint the Servicer as initial custodian
of the Receivables. The Servicer, in its capacity as custodian, will hold the
Receivables and all electronic entries, documents, instruments and writings
relating thereto (each, a "Receivable File"), either directly or through
subservicers, on behalf of the Trustee for the benefit of Certificateholders.
The Receivables will not be stamped or otherwise marked to reflect the sale and
assignment of the Receivables to the Trust and will not be segregated from other
receivables held by the Servicer or the subservicers. However, UCC financing
statements reflecting the sale and assignment of the Receivables by MBCC to the
Seller and by the Seller to the Trustee will be filed, and the Servicer's
accounting records and computer systems will be marked to reflect such sale and
assignment. See "Formation of the Trust" and "Certain Legal Aspects of the
Receivables."
MANDATORY REPURCHASE OF RECEIVABLES
In the event of a breach or failure to be true of any representation or
warranty with respect to the Receivables described in "-- Sale and Assignment of
the Receivables," which breach or failure materially and adversely affects the
interests of the Trust and the Certificateholders in a Receivable, the Seller,
unless such breach or failure has been cured by the last day of the Collection
Period which includes the 60th day after the date on which the Seller becomes
aware of, or receives written notice from the Trustee or the Servicer of, such
breach or failure, will be required to repurchase the Receivable from the
Trustee, and MBCC will be required to repurchase such Receivable from the
Seller, in each case as of the first day of the subsequent Collection Period,
for the Purchase Amount. The Purchase Amount is payable on the Distribution Date
in such subsequent Collection Period. The obligation of the Seller to repurchase
a Receivable is not conditioned on performance by MBCC of its obligation to
repurchase a Receivable. The repurchase obligation will constitute the sole
remedy available to the Certificateholders or the Trustee against the Seller for
any such uncured breach or failure. No Class A Certificateholder will have any
right under the Agreement to institute any proceeding with respect to the
Agreement, unless such holder has given the Trustee written notice of default
and unless the holders of Certificates evidencing not less than a majority of
the sum of the Class A Principal Balance and Class B Principal Balance
(excluding any Certificates held by the Seller or any Affiliate (as defined in
the Agreement) of the Seller) have made a written request to the Trustee to
institute such proceeding in its own name as Trustee thereunder and have offered
to the Trustee reasonable indemnity, and the Trustee for 30 days has neglected
or refused to institute any such proceeding.
The "Purchase Amount" of any Receivable means, with respect to any
Distribution Date and a Purchased Receivable on such Distribution Date, an
amount equal to the sum of (a) the outstanding principal balance of such
Receivable as of the first day of the Collection Period preceding the Collection
Period in which such Distribution Date occurs, and (b) the amount of accrued
interest on such principal balance at the related APR from the date a payment
was last made by or on behalf of the Obligor through the due date for payment of
such Receivable in the Collection Period preceding the Collection Period in
which such Distribution Date occurs, and after giving effect to the receipt of
monies collected on such Receivable in such preceding Collection Period and any
Payahead Balance with respect to such Receivable.
ACCOUNTS
The Trustee will establish two accounts in the name of the Trustee on
behalf of the Trust and the Certificateholders, the first into which certain
payments made on or with respect to the Receivables will be deposited (the
"Collection Account") and the second from which all distributions with respect
to the
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Receivables and the Certificates will be made (the "Certificate Account"). The
Seller will establish the Class A Reserve Fund as an account with the Class A
Agent, on behalf of the Trust and the Class A Certificateholders and will
establish the Class B Reserve Fund as an account with the Class B Agent on
behalf of the Trust and the Class B Certificateholders. The Collection Account,
the Certificate Account, the Reserve Funds and the Payahead Account (as
described below) are collectively referred to as the "Accounts." The Reserve
Funds and the Payahead Account will not be assets of the Trust.
Each Account will be maintained at all times in an Eligible Deposit
Account. "Eligible Deposit Account" means either (a) a segregated account with
an Eligible Bank or (b) a segregated trust account with the 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 trust powers and acting as trustee
for funds deposited in such account, so long as the long-term unsecured debt of
such depository institution will have a credit rating from each Rating Agency in
one of its generic rating categories which signifies investment grade (which,
for Moody's, is Baa3 or higher, and for S&P, is BBB- or higher).
"Eligible Bank" means any depository institution with trust powers (which
may be the Trustee), organized under the laws of the United States of America or
any one of the states thereof or the District of Columbia, which has a net worth
in excess of $50,000,000, the deposits of which are insured to the full extent
permitted by law by the Federal Deposit Insurance Corporation (the "FDIC"),
which is subject to supervision and examination by federal or state banking
authorities and which has (i) a rating of P-1 from Moody's and A-1+ from S&P
with respect to short-term deposit obligations, or (ii) if such institution has
issued long-term unsecured debt obligations, a rating of A2 or higher from
Moody's and AAA from S&P with respect to long-term unsecured debt obligations.
Funds in the Accounts will be invested as provided in the Agreement in
Eligible Investments. "Eligible Investments" are generally limited to
investments acceptable to the Rating Agencies as being consistent with the
rating of the Class A Certificates. Eligible Investments are limited to
obligations or securities that mature not later than the next Distribution Date.
However, to the extent permitted by each Rating Agency, funds on deposit in the
Reserve Funds may be invested in securities that will not mature prior to the
next Distribution Date with respect to the Certificates and will not be sold to
meet any shortfalls. Investment earnings on amounts on deposit in the Collection
Account will be deposited in the Class A Reserve Fund in an amount not to exceed
the Shortfall Amount with respect to such Distribution Date to the extent that
the funds on deposit therein are less than the Specified Class A Reserve
Balance. Any earnings (net of losses and investment expenses) on amounts on
deposit in the other Accounts, except as otherwise specified herein, will be
paid to the Seller, the Class B Certificateholders, MBCC or the Servicer, as
specified in the Agreement, and will not be available to Class A
Certificateholders.
The Trustee will also establish an account (the "Payahead Account"), on
behalf of the Obligors, in which payments by or on behalf of an Obligor on a
Receivable received during each Collection Period and not due in such Collection
Period (other than prepayments in full) or not overdue from a prior Collection
Period ("Payaheads") and not permitted to be held by the Servicer will be
deposited until such time as the payment falls due, whereupon the payment will
be transferred to the Certificate Account on the Distribution Date in the
Collection Period following the scheduled payment due date. Such amounts will be
permitted to be held by the Servicer if either (i) each Monthly Remittance
Condition is satisfied or (ii) a Monthly Remittance Condition is not satisfied
but such failure will not affect the rating of the Class A Certificates by the
Rating Agencies. Until such time as payments are transferred from the Payahead
Account to the Certificate Account, they will not constitute collected interest
or collected principal, and will not be available for distribution to the
Certificateholders. Investment earnings on amounts on deposit in the Payahead
Account with respect to any Collection Period will be deposited in the Class A
Reserve Fund in an amount not to exceed the Shortfall Amount with respect to
such Distribution Date to the extent that the funds on deposit therein are less
than the Specified Class A Reserve Balance on the related Distribution Date.
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COLLECTIONS ON THE RECEIVABLES
The Servicer will deposit all payments on Receivables, including
Liquidation Proceeds and Recoveries, but excluding (i) Payaheads (which will be
deposited in the Payahead Account or held by the Servicer), (ii) Excess Amounts
(which will be paid to MBCC), and (iii) certain amounts payable to the Servicer
under the Agreement, including late fees and charges on the Receivables (which
are not required to be deposited in the Collection Account), into the Collection
Account not later than two business days after receipt thereof unless:
(x) (i) MBCC is the Servicer, (ii) the obligation of the Servicer to make
required remittances under the Agreement on each Distribution Date is
unconditionally guaranteed by DBNA pursuant to a guaranty agreement in favor of
the Trustee (the "Servicing Guaranty Agreement") and DBNA will have a rating of
at least P-1 from Moody's and at least A-1 from S&P with respect to its
short-term obligations and (iii) no Event of Servicing Termination shall have
occurred (each, a "Monthly Remittance Condition"), or
(y) the failure to satisfy a Monthly Remittance Condition will not affect
the rating of the Class A Certificates as confirmed in writing by the Rating
Agencies, in which case such amounts will be paid into the Collection Account on
the Distribution Date.
The Seller or the Servicer will also deposit into the Collection Account on
the Distribution Date the Purchase Amount of each Receivable to be repurchased
or purchased by it pursuant to an obligation that arose during the preceding
Collection Period. The Servicer will be entitled to withhold, or to be
reimbursed from amounts otherwise payable into, or on deposit in, the Collection
Account with respect to a Collection Period, the amounts previously deposited in
the Collection Account but later determined to have resulted from mistaken
deposits or postings or checks returned unpaid for insufficient funds or other
reasons.
In those cases where a subservicer is servicing a Receivable pursuant to a
subservicing agreement, as described below, the Servicer will cause the
subservicer to remit to the relevant Account the amounts collected by such
subservicer on or with respect to the Receivables being serviced by it, within
the period after receipt, and subject to the limitations, described above.
As an administrative convenience, so long as no Event of Servicing
Termination has occurred, the Servicer will be permitted to make deposits of
amounts for a Collection Period net of distributions to be made to it with
respect to such Collection Period. The Servicer will account to the Trustee and
to the Certificateholders, however, as if all such deposits and distributions
were made individually.
SERVICING PROCEDURES
The Servicer will make reasonable efforts to collect all payments due with
respect to the Receivables in a manner consistent with the Agreement and will
exercise the degree of skill and care that the Servicer exercises with respect
to similar motor vehicle receivables owned and/or serviced by the Servicer.
Although it has no current plans to do so, the Servicer may enter into
subservicing agreements with Eligible Servicers for the subservicing of
Receivables. Any such subservicing agreements will contain provisions identical
to those contained in the Agreement and may contain such other provisions as are
not inconsistent with the terms of the Agreement. The Servicer may terminate a
subservicing agreement and either service the related Receivables directly or
enter into a new subservicing agreement for such Receivables with another
subservicer, provided that any such subservicer is an Eligible Servicer.
Notwithstanding any subservicing agreement, the Servicer will remain obligated
and liable to the Trustee and the Certificateholders for servicing and
administering the Receivables in accordance with the Agreement as if the
Servicer alone were servicing the Receivables. References herein to actions
required or permitted to be taken, or restrictions on actions to be taken, by
the Servicer include such actions by a subservicer. References herein to amounts
received by the Servicer include amounts received by a subservicer.
"Eligible Servicer" means (a) any subsidiary of DBNA or (b) any person
which, at the time of its appointment as Servicer or as a subservicer, (i) has a
net worth of not less than $50,000,000, (ii) is servicing a portfolio of motor
vehicle installment contracts and/or motor vehicle loans, (iii) is legally
qualified, and has
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the capacity, to service the Receivables, (iv) has demonstrated the ability to
service a portfolio of motor vehicle installment contracts and/or motor vehicle
loans similar to the Receivables professionally and competently in accordance
with standards of skill and care that are consistent with prudent industry
standards, and (v) is qualified and entitled to use pursuant to a license or
other written agreement, and agrees to maintain the confidentiality of, the
software which the Servicer or any subservicer uses in connection with
performing its duties and responsibilities under the Agreement or the related
subservicing agreement or obtains rights to use, or develops at its own expense,
software which is adequate to perform its duties and responsibilities under the
Agreement or the related subservicing agreement.
The Servicer will covenant in the Agreement that: (A) the Financed Vehicle
securing each Receivable will not be released from the security interest granted
by the Receivable in whole or in part, except as contemplated by the Agreement;
(B) the Servicer will not (nor will it permit any subservicer to) impair in any
material respect, the rights of the Certificateholders in the Receivables,
certain rights under the Dealer Agreements related to breach of representations
and warranties of Dealers with respect to the Receivables, or any physical
damage or other insurance policy; and (C) the Servicer will not increase or
decrease the number or amount of payments or the amount financed under a
Receivable, or extend, rewrite or otherwise modify the payment terms of a
Receivable; provided, however, that the Servicer may extend any Receivable for
credit-related reasons that would be acceptable to the Servicer with respect to
Motor Vehicle Contracts serviced by it for its own account in accordance with
its customary standards if the cumulative extensions with respect to any
Receivable will not cause the term of such Receivable to extend beyond the last
day of the Collection Period immediately preceding the Final Scheduled
Distribution Date (the "Final Scheduled Maturity Date"); provided, further, that
such extensions will not be made if the extension would modify the terms of such
Receivable in such a manner so as to constitute a cancellation of such
Receivable and the creation of a new Receivable for federal income tax purposes.
In the event of a breach by the Servicer of any covenant described above
that materially and adversely affects the interest of the Trust and the
Certificateholders in a Receivable, unless such breach has been cured by the
last day of the Collection Period which includes the 60th day after the date on
which the Servicer becomes aware of, or receives written notice of, such breach,
the Servicer will be required to purchase as of the first day of the subsequent
Collection Period the Receivable from the Trustee for the Purchase Amount which
will be paid on the Distribution Date in such subsequent Collection Period or
earlier under certain circumstances; provided, however, that the Servicer will
be required to purchase any Receivable from the Trustee which has been extended
beyond the Final Scheduled Maturity Date. The purchase obligation will
constitute the sole remedy available to the Certificateholders or the Trust
against the Servicer for any such uncured breach, except with respect to certain
indemnities of the Servicer under the Agreement related thereto.
The Agreement will also require the Servicer to charge-off a Receivable as
a Defaulted Receivable in accordance with its customary standards and to follow
such of its normal collection practices and procedures as it deems necessary or
advisable, and that are consistent with the standard of care required by the
Agreement, to realize upon any Receivable. The Servicer may sell each Financed
Vehicle securing such Receivable at judicial sale or take any other action
permitted by applicable law. See "Certain Legal Aspects of the Receivables." The
net proceeds of such realization will be deposited in the Collection Account at
the time and in the manner described above.
The Agreement will provide that the Servicer will defend and indemnify the
Trust and the Certificateholders against any and all costs, expenses, losses,
damages, claims, and liabilities, including reasonable fees and expenses of
counsel and expenses of litigation, arising out of or resulting from the use,
ownership, or operation by the Servicer or any affiliate thereof of any Financed
Vehicle or in respect of any action taken by the Servicer with respect to any
Receivable or Financed Vehicle; provided that the Servicer will have no
obligation to indemnify the Trust and the Certificateholders against any credit
losses on any Receivable serviced by the Servicer in accordance with the
requirements of the Agreement. The Servicer's obligations to indemnify the Trust
and the Certificateholders for the Servicer's actions or omissions will survive
the removal of the Servicer, but will not apply to any action or omission of a
successor Servicer.
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ADVANCES
To the extent the collection of interest and principal on a Receivable with
respect to a Collection Period is less than the respective scheduled payment, an
Advance will be made by the Servicer. The amount of an Advance will be equal to
that portion of the scheduled payment of a Receivable that was not timely made
by the Obligor. On or before the applicable Distribution Date, the Servicer will
cause the Advance to be deposited in the Collection Account. The Servicer will
recoup the Advance from subsequent payments by or on behalf of the respective
Obligor or from insurance or Liquidation Proceeds with respect to the
Receivable, or, upon the determination that reimbursement from the preceding
sources is unlikely, will recoup the Advance from any collections made on other
Receivables.
The Servicer will not be required to make any Advance with respect to a
Receivable to the extent that it does not expect to recoup the Advance from
subsequent payments on such Receivable. In determining whether to make an
Advance in connection with a delinquent Receivable, the Servicer will consider
certain factors with respect to the delinquent Receivable. Among such factors
will be the payment history for such Receivable, the financial condition of the
Obligor, and the Obligor's reason for the delinquency. The Servicer's decision
not to make an Advance in connection with a delinquent Receivable would
generally coincide with the charge-off of such Receivable.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee for each
Collection Period, in an amount equal to one-twelfth of the product of the
Servicing Rate and the Pool Balance as of the first day of such Collection
Period. If it is acceptable to each Rating Agency without a reduction in the
rating of the Class A Certificates, the Servicing Fee in respect of a Collection
Period (together with any portion of the Servicing Fee that remains unpaid from
prior Collection Periods) at the option of the Servicer may be paid at or as
soon as possible after the beginning of such Collection Period out of the first
collections of interest received on the Receivables for such Collection Period.
The Servicing Rate will equal 1.00% per annum. The Servicer will also be
entitled to receive as additional servicing compensation, to the extent not
required to be deposited in the Class A Reserve Fund, earnings on amounts on
deposit in the Collection Account and the Payahead Account, and all late payment
and prepayment fees actually collected and other administrative fees and
expenses paid with respect to the Receivables. The Servicing Fee will be paid
out of collections from the Receivables, prior to distributions to the
Certificateholders.
The Servicing Fee and the additional servicing compensation will compensate
the Servicer for performing the functions of a third-party servicer of Motor
Vehicle Contracts and for administering the Receivables on behalf of the
Certificateholders, including collecting payments, accounting for collections,
furnishing monthly and annual statements to the Trustee with respect to
distributions, responding to inquiries of Obligors, investigating delinquencies,
and providing collection and repossession services in cases of Obligor default.
In addition, the Servicing Fee and the additional servicing compensation will
provide further compensation for certain taxes, accounting fees, outside auditor
fees, data processing costs, and other costs incurred by the Servicer under the
Agreement in connection with administering and servicing the Receivables.
SHORTFALL AMOUNT AGREEMENT
Payments of Shortfall Amounts will be made from funds on deposit in the
Class A Reserve Fund or, as described below, from amounts to be paid by MBCC
pursuant to the Shortfall Amount Agreement. Amounts withdrawn from the Class A
Reserve Fund or paid by MBCC with respect to Shortfall Amounts will be applied
as Available Principal or Available Interest, as applicable.
Simultaneously with the sale and assignment of the Receivables by MBCC to
the Seller, MBCC and the Seller will enter into the Shortfall Amount Agreement.
The Shortfall Amount Agreement will provide for the payment by MBCC into the
Certificate Account on each Distribution Date of the excess of the Shortfall
Amounts, if any, with respect to such Distribution Date over the amount
available for the payment of such amounts in the Class A Reserve Fund. The
Seller will assign the Shortfall Amount Agreement to the Trust.
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DISTRIBUTIONS ON CERTIFICATES
Determination of Distributable Amounts. On or before the earlier of (a)
the sixteenth calendar day of each month and (b) the third business day
preceding the Distribution Date in each month (the "Determination Date"), the
Servicer will inform the Trustee of the amount of aggregate collections on the
Receivables; the aggregate Advances to be made by the Servicer; the aggregate
Purchase Amount of Receivables to be repurchased by the Seller or to be
purchased by the Servicer; the aggregate Shortfall Amounts; all with respect to
the preceding Collection Period.
The Servicer will determine on each Determination Date the Total Available
Amount, the Available Interest, the Available Principal, the Shortfall Amount,
the Class A Distributable Amount, the Class B Distributable Amount and the
Retained Yield and, based on the Total Available Amount and the other
distributions to be made on such Distribution Date, as described below, the
Servicer will determine the amount to be distributed to Certificateholders of
each class and to the Seller as Retained Yield.
On or before each Distribution Date the Trustee, acting in accordance with
the instructions of the Servicer, will transfer the Total Available Amount from
the Collection Account to the Certificate Account. On or before each
Distribution Date, the Servicer will cause such amounts to be transferred from
the Payahead Balance to the Certificate Account as constitute scheduled payments
due during the related Collection Period or as may be applied to full
prepayments on the Receivables. On or before each Distribution Date, the
Servicer will cause Advances relating to such Distribution Date to be deposited
in the Collection Account.
The "Total Available Amount" for a Distribution Date (being the funds
available for distribution to Certificateholders of each class with respect to
such Distribution Date in accordance with the priorities described below) will
be the sum of the Available Interest and Available Principal.
The "Available Interest" for a Distribution Date will be the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all collections on the Receivables (including amounts withdrawn from
the Payahead Balances but excluding amounts added to the Payahead Balances)
allocable to interest due on such Receivables during such Collection Period;
(ii) all proceeds of the liquidation of Defaulted Receivables which become
Defaulted Receivables during such Collection Period, net of expenses incurred by
the Servicer in connection with such liquidation and any amounts required by law
to be remitted to the Obligor on each such Defaulted Receivable ("Liquidation
Proceeds") to the extent allocable to interest due thereon in accordance with
the Servicer's customary servicing procedures and all proceeds of Defaulted
Receivables which became Defaulted Receivables during prior Collection Periods,
net of expenses incurred by the Servicer in connection with such liquidation and
any amounts required by law to be remitted to the Obligor on such Defaulted
Receivable ("Recoveries"); (iii) all Advances made by the Servicer of interest
due on Receivables; (iv) the Purchase Amount of each Receivable that was
repurchased by the Seller or purchased by the Servicer under an obligation which
arose during such Collection Period (each such Receivable a "Purchased
Receivable"), to the extent allocable to accrued interest thereon; and (v) the
portion of Shortfall Amounts, if any, allocable to interest received by the
Trustee. A "Defaulted Receivable" is a Receivable which by its terms is in
default and as to which the Servicer has determined, in accordance with its
customary standards, policies and procedures, that payment in full is unlikely
or the Servicer has repossessed and disposed of the Financed Vehicle.
The "Available Principal" for a Distribution Date will be the sum of the
following amounts with respect to the preceding Collection Period: (i) that
portion of all collections on the Receivables (including amounts withdrawn from
the Payahead Balances but excluding amounts added to the Payahead Balances)
allocable to principal; (ii) all Liquidation Proceeds allocable to principal in
accordance with the Servicer's customary servicing procedures; (iii) all
Advances made by the Servicer of principal due on the Receivables; (iv) to the
extent allocable to principal, the Purchase Amount received with respect to each
Purchased Receivable; and (v) the portion of the Shortfall Amounts, if any,
allocable to principal received by the Trustee.
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The Available Interest and the Available Principal on any Distribution Date
will exclude the following:
(i) amounts received on Receivables (including Purchase Amounts) to
the extent that unreimbursed Advances have previously been made by the
Servicer;
(ii) Liquidation Proceeds and Recoveries with respect to a particular
Receivable to the extent of any unreimbursed Advances; and
(iii) the amount received upon the prepayment in full of a Receivable
to the extent that such amount is an Excess Amount.
The "Payahead Balance" on a Receivable means the sum, on the last day of a
Collection Period, of all Payaheads made by or on behalf of the Obligor with
respect to such Receivable (including any amount paid by or on behalf of the
Obligor prior to the Cutoff Date that is due on or after the Cutoff Date and was
not used to reduce the principal balance of such Receivable), as reduced by
applications of previous Payaheads with respect to such Receivable.
Calculation of Distributable Amounts. The "Class A Distributable Amount"
with respect to a Distribution Date will be an amount equal to the sum of:
(i) the "Class A Principal," consisting of the Class A Percentage of:
(a) the principal portion of all scheduled payments due on
Receivables during the preceding Collection Period;
(b) the Principal Balance of each Receivable that became a Prepaid
Receivable during the preceding Collection Period (except to the extent
included in (a) above or (d) below);
(c) the Principal Balance of each Receivable that was purchased by
the Servicer or repurchased by the Seller, in each case, under an
obligation that arose during the preceding Collection Period (except to
the extent included in (a) above); and
(d) the Principal Balance of each Receivable which became a
Defaulted Receivable during the preceding Collection Period (except to
the extent included in (a) or (b) above);
(ii) the "Class A Interest," consisting of an amount equal to 30 days'
interest at the Pass-Through Rate, on the Class A Principal Balance on the
first day of the related Collection Period (less principal distributions to
be made on the Distribution Date in such Collection Period);
(iii) the Class A Interest Carryover Shortfall as of the close of
business on the preceding Distribution Date; plus
(iv) the Class A Principal Carryover Shortfall as of the close of
business on the preceding Distribution Date.
In addition to the items specified in clauses (i)(a) through (d) above, on
the Final Scheduled Distribution Date, Class A Principal will include the lesser
of (x) the Class A Percentage of any payments of principal due and remaining
unpaid on each Receivable in the Trust as of the last day of the preceding
Collection Period (except to the extent covered by Advances), and (y) the
portion of such amount necessary (after giving effect to the other amounts
described above to be distributed to the Class A Certificateholders on such
Distribution Date and allocable to principal) to reduce the Class A Principal
Balance to zero.
"Class A Interest Carryover Shortfall" means, as of the close of business
on any Distribution Date, the excess, if any, of the Class A Interest for such
Distribution Date plus any outstanding Class A Interest Carryover Shortfall from
the preceding Distribution Date over the amount of interest that the Class A
Certificateholders actually received on such current Distribution Date (plus
thirty (30) days' interest on the amount of such excess, to the extent permitted
by law, at the Pass-Through Rate).
"Class A Principal Carryover Shortfall" means, as of the close of business
on any Distribution Date, the excess of Class A Principal plus any outstanding
Class A Principal Carryover Shortfall from the preceding
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Distribution Date over the amount of principal that the Class A
Certificateholders actually received on such current Distribution Date.
The "Class A Principal Balance" will equal, initially, the Original Class A
Principal Balance and, thereafter, the Original Class A Principal Balance,
reduced by all amounts previously distributed to Class A Certificateholders and
allocable to principal.
The "Class B Distributable Amount" with respect to a Distribution Date will
be an amount equal to the sum of:
(i) the "Class B Principal," consisting of the Class B Percentage of
the amounts set forth under (i)(a) through (i)(d) above with respect to the
Class A Principal;
(ii) the "Class B Interest," consisting of an amount equal to 30 days'
interest at the Pass-Through Rate, on the Class B Principal Balance on the
first day of the related Collection Period (less principal distributions to
be made on the Distribution Date in such Collection Period);
(iii) the Class B Interest Carryover Shortfall as of the close of
business on the preceding Distribution Date; plus
(iv) the Class B Principal Carryover Shortfall as of the close of
business on the preceding Distribution Date.
In addition, on the Final Scheduled Distribution Date the "Class B
Principal" will include the lesser of (x) the Class B Percentage of any payments
of principal due and remaining unpaid on each Receivable in the Trust as of the
Final Scheduled Maturity Date (except to the extent previously Advanced) and (y)
the portion of such amount that is necessary (after giving effect to the other
amounts to be distributed to the Class B Certificateholders on such Distribution
Date and allocable to principal) to reduce the Class B Principal Balance to
zero, and, in the case of clauses (x) and (y) in this paragraph, remaining after
any required distribution of the amount described in clause (x) or (y) of the
paragraph above describing the inclusion of certain items in the definition of
"Class A Principal" with respect to the Final Scheduled Distribution Date.
"Class B Interest Carryover Shortfall" means, as of the close of business
on any Distribution Date, the excess, if any, of the Class B Interest for such
Distribution Date plus any outstanding Class B Interest Carryover Shortfall from
the preceding Distribution Date over the amount of interest that the Class B
Certificateholders actually received on such current Distribution Date (plus
thirty (30) days' interest on the amount of such excess, to the extent permitted
by law, at the Pass-Through Rate).
"Class B Principal Carryover Shortfall" means, as of the close of business
on any Distribution Date, the excess of Class B Principal plus any outstanding
Class B Principal Carryover Shortfall from the preceding Distribution Date over
the amount of principal that the Class B Certificateholders actually received on
such current Distribution Date.
The "Class B Principal Balance" will equal, initially, $30,959,029.55 (the
"Original Class B Principal Balance") and, thereafter, the Original Class B
Principal Balance, reduced by all amounts previously distributed to Class B
Certificateholders and allocable to principal.
Payment of Distributable Amounts. Prior to each Distribution Date, the
Servicer will calculate the amount to be distributed to each class of
Certificateholders. On each Distribution Date, the Trustee will distribute to
Certificateholders the following amounts from the sources specified in the
following order of priority:
(i) to the Class A Certificateholders, an amount equal to the Class A
Interest and any outstanding Class A Interest Carryover Shortfall as of the
close of the preceding Distribution Date, such amount to be paid (a) first,
from the Class A Percentage of Available Interest (after reducing Available
Interest by payment of the Servicing Fee, including any unpaid Servicing
Fees with respect to prior Collection Periods); (b) second, from the
amounts available in the Class A Reserve Fund; (c) third, from the Class B
Percentage of Available Interest (after reducing Available Interest by
payment of the Servicing
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Fee, including any unpaid Servicing Fees with respect to prior Collection
Periods); and (d) fourth, from the Class B Percentage of Available
Principal;
(ii) to the Class B Certificateholders, an amount equal to the Class B
Interest and any outstanding Class B Interest Carryover Shortfall as of the
close of the preceding Distribution Date, such amount to be paid (a) first,
from Available Interest (after payment to the Class A Certificateholders of
the amount set forth above in clause (i)), and (b) second, from the amounts
available in the Class B Reserve Fund;
(iii) to the Class A Certificateholders, an amount equal to Class A
Principal and any outstanding Class A Principal Carryover Shortfall as of
the close of the preceding Distribution Date, such amount to be paid (a)
first, from the Class A Percentage of Available Principal; (b) second, from
Available Interest remaining after the payment of the amounts set forth in
clauses (i) and (ii); (c) third, from amounts available in the Class A
Reserve Fund; and (d) fourth, from the Class B Percentage of the Available
Principal; and
(iv) to the Class B Certificateholders, an amount equal to Class B
Principal and any outstanding Class B Principal Carryover Shortfall as of
the close of the preceding Distribution Date, such amount to be paid (a)
first, from the Class B Percentage of Available Principal, (b) second, from
the Available Interest remaining after the payment of the amounts set forth
in clauses (i), (ii), and (iii); and (c) third, from amounts available in
the Class B Reserve Fund.
Any portion of Available Interest remaining after distributions are made as
set forth above to the Class A Certificateholders and the Class B
Certificateholders will be (i) first, deposited in the Class A Reserve Fund to
the extent that the amount on deposit therein (after giving effect to any
deposit thereto by MBCC or the Servicer with respect to Shortfall Amounts) is
less than the Specified Class A Reserve Balance; (ii) second, deposited in the
Class B Reserve Fund to the extent that the amount on deposit therein is less
than the Specified Class B Reserve Balance and (iii) third, distributed to the
Seller in payment of Retained Yield.
SUBORDINATION OF THE CLASS B CERTIFICATES AND RETAINED YIELD; RESERVE FUNDS
The rights of the Class B Certificateholders to receive distributions with
respect to the Receivables will be subordinated, to the extent described above
and in the Agreement, to the rights of the Class A Certificateholders in the
event of defaults and delinquencies on the Receivables. Thus, the Class B
Certificateholders generally will not receive distributions of interest on a
Distribution Date (other than from the Class B Reserve Fund) unless the Class A
Certificateholders receive the full amount of interest due to them on such
Distribution Date (including from amounts on deposit in the Class A Reserve
Fund), and the Class B Certificateholders will not receive distributions of
principal on a Distribution Date (other than from the Class B Reserve Fund)
unless the Class A Certificateholders receive the full amount of interest and
principal due to them on such Distribution Date (including from amounts on
deposit in the Class A Reserve Fund). Distributions of interest on the Class B
Certificates will not be subordinate to distributions of principal on the Class
A Certificates.
In addition, the rights of the Seller to receive the Retained Yield will be
subordinate to the rights of the Class A and Class B Certificateholders to
receive amounts due to each of them. Accordingly, the Seller will not receive
distributions attributable to the Retained Yield on any Distribution Date unless
all interest and principal due to the Class A and Class B Certificateholders
have been paid and amounts on deposit in each Reserve Fund at least equal the
Specified Class A Reserve Balance or the Specified Class B Reserve Balance, as
the case may be.
In the event of losses and delinquencies on the Receivables, the protection
afforded to the Class A Certificateholders will be effected by the application
of Available Interest and Available Principal for each Distribution Date in the
priority specified under "-- Distributions on Certificates -- Payment of
Distributable Amounts." In addition, the Class A Certificateholders will have
the benefit of the Class A Reserve Fund.
The Class A Reserve Fund will not be a part of or otherwise includible in
the Trust and will be an Eligible Deposit Account initially held by the Class A
Agent. On each Distribution Date, if the amounts on deposit in the Class A
Reserve Fund are less than the Specified Class A Reserve Balance, the Trustee
will, after
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payment of amounts required to be distributed to the Class A Certificateholders
and Class B Certificateholders and the payment of the Servicing Fee due with
respect to the related Collection Period (including any unpaid Servicing Fees
with respect to prior Collection Periods) withdraw from the Collection Account
and deposit in the Class A Reserve Fund the amount remaining in the Collection
Account that would otherwise be distributed to the Seller as Retained Yield, or
such lesser portion thereof as is sufficient to restore the amount in the Class
A Reserve Fund to such Specified Class A Reserve Balance. If the amount on
deposit in the Class A Reserve Fund on such Distribution Date (after giving
effect to all deposits or withdrawals therefrom on such Distribution Date) is
greater than the Specified Class A Reserve Balance for such Distribution Date,
the Class A Agent will release such excess amount from the Class A Reserve Fund
and (i) deposit such excess amount in the Class B Reserve Fund to the extent
that the amount on deposit therein is less than the Specified Class B Reserve
Balance, and (ii) distribute any remaining excess to the Seller. Upon any
deposit of amounts in the Class B Reserve Fund or distribution to the Seller,
the Class A Certificateholders will have no rights in, or claims to, such
amounts.
Amounts held from time to time in the Class A Reserve Fund will continue to
be held solely for the benefit of the Class A Certificateholders and amounts
held in the Class B Reserve Fund will be held solely for the benefit of the
Class B Certificateholders. Amounts held in the Class B Reserve Fund will not be
available to cover shortfalls in amounts due to the Class A Certificateholders.
Amounts on deposit from time to time in the Class A Reserve Fund and Class B
Reserve Fund will be invested, as provided in the Agreement, in Eligible
Investments maturing on or prior to the next succeeding Distribution Date;
provided, however, that to the extent permitted by the Rating Agencies, amounts
on deposit in the Class A Reserve Fund and the Class B Reserve Fund may be
invested in Eligible Investments that mature later than the next Distribution
Date. The Seller will be entitled to receive all investment earnings on amounts
in the Reserve Funds. Investment earnings on amounts in the Reserve Funds will
not be available for distribution to the Certificateholders or otherwise subject
to any claims or rights of the Class A Certificateholders or the Class B
Certificateholders.
The ability of the Class A Reserve Fund to maintain the Specified Class A
Reserve Balance at any time after the Closing Date will be affected by the
delinquency, credit loss and repossession and prepayment experience of the
Receivables and, therefore, cannot be accurately predicted.
The subordination of the Class B Certificates and the creation of the Class
A Reserve Fund are intended to enhance the likelihood of receipt by Class A
Certificateholders of the full amount of principal and interest on the
Receivables due to them and to decrease the likelihood that the Class A
Certificateholders will experience losses. However, in certain circumstances,
the Class A Reserve Fund could be depleted and shortfalls could result.
STATEMENTS TO CLASS A CERTIFICATEHOLDERS
On each Distribution Date, the Trustee will include with the distribution
to each Class A Certificateholder a statement prepared by the Servicer setting
forth the following information for the preceding Collection Period:
(i) the amount of the distribution allocable to principal;
(ii) the amount of the distribution allocable to interest;
(iii) the amount of the Servicing Fee and additional servicing
compensation from administrative fees and charges (including late fees and
charges) collected on the Receivables paid to the Servicer with respect to
such Collection Period;
(iv) the Class A Principal Balance, the Class A Pool Factor, the Class
B Pool Factor, if applicable, and the Class B Principal Balance as of such
Distribution Date, after giving effect to payments allocated to principal
reported under clause (i) above;
(v) the Pool Balance as of the close of business on the last day of
such Collection Period;
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(vi) the amount of the Class A Interest Carryover Shortfall, Class B
Interest Carryover Shortfall, Class A Principal Carryover Shortfall and
Class B Principal Carryover Shortfall, if any, for such Distribution Date;
(vii) the amount, if any, otherwise distributable to the Seller that
is distributed to Class A Certificateholders and Class B Certificateholders
on such Distribution Date;
(viii) the balance of the Reserve Funds on such Distribution Date,
after giving effect to changes therein on such Distribution Date; and
(ix) the aggregate Purchase Amount of Receivables repurchased by the
Seller or purchased by the Servicer.
Each amount set forth pursuant to clauses (i), (ii), (iii) and (vii) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
denomination of the Certificates.
Within a reasonable period of time after the end of each calendar year, but
not later than the latest date permitted by law, the Trustee will furnish to
each person who at any time during such calendar year was a Certificateholder a
statement prepared by the Servicer containing the sum of the amounts described
in clauses (i), (ii), (iii) and (vii) above and such other information as is
available to the Servicer as the Servicer deems necessary or desirable to enable
Certificateholders to prepare their federal income tax returns. See "Certain
Federal Income Tax Consequences."
Such monthly reports and annual tax statements may be available to
Certificate Owners in accordance with the regulations and procedures of DTC. See
"Reports to the Class A Certificateholders."
EVIDENCE AS TO COMPLIANCE
The Agreement will provide that a firm of independent certified public
accountants, who may provide audit and other services to the Servicer, will
furnish to the Trustee, on or before March 31 of each year, beginning March 31,
1999, a report of examination as to compliance by the Servicer during the 12
months (or longer period in the case of the first such report) ended the
preceding December 31 with certain standards relating to the servicing of the
Receivables.
The Agreement will also provide for delivery to the Trustee, on or before
March 31 of each year, beginning March 31, 1999, of a certificate signed by an
officer of the Servicer stating that the Servicer has fulfilled its obligations
under the Agreement throughout the 12 months (or longer period in the case of
the first such certificate) ended the preceding December 31 or, if there has
been a default in the fulfillment of any such obligation, describing each such
default.
Certificateholders and Certificate Owners may obtain copies of such reports
of examination as to compliance by the Servicer and copies of such certificates
signed by an officer of the Servicer by written request addressed to the
Trustee. See "-- The Trustee."
CERTAIN MATTERS REGARDING THE SERVICER
The Agreement will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except upon a determination that
the Servicer's performance of such obligations or duties is no longer
permissible under applicable law.
Any corporation or other entity into which the Servicer may be merged or
consolidated, or that may result from any merger, conversion, or consolidation
to which the Servicer is a party, or any entity that may succeed by purchase and
assumption to all or substantially all of the business of the Servicer, where
the Servicer is not the surviving entity and where such corporation is an
Eligible Servicer and assumes the obligations of the Servicer under the
Agreement, will be the successor to the Servicer under the Agreement.
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INDEMNIFICATION AND LIMITS ON LIABILITY
The Agreement will provide that the Servicer will be liable only to the
extent of the obligations specifically undertaken by it under the Agreement and
will have no other obligations or liabilities thereunder.
The Agreement will also provide that the Servicer will be under no
obligation to appear in, prosecute, or defend any legal action that is not
incidental to the Servicer's servicing responsibilities under the Agreement and
that, in its opinion, may cause it to incur any expense or liability. The
Servicer may, however, at its expense undertake any reasonable action that it
may deem necessary or desirable in respect of the Agreement and the rights and
duties of the parties thereto and the interests of the Certificateholders
thereunder.
EVENTS OF SERVICING TERMINATION
The following events will constitute "Events of Servicing Termination"
under the Agreement: (i) any failure by the Servicer to deliver to the Trustee
on or before the Determination Date the certificate required to be delivered
pursuant to the Agreement with respect to the preceding Collection Period (which
failure continues beyond the earlier of three business days from the date such
Servicer's certificate was due to be delivered and the Distribution Date next
succeeding such Collection Period), (ii) any failure by the Servicer (or, for so
long as the Servicer is an Affiliate (as defined in the Agreement) of the
Seller, the Seller) to deliver to the Collection Account or any other Account
any required payment or deposit including, so long as MBCC is the Servicer,
pursuant to the Shortfall Amount Agreement, which failure continues unremedied
for five business days following the due date, (iii) any failure by the Servicer
(or, for so long as the Servicer is an Affiliate (as defined in the Agreement)
of the Seller, the Seller) duly to observe or perform in any material respect
any other covenant or agreement in the Certificates and the Agreement, which
failure materially and adversely affects the rights of Certificateholders and
which continues unremedied for 90 days after written notice of such failure is
given to the Servicer by the Trustee or to the Servicer and the Trustee by the
Certificateholders evidencing not less than 25% of the aggregate Class A
Principal Balance and the Class B Principal Balance (excluding any Certificates
held by the Seller or any Affiliate (as defined in the Agreement) of the
Seller), (iv) certain events of bankruptcy, receivership, insolvency,
readjustment of debt, marshalling of assets and liabilities, or similar
proceedings and certain actions by the Servicer indicating its insolvency or
reorganization pursuant to bankruptcy, receivership, conservatorship,
insolvency, or similar proceedings, and (v) failure of the Servicer to be an
Eligible Servicer. The Certificateholders evidencing not less than a majority of
the Class A Principal Balance and the Class B Principal Balance (excluding any
Certificates held by the Seller or any Affiliate (as defined in the Agreement)
of the Seller) may waive any Event of Servicing Termination except an event
resulting from the failure to make any required deposit or payment to any
Account.
The Trustee will have no obligation to notify Class A Certificateholders of
any event which, with lapse of time to cure, would become an Event of Servicing
Termination, until after the expiration of any applicable cure period.
RIGHTS UPON AN EVENT OF SERVICING TERMINATION
As long as an Event of Servicing Termination remains unremedied, the
Trustee or the Certificateholders evidencing not less than a majority of the
Class A Principal Balance and the Class B Principal Balance (excluding any
Certificates held by the Seller or any Affiliate (as defined in the Agreement)
of the Seller) may terminate the Servicer's rights and obligations under the
Agreement, whereupon the Trustee or a servicer appointed by the Trustee will
succeed to all the responsibilities, duties, and liabilities of the Servicer
under the Agreement. Thereafter, the successor Servicer will be entitled to the
compensation payable to the Servicer. In the event that the Trustee is unwilling
or legally unable so to act, the Trustee may appoint, or petition a court of
competent jurisdiction for the appointment of, an Eligible Servicer to act as
successor to the outgoing Servicer under the Agreement. In no event may the
servicing compensation to be paid to such successor be greater than the
servicing compensation payable to the Servicer under the Agreement. In the event
of the bankruptcy of the Servicer, the bankruptcy trustee or the Servicer, as
debtor in possession, may have the power to prevent a termination of the
Servicer's rights and obligations under the Agreement.
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AMENDMENT
The Agreement may be amended by the Seller, the Servicer, MBCC, the
Payahead Agent, the Class A Agent, the Class B Agent and the Trustee, without
the consent of the Certificateholders, (i) to cure any ambiguity, to correct or
supplement any provision therein which may be inconsistent with any other
provision therein, to add, change or eliminate any other provision with respect
to matters or questions arising under the Agreement which are not inconsistent
with the provisions of the Agreement; provided that such action will not, in the
opinion of counsel (which may be internal counsel to the Seller or the Servicer)
satisfactory to the Trustee, materially and adversely affect the interest of any
Certificateholder, and (ii) to provide for the transfer of the Class B
Certificates; provided that certain conditions specified in the Agreement are
satisfied prior to such transfer, including written confirmation from each
Rating Agency that such transfer will not result in the qualification,
downgrading or withdrawal of the then current rating assigned to the Class A
Certificates by such Rating Agency, and that such amendment will not change the
timing of, or the amount of, any distributions that the Class A
Certificateholders are entitled to receive under the Agreement; and provided,
further, that an opinion of independent outside counsel will be delivered to the
Trustee to the effect that such amendment will not adversely affect the status
of the Trust as a grantor trust for federal or applicable state tax purposes.
The Agreement also may be amended by the Seller, the Servicer and the
Trustee with the consent of the Class A Certificateholders and Class B
Certificateholders, each voting as a class, evidencing not less than a majority
of the Class A Principal Balance and Class B Principal Balance, respectively,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Agreement or modifying the rights of
the Certificateholders. However, no such amendment may (i) increase or reduce in
any manner the amount of, or accelerate or delay the timing of, or change the
allocation or priority of, collections of payments on Receivables or
distributions that are required to be made on any Certificate, without the
consent of all adversely affected Certificateholders, (ii) reduce the aforesaid
percentage of the Class A Principal Balance or Class B Principal Balance, which
is required to consent to any such amendment, without the consent of all
Certificateholders of the relevant class, or (iii) adversely affect the rating
of the Class A Certificates by the Rating Agencies without the consent of Class
A Certificateholders evidencing not less than 66 2/3% of the Class A Principal
Balance, except that, the interest evidenced by any Class A Certificate or
interest in the Retained Yield registered in the name of the Seller, the
Servicer, or any person actually known to an authorized officer of the Trustee
to be an Affiliate (as defined in the Agreement) of the Seller or the Servicer,
will not be taken into account in determining whether the requisite percentage
necessary to effect any such consent will have been obtained.
LIST OF CERTIFICATEHOLDERS
If Definitive Certificates have been issued, the Trustee, upon written
request of the Certificateholders evidencing not less than 25% of the aggregate
Class A Principal Balance, will afford such Certificateholders access during
business hours to the current list of Certificateholders for purposes of
communicating with other Class A Certificateholders with respect to their rights
under the Agreement. Prior to such time, neither the Trustee nor DTC will have
an obligation to maintain, or provide Class A Certificate Owners with access to,
a list of Class A Certificate Owners.
The Agreement will not provide for holding any annual or other meetings of
Certificateholders.
TERMINATION
The obligations of the Seller, the Servicer, and the Trustee under the
Agreement will, except with respect to certain reporting requirements, terminate
upon the earliest of (i) the Distribution Date next succeeding the Servicer's
purchase of the Receivables, as described below, (ii) payment to
Certificateholders of all amounts required to be paid to them pursuant to the
Agreement and (iii) the Distribution Date next succeeding the month which is six
months after the maturity or other liquidation of the last Receivable and the
disposition of any amounts received upon liquidation of any property remaining
in the Trust in accordance with the terms and priorities set forth in the
Agreement.
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In order to avoid excessive administrative expense, the Servicer will be
permitted, at its option, in the event that the Pool Balance as of the last day
of a Collection Period has declined to 10% or less of the initial Pool Balance,
to purchase from the Trust, on the Distribution Date occurring in any subsequent
Collection Period which follows the Collection Period in which appropriate
notice is given to Certificateholders (with effect from the first day of the
Collection Period in which such Distribution Date occurs), all remaining
Receivables in the Trust at a purchase price equal to the aggregate of the
Purchase Amounts thereof. The exercise of this right will effect an early
retirement of the Certificates.
The Trustee will give written notice of termination of the Trust to each
Certificateholder of record. The final distribution to any Certificateholder
will be made only upon surrender and cancellation of such holder's Certificate
(whether a Definitive Certificate or the physical certificate representing the
Certificates) at the office or agency of the Trustee specified in the notice of
termination. Any funds remaining in the Trust, after the Trustee has taken
certain measures to locate a Certificateholder and such measures have failed,
will be distributed to the Servicer or as otherwise provided in the Agreement.
THE TRUSTEE
Citibank, N.A. will be the Trustee. The Trustee, in its individual capacity
or otherwise, and any of its affiliates, may hold Certificates in their own
names or as pledgee. In addition, for the purpose of meeting the legal
requirements of certain jurisdictions, the Servicer and the Trustee, acting
jointly (or in some instances, the Trustee, acting alone), will 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 Trustee by the Agreement will be conferred or
imposed upon the Trustee and such co-trustee or separate trustee jointly, or, in
any jurisdiction where the Trustee is incompetent or unqualified to perform
certain acts, singly upon such co-trustee or separate trustee who will exercise
and perform such rights, powers, duties, and obligations solely at the direction
of the Trustee.
The Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to serve, becomes legally unable to
act, is adjudged insolvent, or is placed in receivership or similar proceedings.
In such circumstances, the Servicer will be obligated to appoint a successor
trustee. Any resignation or removal of the Trustee and appointment of a
successor trustee will not become effective until acceptance of the appointment
by the successor trustee.
The Agreement will provide that the Servicer will pay or cause to be paid
the Trustee's fees. The Agreement will also provide that the Trustee will be
entitled to indemnification by the Servicer for, and will be held harmless
against, certain loss, liability, or expense incurred by the Trustee not
resulting from the Trustee's own willful misfeasance, bad faith, or negligence.
Indemnification will be unavailable to the Trustee to the extent that any such
loss, liability, or expense results from a breach of any of the Trustee's
representations or warranties set forth in the Agreement, and for any tax, other
than those for which the Seller or the Servicer is required to indemnify the
Trustee.
The Trustee's Corporate Trust Office is located at 120 Wall Street, New
York, NY 10043. The Seller, the Servicer, and their respective affiliates may
have other banking relationships with the Trustee and its affiliates in the
ordinary course of their business.
In addition, Citibank, N.A. will act as Class A Agent, Class B Agent and
Payahead Agent.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of the Agreement, any Dealer Agreement, the Certificates (other than the
execution and authentication of the Certificates), the Receivables, or any
related documents, and will not be accountable for the use or application by the
Seller or the Servicer of any funds paid to the Seller or the Servicer in
respect of the Certificates or the Receivables or for any monies prior to the
time such monies are deposited into the Collection Account. The Trustee will be
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accountable for any monies deposited into any Account only if the Trustee is
maintaining such account. The Trustee will not independently verify the
Receivables.
If no Event of Servicing Termination has occurred and is continuing, the
Trustee will be required to perform only those duties specifically required of
it under the Agreement. Generally, those duties are limited to the receipt of
the various certificates, reports, or other instruments required to be furnished
by the Servicer to the Trustee under the Agreement, in which case the Trustee
will only be required to examine such instruments to determine whether they
conform to the requirements of the Agreement.
The Trustee will be under no obligation to exercise any of the rights or
powers vested in it by the Agreement or to institute, conduct, or defend any
litigation thereunder or in relation thereto at the request, order, or direction
of any of the Certificateholders, unless such Certificateholders have offered
the Trustee reasonable security or indemnity against the costs, expenses, and
liabilities which may be incurred therein or thereby. No Class A
Certificateholder will have any right under the Agreement to institute any
proceeding with respect to the Agreement, unless such Class A Certificateholder
has given the Trustee written notice of default and unless the holders of
Certificates evidencing not less than a majority of the Class A Principal
Balance and the Class B Principal Balance (excluding any Certificates held by
the Seller or any Affiliate (as defined in the Agreement) of the Seller) have
made a written request to the Trustee to institute such proceeding in its own
name as Trustee thereunder and have offered to the Trustee reasonable indemnity,
and the Trustee for 30 days has neglected or refused to institute any such
proceeding.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
RIGHTS IN THE RECEIVABLES
The Receivables are "chattel paper" as defined in the UCC in effect in each
relevant state. Pursuant to the UCC, for most purposes, a sale of chattel paper
is treated in a manner similar to a transaction creating a security interest in
chattel paper. MBCC and the Seller will cause financing statements to be filed
with the appropriate governmental authorities to perfect the interest of the
Seller and the Trust, as the case may be, in the Receivables.
Pursuant to the Agreement, the Servicer will hold the Receivables, either
directly or through subservicers, as custodian for the Trustee following the
sale and assignment of the Receivables to the Trust. The Seller will take such
action as is required to perfect the rights of the Trustee in the Receivables.
The Receivables will not be segregated, stamped, or otherwise marked, to
indicate that they have been sold to the Trust. If, through inadvertence or
otherwise, another party purchases (or takes a security interest in) the
Receivables for new value in the ordinary course of business and takes
possession of the Receivables without actual knowledge of the Trust's interest,
the purchaser (or secured party) will acquire an interest in the Receivables
superior to the interest of the Trust.
Under the Agreement, the Servicer will be obligated from time to time to
take such actions as are necessary to protect and perfect the Trust's interest
in the Receivables and their proceeds.
SECURITY INTERESTS IN THE FINANCED VEHICLES
Generally, retail installment contracts such as the Receivables evidence
the credit sale of automobiles by dealers to obligors; the contracts also
constitute personal property security agreements and include grants of security
interests in the vehicles under the UCC. Perfection of security interests in
motor vehicles is generally governed by the motor vehicle registration laws of
the state in which the vehicle is located. In most states in which the
Receivables have been originated, a security interest in the vehicle is
perfected by notation of the secured party's lien on the vehicle's certificate
of ownership or title.
MBCC's practice is to take such action as is required in order to perfect
its security interest in a Motor Vehicle under the laws of the jurisdiction in
which the Motor Vehicle is registered. If MBCC, because of clerical error or
otherwise, has failed to take such action with respect to a Financed Vehicle, it
will not have a perfected security interest in the Financed Vehicle and its
security interest may be subordinate to the interests
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of, among others, subsequent purchasers of the Financed Vehicle that give value
without notice of MBCC's security interest and to whom a certificate of
ownership or title is issued in such purchaser's name, holders of perfected
security interests in the Financed Vehicle, and the trustee in bankruptcy of the
Obligor. MBCC's security interest may also be subordinate to such third parties
in the event of fraud or forgery by the Obligor or administrative error by state
recording officials or in the circumstances noted below. As described more fully
below, MBCC and the Seller (i) will represent and warrant in the Purchase
Agreement and the Agreement, respectively, that, to the best of their knowledge,
an enforceable first priority perfected security interest exists for the benefit
of the Seller and Trustee, respectively, with respect to each Financed Vehicle
and (ii) will be required to repurchase the related Receivable in the event of
an uncured breach or failure to be true of such representation or warranty if
the interests of the Seller and the Trustee, respectively, therein are
materially and adversely affected by such breach or failure. This repurchase
obligation will constitute the sole remedy available to the Trust and the
Certificateholders for such breach or failure.
Pursuant to the Purchase Agreement, MBCC will assign its security interests
in the Financed Vehicles, along with the sale and assignment of the Receivables,
to the Seller and, pursuant to the Agreement, the Seller will assign its
security interests in the Financed Vehicles, along with the sale and assignment
of the Receivables, to the Trust. The Servicer will hold the certificates of
title relating to the Financed Vehicles, either directly or through
subservicers, as custodian for the Trustee following such sale and assignment.
The certificates of title will not be endorsed or otherwise amended to identify
the Trust as the new secured party, however, because of the administrative
burden and expense involved. The Seller will assign its rights under the
Purchase Agreement to the Trust.
In most states, an assignment of a security interest in a Financed Vehicle
along with the applicable Receivable is an effective conveyance of a security
interest without amendment of any lien noted on such Financed Vehicle's
certificate of title or ownership, and the assignee succeeds thereby to the
assignor's rights as secured party. However, because the Trust will not be
identified as the secured party on any such certificate, the security interest
of the Trust in any Financed Vehicle could be defeated through fraud, forgery,
negligence or error. In most states, in the absence of fraud or forgery by the
Financed Vehicle owner or of fraud, forgery, negligence or error by MBCC or
administrative error by state or local agencies, the notation of MBCC's lien on
the certificates of ownership or possession of such certificates with such
notation 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 the Trust fails to obtain a perfected security interest, its security
interest would be subordinate to, among others, subsequent purchasers of the
Financed Vehicles and holders of perfected security interests.
MBCC and the Seller will represent and warrant in the Purchase Agreement
and the Agreement, respectively, as to each Receivable that to the best of their
knowledge, immediately prior to the sale, assignment, and transfer of each
Receivable by MBCC to the Seller, such Receivable was secured by a validly
perfected first priority security interest in the related Financed Vehicle in
favor of MBCC as secured party and, at such time as enforcement of such security
interest is sought, there will exist a valid, subsisting, and enforceable first
priority perfected security interest in such Financed Vehicle for the benefit of
the Trustee (subject to any statutory or other liens arising after the Closing
Date by operation of law or any rights of third parties arising after the
Closing Date as a result of the fraud or forgery of the vehicle owner or
administrative error by state recording officials which are prior to such
security interest). In the event of an uncured breach or failure to be true of
such representation or warranty, MBCC and the Seller, pursuant to the terms of
the Purchase Agreement and the Agreement, respectively, will be required to
repurchase such Receivable for its Purchase Amount if the interests of the
Seller or the Trust, respectively, therein are materially and adversely affected
by such breach or failure. This repurchase obligation will constitute the sole
remedy available to the Trust and the Certificateholders for such breach or
failure. MBCC's and the Seller's warranties with respect to perfection and
enforceability of a security interest in a Financed Vehicle will not cover
statutory or other liens arising after the Closing Date by operation of law or
any rights of third parties arising as a result of the fraud or forgery of the
vehicle owner as described above or administrative error by state recording
officials as described above which are prior to such security interest.
Accordingly, any such lien or right would not by itself give rise to a
repurchase obligation on the part of MBCC and the Seller.
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Under the laws of most states, a perfected security interest in a motor
vehicle continues for four months after the motor vehicle is moved to a new
state from the one in which it was initially registered and thereafter until the
motor vehicle owner re-registers the motor vehicle in the new state, but in any
event not beyond the surrender of the certificate. A majority of states requires
surrender of a certificate of title to re-register a motor vehicle and requires
that notice of such surrender be given to each secured party noted on the
certificate of title. In those states that require a secured party to take
possession of a certificate of title to perfect a security interest, the secured
party would learn of the re-registration through the request from the obligor to
surrender possession of the certificate of title. In those states that require a
secured party to note its lien on a certificate of title to perfect a security
interest but do not require possession of the certificate of title, the secured
party would learn of the re-registration through the notice from the state
department of motor vehicles that the certificate of title had been surrendered.
The requirements that a certificate of title be surrendered and that notices of
such surrender be given to each secured party also apply to re-registrations
effected following a sale of a motor vehicle. MBCC would therefore have the
opportunity to re-perfect its security interest in a Financed Vehicle in the
state of re-registration following relocation of the Obligor and would be able
to require satisfaction of the related Receivable following a sale of the
Financed Vehicle. 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 motor vehicle installment contracts, MBCC takes
steps to effect re-perfection upon receipt of notice of re-registration or
information from the Obligor as to relocation.
Under the laws of many states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over a perfected security
interest in the motor vehicle. The Code also grants priority to certain federal
tax liens over the lien 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.
MBCC and the Seller will warrant in the Purchase Agreement and the Agreement,
respectively, that, to the best of their knowledge, as of the Closing Date, no
such liens or rights of confiscation are pending. In the event of a breach or
failure to be true of such representation or warranty which has a material and
adverse effect on the interests of the Trust and the Certificateholders, MBCC
and the Seller, pursuant to the terms of the Purchase Agreement and the
Agreement, respectively, will be required to repurchase the Receivable secured
by the Financed Vehicle involved. This repurchase obligation will constitute the
sole remedy available to the Trust and the Certificateholders for such breach.
Any liens for repairs or taxes or rights of confiscation arising at any time
after the Closing Date during the term of a Receivable would not give rise to a
repurchase obligation on the part of MBCC and the Seller.
REPOSSESSION
In the event of a default by an obligor under a retail installment
contract, the holder of a receivable such as a Receivable has all the remedies
of a secured party under the UCC, except where specifically limited by other
state laws or by contract. The remedies of a secured party under the UCC include
the right to repossession by means of self-help, unless such means would
constitute a breach of the peace. Self-help repossession is the method employed
by MBCC in most cases, and is accomplished simply by taking possession of the
motor vehicle. Generally, where the obligor objects or raises a defense to
repossession, a court order must be obtained from the appropriate state court
and the motor vehicle must then be repossessed in accordance with that order. In
the event of a default by an obligor, many jurisdictions require that the
obligor be notified of the default and be given a time period within which he
may cure the default prior to repossession.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide an
obligor with reasonable notice of the date, time, and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor generally has the right to redeem the collateral prior to actual sale by
paying the secured party the unpaid principal balance of the obligation plus, in
most cases, reasonable expenses for repossessing, holding, and preparing the
collateral for disposition and arranging for its sale plus, in many
jurisdictions,
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reasonable attorneys' fees. In some states, the obligor has the right, prior to
actual sale, to reinstatement of the original loan terms and to return of the
collateral by payment of delinquent installments of the unpaid balance.
Generally, this right of reinstatement may be exercised on a limited number of
occasions in any one-year period.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The resale proceeds of 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. 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. Any such deficiency
judgment would be a personal judgment against the Obligor for the shortfall,
however, and a defaulting Obligor may have very little capital or sources of
income available following repossession. Therefore, in many cases, it may not be
useful to seek a deficiency judgment or, if one is obtained, it may be settled
at a significant discount or not paid at all. MBCC generally seeks to recover
any deficiency existing after repossession and sale of a motor vehicle.
Occasionally, after resale of a repossessed motor vehicle and payment of
all expenses and indebtedness, there is a surplus of funds. In that case, the
UCC requires the secured party to remit the surplus to any other holder of a
lien with respect to the motor vehicle or, if no such lienholder exists or funds
remain after paying such other lienholders, to the former owner of the motor
vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B, Z, and
AA, and other similar acts, state adoptions of the National Consumer Act and of
the Uniform Consumer Credit Code and state motor vehicle retail installment
sales acts, retail installment sales acts, and other similar laws. Also, state
laws impose finance charge and late charge ceilings and other restrictions on
consumer transactions and require contract disclosures in addition to those
required under federal law. These requirements impose specific statutory
liabilities upon creditors who fail to comply with their provisions. In some
cases, this liability could affect the ability of an assignee, such as the
Trustee, to enforce Receivables to the extent they are consumer finance
contracts subject to such requirements. The "Credit Practices" Rule of the
Federal Trade Commission (the "FTC") imposes additional restrictions on contract
provisions and credit practices.
The FTC's holder-in-due-course rule (the "FTC Rule") has the effect of
subjecting a seller (and certain related lenders and their assignees) in a
consumer credit transaction and any assignee of the seller to all claims and
defenses which the purchaser could assert against the seller of the goods.
Liability under the FTC Rule is limited to the amounts paid by the purchaser
under the contract, and the holder of the contract may also be unable to collect
any balance remaining due thereunder from the purchaser. The FTC Rule is
generally duplicated by state statutes or the common law in certain states.
Accordingly, the Trustee, as holder of the Receivables, will be subject to
claims or defenses, if any, that the purchaser of a Financed Vehicle may assert
against the seller of such vehicle.
Under the motor vehicle dealer licensing laws of most states, sellers of
motor vehicles are required to be licensed to sell such vehicles at retail sale
and to originate certain installment contracts in connection with such sales. In
addition, with respect to used motor vehicles, the FTC's Rule on Sale of Used
Vehicles requires that all sellers of used motor vehicles prepare, complete, and
display a "Buyer's Guide" which explains the warranty coverage for such
vehicles. Federal Odometer Regulations promulgated under the Motor Vehicle
Information and Cost Savings Act require that all sellers of used motor vehicles
furnish a written statement signed by the seller certifying the accuracy of the
odometer reading. If a seller is not properly licensed or if either a Buyer's
Guide or Odometer Disclosure Statement was not properly provided to the
purchaser of a
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financed vehicle, such purchaser may be able to assert a defense as to a retail
installment contract against the seller of such vehicle or of a subsequent
holder of the retail installment contract.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
MBCC and the Seller will represent and warrant in the Purchase Agreement
and the Agreement, respectively, as to each Receivable that such Receivable
complied at the time it was originated and as of the Closing Date in all
material respects with all requirements of applicable law. If, as of the Cutoff
Date, an Obligor had a claim against the Trust for violation of any law and such
claim materially and adversely affected the Trust's interest in a Receivable,
such violation would create an obligation of MBCC and the Seller under the
Purchase Agreement and the Agreement, respectively, to repurchase the Receivable
unless the breach were cured. This repurchase obligation will constitute the
sole remedy of the Trustee and the Certificateholders against the Seller in
respect of any such uncured breach. See "The Certificates -- Sale and Assignment
of the Receivables."
OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including Insolvency Laws, may interfere
with or affect the ability of a lender to realize upon collateral or enforce a
deficiency judgment. For example, in a proceeding under the Bankruptcy Code, 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 such 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the material United States federal
income tax consequences of the purchase, ownership and disposition of Class A
Certificates which are anticipated to be relevant to most categories of
investors. This summary is based upon laws, regulations, rulings and decisions
currently in effect, all of which are subject to change, which change may be
retroactive. The discussion does not cover all federal income tax consequences
which may be material to all categories of investors, some of which may be
subject to special rules, and does not discuss the status of the Trust or the
Class A Certificates or the tax treatment of any Class A Certificate Owner under
the laws of any foreign, state or local jurisdiction. In addition, this summary
is generally limited to investors who will hold the Class A Certificates as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
Prospective investors should note that no rulings have been or will be sought
from the Internal Revenue Service (the "IRS") with respect to any of the federal
income tax consequences discussed below, and no assurance can be given that the
IRS will not take contrary positions.
INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THEIR PURCHASE, OWNERSHIP
AND DISPOSITION OF THE CLASS A CERTIFICATES.
TAX STATUS AS A GRANTOR TRUST; SCOPE OF TAX OPINION
Morgan, Lewis & Bockius LLP, special tax counsel to the Seller ("Special
Tax Counsel"), has advised that, in its opinion, for federal income tax
purposes, (i) the Trust will be classified as a grantor trust and not as a
partnership or as an association which is taxable as a corporation and (ii) each
Class A Certificate Owner will be treated as an owner of an undivided pro rata
interest in the income (other than the Retained Yield) and corpus attributable
to the Trust. In addition, Special Tax Counsel has prepared or reviewed the
statements in this Prospectus under the headings "Prospectus Summary -- Tax
Status" and "Certain Federal Income Tax Consequences," and is of the opinion
that such statements, to the extent that such statements describe
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matters of federal income tax law, are correct in all material respects. Such
statements constitute an explanatory discussion of the possible effects of the
classification of the Trust as a grantor trust for federal income tax purposes
on investors generally and of related tax matters affecting investors generally.
Further, such statements do not purport to furnish information in the level of
detail or with the attention to an investor's specific tax circumstances that
would be provided by an investor's tax advisor. Accordingly, each investor is
advised to consult its tax advisor with regard to the tax consequences to it of
investing in the Class A Certificates.
TREATMENT OF CLASS A CERTIFICATE OWNERS' INVESTMENTS IN THE CERTIFICATES
Classification as a grantor trust should cause each Class A Certificate
Owner to be treated for federal income tax purposes as if it owned directly its
interest in each asset owned by the Trust, received or accrued directly its
share of income paid to or accrued by the Trust and paid or incurred directly
its share of reasonable expenses paid or incurred by the Trust. Accordingly,
each Class A Certificate Owner should be viewed as owning an interest in each
Receivable and each other asset which is held by the Trust. It is also possible
that each Class A Certificate Owner would be considered to own an undivided
interest in a single debt obligation of the Seller and generally having a
principal amount equal to the total stated principal amount of the Receivables
and an interest rate equal to the applicable Pass-Through Rate. Special Tax
Counsel is unable to opine as to which characterization will govern because no
authority exists addressing the characterization of transactions having assets
and other characteristics identical to those of the Trust. The Agreement will
express the intent of the Seller to sell, and the Class A Certificate Owners to
purchase, the Receivables (other than the Retained Yield and Excess Amounts) and
the Seller, each Certificateholder and each Class A Certificate Owner, by
accepting a beneficial interest in a Certificate, will agree to treat the Class
A Certificates as ownership interests in the Receivables. Unless otherwise
specified, the remainder of this section will discuss the manner in which income
would be reported if each Class A Certificate Owner were viewed as owning an
interest in each Receivable and each other asset which is held by the Trust.
TAX ACCOUNTING ISSUES
For administrative convenience, the Servicer intends to report information
with respect to a Class A Certificate Owner's investment in a Class A
Certificate on an aggregate basis as though such Class A Certificate Owner's
investment in the Receivables and other assets will be equal to such Class A
Certificate Owner's share of the initial Class A Principal Balance and on which
interest and Shortfall Amounts are payable at a combined rate equal to the sum
of the Pass-Through Rate and the Servicing Rate. Unless otherwise specified, the
remainder of this section will discuss the manner in which income would be
reported on an asset-by-asset basis, although the Servicer will report on an
aggregate basis.
If the IRS were to require reporting on an asset-by-asset basis, the
timing, amount and character of income reportable to Class A Certificate Owners
for any period could differ from that which is reportable on an aggregate basis.
If reporting on an aggregate basis results in under-reporting of income, or if
the IRS were to take a position different from that adopted by the Trust with
respect to any issue, a Class A Certificate Owner could be required to pay
interest on underpayments of tax and could be subject to penalties for under-
reporting of income. Special Tax Counsel is unable to opine with respect to a
number of issues which could affect the timing, amount and characterization of
income because no authority exists addressing the characterization of
transactions having assets and other characteristics identical to those of the
Trust.
Except to the extent that the original issue discount rules are applicable
(as discussed below), ordinary income on the Class A Certificate Owner's
interest in the Receivables and other Trust assets will be reportable by a Class
A Certificate Owner in accordance with its usual method of accounting as such
amounts are accrued on the Receivables or, in the case of Class A Certificate
Owners who are cash basis taxpayers, ordinary income will be reportable when
received by the Servicer as agent for the Class A Certificate Owners. Because
items of income generally accrue on the Receivables over various monthly periods
ending in the calendar month preceding the calendar month which includes the
related Distribution Date, in general, distributions made on a Class A
Certificate will represent amounts which accrued over a period that began
between 75 and 45 days prior to such Distribution Date. The portion of each
distribution to a Class A
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Certificate Owner that is allocable to principal on the Receivables (other than
amounts representing accrued market discount, as described below) will reduce
the tax basis of such Class A Certificate Owner's interest in the Receivables.
See "-- Payments Under the Shortfall Amount Agreement -- Shortfall Amounts."
PAYMENTS UNDER THE SHORTFALL AMOUNT AGREEMENT
Excess Amounts. Excess Amounts are to be retained by MBCC. It is possible
that Excess Amounts will be viewed as constructively received by the Trust and
then paid to MBCC as a fee for the rights granted under the Shortfall Amount
Agreement, in which case such Excess Amounts may be includible in income by the
Class A Certificate Owners and deductible by Class A Certificate Owners subject
to the rules discussed below. See "-- Servicing Fees."
Shortfall Amounts. A Shortfall Amount compensates the Class A Certificate
Owners for the excess, if any, of the interest which would have accrued on a
Receivable at its APR prior to prepayment or acceleration using the actuarial
method over the interest which actually accrued on such Receivable at such rate
over such period using the simple interest method. See "The
Receivables -- Payments on the Receivables." Shortfall Amounts are paid to Class
A Certificate Owners from amounts on deposit in the Class A Reserve Fund or by
MBCC pursuant to the Shortfall Amount Agreement to eliminate this difference in
yield. A Class A Certificate Owner may be required to allocate a portion of its
purchase price for a Receivable to its contingent right to receive Shortfall
Amounts. See "-- Application of the Original Issue Discount Rules to the
Receivables."
Shortfall Amounts should be treated as ordinary income which is not
interest income. However, because the Trust will have accounted for each
Receivable (in accordance with its terms) using the actuarial method, by the
time a Shortfall Amount is received, a Class A Certificate Owner on the accrual
basis method of accounting should previously have overcounted (and thus may have
over-reported with respect to prior collection periods) its interest income by
an amount equal to the Shortfall Amount, which amount should instead have been
accounted for as a recovery of basis. A Class A Certificate Owner that takes the
position that the Shortfall Amount should be treated as basis recovery (because
an identical amount was previously over-reported as income) could be challenged
by the IRS if the difference in character (basis recovery vs. interest) or
timing of the reported amounts affects such Class A Certificate Owner's tax
liability. Another possible alternative is that the Shortfall Amounts could be
treated as an adjustment to the purchase price of the Receivables. In that
event, the amount of discount on the Receivables would increase compared with
the amount of such discount if the Shortfall Amounts were not treated as an
adjustment to the purchase price of Receivables.
It is not clear whether payments analogous to the Shortfall Amounts should
be treated as "fixed or determinable annual or periodic" income (within the
meaning of Section 871(a)(1) or 881(a)(1) of the Code) and, therefore, subject
to United States withholding tax. Furthermore, Shortfall Amounts will not be
treated as interest and, therefore, will not qualify as "portfolio interest"
(within the meaning of Section 871(h)(2) or 881(c)(2) of the Code).
APPLICATION OF THE ORIGINAL ISSUE DISCOUNT RULES TO THE RECEIVABLES
The Receivables bear interest at varying rates. Because the Seller will
retain the Retained Yield, the issuance of the Class A Certificates will result
in the separation of ownership ("stripping") of a portion of the rights to
interest payments on those Receivables (the "High Yield Receivables") that bear
an interest rate which is greater than the sum of the Pass-Through Rate and the
Servicing Rate from the principal of and remaining interest on such Receivables.
Those Receivables that bear an interest rate which is equal to the sum of the
Pass-Through Rate and the Servicing Rate do not provide rights to receive
interest in excess of the sum of the Pass-Through Rate and the Servicing Rate
and, therefore, will not be treated as stripped instruments.
As discussed below, the stripping of the High Yield Receivables may result
in original issue discount ("OID"). Furthermore, in determining whether the High
Yield Receivables (or any High Yield Receivable) purchased by the Class A
Certificate Owners have OID or whether any other Receivables (or any other
Receivable) have market discount, the purchase price of a Class A Certificate
should be allocated among the
47
<PAGE> 49
High Yield Receivables and the Trust's other assets based on their respective
fair market values. The Trust's other assets include the Class A Certificate
Owner's undivided interest in accrued but unpaid interest and amounts collected
as of the time of purchase but not yet distributed, and, possibly, contingent
rights to receive Shortfall Amounts pursuant to the Shortfall Amount Agreement.
As a result, the portion of the purchase price allocable to a Class A
Certificate Owner's undivided interest in the Receivables (or any Receivable)
will be decreased and the potential OID or market discount on the Receivables
(or any Receivable) could be increased.
The "stripped bond" rules of Section 1286 of the Code will apply to the
High Yield Receivables (the "stripped Receivables"). Under Section 1286 of the
Code, a stripped bond is treated as if it had been newly issued on the date of
the stripping with an issue price equal to the purchase price allocable to the
stripped bond (based on its fair market value). If the stated redemption price
at maturity exceeds the issue price, the difference is treated as OID. Under
regulations under Section 1286 of the Code and under the OID provisions of the
Code (the "OID Regulations"), it appears that the interest on the stripped
Receivables would be treated as "qualified stated interest." Thus, the stated
redemption price at maturity should not include such interest payments, and
should therefore equal the principal amount of the stripped Receivables.
It is unclear under Section 1286 of the Code and the OID Regulations
whether stripped bonds which are deemed to be issued in a single transaction
should be aggregated. The OID Regulations generally provide for the aggregation
of debt instruments issued by a single "issuer" to a single holder. Although it
is not clear whether the Seller, as the entity stripping the Receivables, should
be treated as the "issuer" of the stripped Receivables for purposes of the OID
Regulations, as described above, the Servicer will prepare reports as if the OID
Regulations allow aggregation.
The rules that follow would apply regardless of whether the stripped
Receivables are aggregated (and thus treated as a single Receivable for OID
purposes) or not aggregated (and thus analyzed on a Receivable-by-Receivable
basis for OID purposes), although the amount and timing of OID recognition may
differ under the two methods.
If the excess of a stripped Receivable's "stated redemption price at
maturity" (which should equal the Receivable's principal amount) over the
purchase price which the Class A Certificate Owner is deemed to have paid for
such stripped Receivable is less than a statutorily defined de minimis amount,
such stripped Receivable would not be treated as having OID. In general, the
amount of OID on a stripped Receivable will be de minimis if it is less than
1/4 of 1% multiplied by the product of the stated redemption price at maturity
and the number of full years of weighted average life remaining after the
purchase date until the final maturity of the Receivable. It is not clear
whether the maturity date which would be used for determining whether OID on a
stripped Receivable is de minimis should be calculated taking into account
expected prepayments and, absent further guidance to the contrary, the Servicer
does not intend to apply a prepayment assumption, for purposes of either
applying the de minimis rule or calculating OID generally. However, as a result
of recently enacted legislation, a Class A Certificate Owner which has a taxable
year commencing after August 5, 1997, likely would be required to make the
calculation using reasonable prepayment assumptions. If the amount of OID on any
stripped Receivable is de minimis under this rule, the actual amount of discount
on such Receivable would be includible in income proportionately as principal
payments are received on the Receivable in the proportion that the amount that
each principal payment bears to the total principal amount of the stripped
Receivable.
If OID on a stripped Receivable is not treated as de minimis, a Class A
Certificate Owner will be required to include OID in income as it accrues on a
daily basis, regardless of when cash payments are received, using a method
reflecting a constant yield-to-maturity on such stripped Receivable. The OID
that accrues from time to time would increase a Class A Certificate Owner's tax
basis in the Class A Certificate. Distributions of principal and other items
attributable to accrued OID (other than payments of interest at the sum of the
Pass-Through Rate and Servicing Rate) would reduce a Class A Certificate Owner's
tax basis. The accrual of income by a Class A Certificate Owner under the OID
rules could be accelerated as compared with reporting income at the sum of the
Pass-Through Rate and the Servicing Rate, and for taxable years beginning after
August 5, 1997, would be required to take into account reasonable prepayment
assumptions. Application
48
<PAGE> 50
of the OID rules, particularly if a prepayment assumption is required and the
Receivables are not aggregated, would be complex and could significantly affect
the timing of inclusion of income on a Class A Certificate.
For the reasons discussed above, the Receivables other than the High Yield
Receivables will not be treated as stripped bonds. However, to the extent that
the portion of the purchase price allocated to a Certificate Owner's undivided
interest in a Receivable other than a High Yield Receivable is less than the
"stated redemption price at maturity," such Receivable could have market
discount. The market discount on such a Receivable will be considered to be zero
if it is less than a statutorily defined de minimis amount. The allocation of a
portion of the purchase price of a Class A Certificate to the rights to payments
under the Shortfall Amount Agreement, accrued interest and/or amounts collected
and undistributed as of the date such Class A Certificate was purchased may
cause or increase the amount of market discount.
In general, under the market discount provisions of the Code, principal
payments received by the Trust and all or a portion of the gain recognized upon
a sale or other disposition of a Receivable other than a High Yield Receivable
or upon the sale or other disposition of a Class A Certificate by a Class A
Certificate Owner, will be treated as ordinary income to the extent of accrued
market discount. Any payments received by a Class A Certificate Owner upon a
sale or other disposition of a Certificate in an amount in excess of accrued
market discount will be treated as capital gain. In addition, a portion of the
interest deductions of the Class A Certificate Owner attributable to any
indebtedness treated as incurred or continued to purchase or carry a Receivable
may have to be deferred, unless a Class A Certificate Owner makes an election to
include market discount in income currently as it accrues, which election would
apply to all debt instruments acquired by the taxpayer on or after the first day
of the first taxable year to which such election applies. Taxpayers may, in
general, elect to accrue market discount either (i) under a constant
yield-to-maturity method or (ii) in the proportion that the stated interest paid
on the obligation for the current period bears to the total remaining interest
on the obligation.
SERVICING FEES
An amount equal to each Class A Certificate Owner's allocable share of the
Servicing Fee and other compensation to the Servicer will be treated as having
been received by and will be includible in the income of such Class A
Certificate Owner. A corporate Class A Certificate Owner or a Class A
Certificate Owner who holds a Class A Certificate in connection with a trade or
business will be entitled to deduct, consistent with its method of accounting,
its pro rata share of amounts paid as fees and other expenses under Section 162
of the Code to the extent that such fees and expenses represent reasonable
compensation for services rendered. Other Class A Certificate Owners will be
entitled to deduct, under Section 212 of the Code, their pro rata share of
amounts paid as reasonable fees and expenses only if such amounts, when added to
certain other "miscellaneous itemized deductions," exceed 2% of adjusted gross
income for the taxable year in which the deductions may be claimed. In addition,
in the case of Class A Certificate Owners who are individuals, certain otherwise
allowable itemized deductions will be reduced, but not by more than 80%, by an
amount equal to 3% of the Class A Certificate Owner's adjusted gross income in
excess of a statutorily defined amount adjusted annually for inflation ($117,950
for married couples filing jointly for the taxable year beginning in 1996).
The Servicer believes that the Servicing Fees will be considered reasonable
compensation for services rendered. Although the IRS has issued guidance as to
what constitutes reasonable compensation for servicing residential mortgages,
there are no guidelines as to either the maximum amount of compensation that may
be considered reasonable for servicing debt instruments similar to the
Receivables or whether the reasonableness of such compensation would be
determined on a weighted average or a Receivable-by-Receivable basis.
If amounts paid to the Servicer exceed reasonable compensation for services
provided, the Servicer may be viewed as having, for federal income tax purposes,
an ownership interest in a portion of each interest payment with respect to each
Receivable under the "stripped bond" rules. In such case, the portion of each
interest payment treated as a strip owned by the Servicer will not be included
in the Class A Certificate Owner's income, and the Class A Certificate Owner's
deduction for Servicing Fees will be reduced accordingly.
49
<PAGE> 51
Any prepayment penalties, late payment fees, extension and administrative
fees or similar charges (collectively, "Late Fees") paid by the Obligors under
the Receivables and any interest on amounts collected by the Servicer are to be
retained by the Servicer. Thus, such Late Fees and interest should not
constitute taxable income to the Class A Certificate Owners as additional
compensation. Accordingly, the Trustee will not report to the Class A
Certificate Owners such Late Fees and interest received. However, it is possible
that such Late Fees and interest might be viewed as constructively received by
the Trust and then paid to the Servicer as additional servicing fees, in which
case such Late Fees and interest may be includible in income by the Class A
Certificate Owners and become deductible by Class A Certificate Owners subject
to the rules discussed above.
SALE OF A CERTIFICATE
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Class A Certificate
Owner's adjusted basis in the Certificate. A Class A Certificate Owner's
adjusted basis generally will equal the purchase price the Certificate Owner is
deemed to have paid for the Certificate, increased by any OID or market discount
previously included in income, and decreased by any deduction previously allowed
for amortized premium and by the amount of payments previously received on the
Receivables which are allocable to principal or previously included OID or
market discount for tax purposes. Gain realized will be treated as ordinary
income to the extent that market discount accrued in respect of a Receivable had
not previously been taken into account. Any remaining gain would be treated as
capital gain and any loss realized would be treated as capital loss.
FOREIGN CLASS A CERTIFICATE OWNERS
To the extent that amounts paid to a Class A Certificate Owner that is not
a United States person (a "Foreign Class A Certificate Owner") are treated as
interest or OID for federal income tax purposes, such amounts generally will be
exempt from the normal 30% United States withholding tax, provided that such
Foreign Class A Certificate Owner is not engaged in a trade or business in the
United States and that such Certificate Owner fulfills certain certification
requirements. Under such requirements, a Foreign Class A Certificate Owner must
certify, under penalties of perjury, that it is not a "United States person,"
among other things. However, since Shortfall Amounts will not qualify as
"portfolio interest" within the meaning of Section 871(h)(2) or 881(c)(2) of the
Code, such payments may be subject to United States withholding tax at a 30% or
lower treaty reduced rate. To the extent that an Excess Amount is treated as
constructively received by the Trust, it is not clear whether all or a portion
of such Excess Amount may qualify as "portfolio interest" (within the meaning of
Section 871(b)(2) or 881(c)(2) of the Code) which would be exempt from United
States withholding tax. See "-- Payments Under the Shortfall Amount
Agreement -- Excess Amounts." The term "United States person" means a citizen or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, and an estate or trust whose income is includible in gross
income for United States federal income tax purposes regardless of its source.
Potential investors who are not United States persons should consult their own
tax advisors regarding the specific tax consequences to them of owning a Class A
Certificate.
BACKUP WITHHOLDING
Payments made to a Class A Certificate Owner and proceeds from the sale of
the Certificates will not be subject to a 31% "backup" withholding tax unless,
in general, such Class A Certificate Owner fails to comply with certain
reporting procedures and is not an exempt recipient under applicable provisions
of the Code.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans and certain
other retirement plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and collective investment funds and separate
accounts in which such plans, accounts or arrangements are invested that are
subject to ERISA and
50
<PAGE> 52
the Code (all of which are hereinafter referred to as a "Plan") and on persons
who are fiduciaries with respect to such Plans. Moreover, based on the reasoning
of the United States Supreme Court in John Hancock Life Ins. Co. v. Harris Trust
and Sav. Bank, 114 S. Ct. 517 (1993) ("John Hancock"), an insurance company's
general account may be deemed to include assets of the Plans investing in the
general account (e.g., through the purchase of an annuity contract), and the
insurance company might be treated as a fiduciary with respect to such plans by
virtue of such investment. In accordance with ERISA's general fiduciary
standards, before investing in a Class A Certificate, a Plan fiduciary should
determine whether such an investment is permitted under the governing Plan
instruments and is appropriate for the Plan in view of its overall investment
policy and the composition and diversification of its portfolio. Other
provisions of ERISA and the Code prohibit certain transactions involving the
assets of a Plan and persons who have certain specified relationships to the
Plan ("parties in interest" within the meaning of ERISA or "disqualified
persons" within the meaning of the Code). Thus, a Plan fiduciary considering an
investment in Class A Certificates should also consider whether such an
investment might constitute or give rise to a prohibited transaction under ERISA
or the Code.
An investment in Class A Certificates by a Plan might result in the assets
of the Trust being deemed to constitute Plan assets, which in turn might mean
that certain aspects of such investment, including the operation of the Trust,
might be prohibited transactions under ERISA and the Code. There may also be an
improper delegation of the responsibility to manage Plan assets if Plans that
purchase the Class A Certificates are deemed to own an interest in the
underlying assets of the Trust. Neither ERISA nor the Code defines the term
"plan assets". Under Section 510.3-101 of the United States Department of Labor
("DOL") regulations (the "Regulation"), a Plan's assets may include an interest
in the underlying assets of an entity (such as a trust) for certain purposes,
including the prohibited transaction provisions of ERISA and the Code, if the
Plan acquires an "equity interest" in such entity. The Seller believes that the
Class A Certificates will give Class A Certificateholders an equity interest in
the Trust for purposes of the Regulation. Under the Regulation, when a Plan
acquires an equity interest that is neither a "publicly offered security" nor a
security issued by an investment company registered under the Investment Company
Act of 1940, as amended, the underlying assets of the entity will be considered
"plan assets" unless the entity is an "operating company" or equity
participation in the entity by benefit plan investors is not "significant". A
publicly offered security is a security which is (1) held by 100 or more
investors independent of the issuer and of each other, (2) freely transferable,
and (3) sold as part of an offering pursuant to an effective registration
statement under the Securities Act, and then registered under Section 12(b) or
12(g) of the Exchange Act. The Regulation provides that participation is
significant if immediately after the most recent acquisition of any equity
interest in the entity, whether or not from an issuer or an underwriter,
twenty-five percent (25%) or more of the value of any class of equity interest
is held by "benefit plan investors", which are defined as Plans and employee
benefit plans not subject to ERISA (for example, governmental plans).
The Trust will not be an "operating company" as defined in the Regulation,
and it will not be an investment company registered under the Investment Company
Act of 1940, as amended. It is expected that the Class A Certificates will meet
the criteria of publicly offered securities as set forth above. The Underwriters
expect (although no assurances can be given) that the Class A Certificates will
be held by at least 100 independent investors at the conclusion of the offering
made by this Prospectus; there are no restrictions imposed on the transfer of
the Class A Certificates; and the Seller intends to cause the registration
requirements to be satisfied. If, however, none of the exceptions set forth in
the Regulation applies, the persons providing services with respect to the
assets of the Trust may be subject to the fiduciary responsibility provisions of
Title I of ERISA and be subject to the prohibited transaction provisions of
ERISA and the Code unless exemptions from such provisions apply. For example,
based on the reasoning of the United States Supreme Court in John Hancock, an
insurance company's general account may be deemed to include assets of the Plans
investing in the general account (e.g., through the purchase of an annuity
contract), and the insurance company might be treated as a fiduciary with
respect to such plans by virtue of such investment. Certain exemptions issued by
the DOL from the prohibited transaction rules could be applicable, depending in
part upon the type and circumstances of the Plan fiduciary making the decision
to acquire a Class A Certificate. Included among these exemptions are DOL
Prohibited Transaction Exemptions 84-14 (Class Exemption for Plan Asset
Transactions Determined by Independent Qualified Professional Asset Managers),
91-38 (Class Exemption for Certain Transactions Involving Bank Collective
Investment Funds), 90-1 (Class
51
<PAGE> 53
Exemption for Certain Transactions Involving Insurance Company Pooled Separate
Accounts) and 95-60 (Class Exemption for Certain Transactions Involving
Insurance Company General Accounts).
Any Plan fiduciary considering whether to purchase Class A Certificates on
behalf of a Plan should consult with its counsel regarding the applicability of
the fiduciary responsibility and prohibited transaction provisions of ERISA and
the Code to such investment.
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<PAGE> 54
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Seller has agreed to sell to each of the
underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom J.P. Morgan Securities Inc. is acting as representative (the
"Representative"), has severally agreed to purchase from the Seller, the
principal amount of Class A Certificates set forth opposite its name below:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AMOUNT
OF CLASS A
CERTIFICATES TO
BE
UNDERWRITERS PURCHASED
----------------------------------------------------------- ----------------
<S> <C>
J.P. Morgan Securities Inc. ............................... $
Chase Securites Inc........................................
Citicorp Securities, Inc. .................................
Deutsche Morgan Grenfell Inc. .............................
Goldman, Sachs & Co. ......................................
Total............................................ $
====
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all the Class
A Certificates offered hereby if any of the Class A Certificates are purchased.
In the event of a default by any Underwriter, the Underwriting Agreement
provides that, in certain circumstances, purchase commitments of the
nondefaulting Underwriters may be increased or the Underwriting Agreement may be
terminated.
In connection with the offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the Class
A Certificates. Specifically, the Underwriters may overallot the offering,
creating a syndicate short position. In addition, the Underwriters may bid for,
and purchase the Class A Certificates in the open market to cover syndicate
shorts or to stabilize the price of the Class A Certificates. Any of these
activities may stabilize or maintain the market price of the Class A
Certificates above independent market levels. The Underwriters are not required
to engage in these activities, and if commenced, such activities may be
discontinued at any time.
The Seller has been advised by the Representative that the several
Underwriters propose initially to offer the Class A Certificates to the public
at the price set forth on the cover page hereof, and to certain dealers at such
price less a concession not in excess of % of the Class A Certificate
denominations. The Underwriters may allow and such dealers may reallow a
concession not in excess of % of the Class A Certificate denominations to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed.
The Seller does not intend to apply for listing of the Class A Certificates
on a national securities exchange, but has been advised by the Underwriters that
they intend to make a market in the Class A Certificates. The Underwriters are
not obligated, however, to make a market in the Class A Certificates and may
discontinue market making at any time without notice. No assurance can be given
as to the liquidity of, or the trading market for the Class A Certificates.
The Underwriting Agreement provides that the Seller will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. The Underwriters have agreed to reimburse the Seller for certain
expenses incurred in connection with the issuance and distribution of the Class
A Certificates.
In the ordinary course of their respective businesses, certain of the
Underwriters and their affiliates have engaged, and may in the future engage, in
commercial banking and investment banking transactions with DBNA, MBCC and their
affiliates.
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<PAGE> 55
VALIDITY OF THE CERTIFICATES
Certain legal matters relating to the validity of the Certificates will be
passed upon for the Seller by Morgan, Lewis & Bockius LLP, New York, New York.
The validity of the Certificates will be passed upon for the Underwriters by
Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. Skadden, Arps,
Slate, Meagher & Flom LLP has from time to time represented MBCC, DBNA and their
affiliates in connection with certain matters.
54
<PAGE> 56
INDEX OF PRINCIPAL TERMS
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Accounts............................................................................ 28
Advance............................................................................. 9
Agreement........................................................................... 4
Amount Financed..................................................................... 20
APR................................................................................. 4, 18
Available Interest.................................................................. 32
Available Principal................................................................. 32
Bankruptcy Code..................................................................... 11
Certificate Account................................................................. 28
Certificate Owners.................................................................. 2, 6
Certificateholders.................................................................. 7
Certificates........................................................................ 1
Class A Agent....................................................................... 9
Class A Certificate Owners.......................................................... 6
Class A Certificateholders.......................................................... 5, 25
Class A Certificates................................................................ 4
Class A Distributable Amount........................................................ 33
Class A Interest.................................................................... 33
Class A Interest Carryover Shortfall................................................ 33
Class A Percentage.................................................................. 4, 24
Class A Pool Factor................................................................. 22
Class A Principal................................................................... 6, 33
Class A Principal Balance........................................................... 5, 34
Class A Principal Carryover Shortfall............................................... 33
Class A Reserve Fund................................................................ 7
Class A Reserve Initial Deposit..................................................... 8
Class B Agent....................................................................... 9
Class B Certificateholders.......................................................... 7
Class B Certificates................................................................ 4
Class B Distributable Amount........................................................ 34
Class B Interest.................................................................... 34
Class B Interest Carryover Shortfall................................................ 34
Class B Percentage.................................................................. 4, 25
Class B Principal................................................................... 34
Class B Principal Balance........................................................... 34
Class B Principal Carryover Shortfall............................................... 34
Class B Reserve Fund................................................................ 7
Closing Date........................................................................ 5, 22
Code................................................................................ 10
Collection Account.................................................................. 27
Collection Period................................................................... 6, 24
Commission.......................................................................... 2
Cutoff Date......................................................................... 2, 4
DBNA................................................................................ 4
Dealer Agreement.................................................................... 15
Dealers............................................................................. 15
</TABLE>
55
<PAGE> 57
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Defaulted Receivable................................................................ 6, 32
Definitive Certificates............................................................. 26
Determination Date.................................................................. 32
Direct Participants................................................................. 25
Distribution Date................................................................... 2, 5
DOL................................................................................. 10, 51
DTC................................................................................. 1, 6
Due Date............................................................................ 16
Eligible Bank....................................................................... 28
Eligible Deposit Account............................................................ 28
Eligible Investments................................................................ 28
Eligible Servicer................................................................... 29
ERISA............................................................................... 2, 50
Events of Servicing Termination..................................................... 38
Excess Amount....................................................................... 21
Exchange Act........................................................................ 2
FDIC................................................................................ 28
Final Scheduled Distribution Date................................................... 2
Final Scheduled Maturity Date....................................................... 30
Financed Vehicles................................................................... 4
Foreign Class A Certificate Owner................................................... 50
FTC................................................................................. 44
FTC Rule............................................................................ 44
High Yield Receivables.............................................................. 47
Holders............................................................................. 26
Indirect Participants............................................................... 25
Insolvency Laws..................................................................... 11
IRS................................................................................. 45
John Hancock........................................................................ 51
Liquidation Proceeds................................................................ 32
MBCC................................................................................ 4
Monthly Remittance Condition........................................................ 29
Moody's............................................................................. 10
Motor Vehicle....................................................................... 15
Motor Vehicle Contracts............................................................. 15
Obligors............................................................................ 5
OID................................................................................. 47
OID Regulations..................................................................... 48
Original Class A Principal Balance.................................................. 5
Original Class B Principal Balance.................................................. 34
Pass-Through Rate................................................................... 5
Payahead Account.................................................................... 28
Payahead Agent...................................................................... 9
Payahead Balance.................................................................... 33
Payaheads........................................................................... 28
Plan................................................................................ 10, 51
Pool Balance........................................................................ 7, 20
Prepaid Receivable.................................................................. 6
</TABLE>
56
<PAGE> 58
<TABLE>
<CAPTION>
PAGE
-------
<S> <C>
Principal Balance................................................................... 20
Purchase Agreement.................................................................. 5
Purchase Amount..................................................................... 27
Purchased Receivable................................................................ 32
Rating Agency....................................................................... 10
Receivable File..................................................................... 27
Receivables......................................................................... 2, 4
Record Date......................................................................... 5
Recoveries.......................................................................... 32
Representative...................................................................... 53
Reserve Funds....................................................................... 7
Retained Yield...................................................................... 4
Rules............................................................................... 25
S&P................................................................................. 10
Securities Act...................................................................... 2
Seller.............................................................................. 1
Servicer............................................................................ 1
Servicing Fee....................................................................... 6
Servicing Guaranty Agreement........................................................ 29
Servicing Rate...................................................................... 6
Shortfall Amount.................................................................... 8, 20
Shortfall Amount Agreement.......................................................... 8
Special Counsel..................................................................... 23
Special Tax Counsel................................................................. 45
Specified Class A Reserve Balance................................................... 8
Specified Class B Reserve Balance................................................... 8
Total Available Amount.............................................................. 32
Trust............................................................................... 1, 4
Trust Property...................................................................... 4
Trustee............................................................................. 9
UCC................................................................................. 5
Underwriters........................................................................ 53
Underwriting Agreement.............................................................. 53
</TABLE>
57
<PAGE> 59
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee................................................ $198,793.76*
Printing and Engraving.......................................... 70,000.00
Trustee's Fee................................................... 20,000.00
Legal Fees and Expenses......................................... 100,000.00
Blue Sky Fees and Expenses...................................... 10,000.00
Accountant's Fees and Expenses.................................. 45,000.00
Rating Agency Fees.............................................. 185,000.00
Miscellaneous Fees and Expenses................................. 10,206.24
--------
Total Expenses........................................ $639,000.00
========
</TABLE>
- ---------------
* $303.03 of which has previously been paid.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware provides as follows:
145 Indemnification of Officers, Directors, Employees and Agents;
Insurance
(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b)
II-1
<PAGE> 60
of this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
II-2
<PAGE> 61
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
Article VI of the By-Laws of Daimler-Benz Vehicle Receivables Corporation
provides as follows:
To the full extent permitted by law, the corporation may indemnify any
person, or his heirs, distributees, next of kin, successors, appointees,
executors, administrators, legal representatives and assigns, who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, domestic or foreign,
against expenses, attorneys' fees, court costs, judgments, fines, amounts paid
in settlement and other losses actually and reasonably incurred by him in
connection with such action, suit or proceeding.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----- ----------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement
3.1 -- Restated Certificate of Incorporation of the Seller; incorporated by reference to
Exhibit 3.1 to Registrant's Registration Statement on Form S-1 (No. 33-79574)
3.2 -- By-laws of the Seller; incorporated by reference to Exhibit 3.2 to Registrant's
Registration Statement on Form S-1 (No. 33-79574)
4.1 -- Form of Pooling and Servicing Agreement among the Seller, the Servicer, MBCC, the
Trustee, the Class A Agent, the Class B Agent and the Payahead Agent
5.1 -- Opinion of Morgan, Lewis & Bockius LLP re Legality
8.1 -- Opinion of Morgan, Lewis & Bockius LLP re Tax Matters
10.1 -- Form of Purchase Agreement between Mercedes-Benz Credit Corporation and the Seller
10.2 -- Form of Servicing Guaranty Agreement between Daimler-Benz North America
Corporation and the Trustee (contained in Exhibit 4.1)
24.1 -- Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)
24.2 -- Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 8.1)
25 -- Powers of Attorney*
</TABLE>
- ---------------
* Previously filed.
(b) Financial Statement Schedules
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes as follows:
(a) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
II-3
<PAGE> 62
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question 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.
(c) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 63
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
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 State of New
York, City of New York, on October 7, 1997.
DAIMLER-BENZ VEHICLE RECEIVABLES
CORPORATION
By /s/ HARVEY S. TRAISON
---------------------------------------
Harvey S. Traison
President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------------- -----------------
<S> <C> <C>
/s/ HARVEY S. TRAISON
- ------------------------------------------
Harvey S. Traison Director and President (principal
executive officer) October 7, 1997
/s/ DAVID A. KLANICA
- ------------------------------------------
David A. Klanica Director and Secretary and Treasurer
(principal financial officer and
principal accounting officer) October 7, 1997
- ------------------------------------------
Klaus Jacobs Director October 7, 1997
- ------------------------------------------
Charles B. McKenna Director October 7, 1997
*By /s/ HARVEY S. TRAISON
- ------------------------------------------
Harvey S. Traison,
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 64
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------ ------------
<S> <C> <C>
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Seller; incorporated by
reference to Exhibit 3.1 to Registrant's Registration Statement on Form
S-1 (No. 33-79574)
3.2 By-laws of the Seller; incorporated by reference to Exhibit 3.2 to
Registrant's Registration Statement on Form S-1 (No. 33-79574)
4.1 Form of Pooling and Servicing Agreement among the Seller, the Servicer,
MBCC, the Trustee, the Class A Agent, the Class B Agent and the Payahead
Agent
5.1 Opinion of Morgan, Lewis & Bockius LLP re Legality
8.1 Opinion of Morgan, Lewis & Bockius LLP re Tax Matters
10.1 Form of Purchase Agreement between Mercedes-Benz Credit Corporation and
the Seller
10.2 Form of Servicing Guaranty Agreement between Daimler-Benz North America
Corporation and the Trustee (contained in Exhibit 4.1)
24.1 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)
24.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 8.1)
25 Powers of Attorney*
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
DAIMLER-BENZ AUTO GRANTOR TRUST 1997-A
____% ASSET BACKED CERTIFICATES, CLASS A
DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION
(Company)
MERCEDES-BENZ CREDIT CORPORATION
(Servicer)
UNDERWRITING AGREEMENT
____________, 1997
J.P. Morgan Securities Inc.
As Representative of the
Several Underwriters named
in Schedule I (the "Representative")
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Daimler-Benz Vehicle Receivables Corporation, a Delaware
corporation (the "Company"), proposes to sell to the several Underwriters named
in Schedule I hereto (the "Underwriters") $ principal amount of %
Asset Backed Certificates, Class A (the "Class A Certificates"), to be issued by
the Daimler-Benz Auto Grantor Trust 1997-A. Each Class A Certificate will
represent a specified percentage undivided interest in the Daimler-Benz Auto
Grantor Trust 1997-A (the "Trust"). The assets of the Trust include, among other
things, a pool of retail installment contracts secured by new and used
automobiles (the "Receivables") and certain monies due thereunder on or after
__________, 1997 (the "Cutoff Date"), such Receivables to be sold to the Trust
by the Company and to be serviced for the Trust by the Servicer. The Class A
Certificates will be issued in an aggregate principal amount of $ , which
is equal to % of the aggregate principal balance of the Receivables as of
the Cutoff Date. Simultaneously with the issuance and sale of the Class A
Certificates as contemplated herein, the Trust will also issue the % Asset
Backed Certificates, Class B (the "Class B Certificates," and together
<PAGE> 2
with the Class A Certificates, the "Certificates"), evidencing an undivided
ownership interest of % in the Trust, payments in respect of which are, to
the extent specified in the Pooling and Servicing Agreement, subordinated to the
rights of the holders of the Class A Certificates. The Certificates will be
issued pursuant to a Pooling and Servicing Agreement dated as of ____________,
1997 (the "Pooling and Servicing Agreement"), among the Company, Mercedes-Benz
Credit Corporation, as servicer (the "Servicer") and in its individual capacity,
and Citibank, N.A., as trustee (the "Trustee"), Class A Agent, Class B Agent and
Payahead Agent.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended (the "Act"), and the rules and regulations of
the Commission thereunder (the "Rules and Regulations"), a registration
statement, including a prospectus, relating to the Class A Certificates. Any
preliminary prospectus included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the Rules and Regulations is referred to
in this Agreement as the "Preliminary Prospectus." The registration statement as
amended at the time when it shall become effective, or, if a post-effective
amendment is filed with respect thereto, as amended by such post-effective
amendment at the time of its effectiveness, including in each case information
(if any) deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Act, is referred to in this
Agreement as the "Registration Statement," and the prospectus in the form used
to confirm sales of Class A Certificates is referred to in this Agreement as the
"Prospectus."
The terms which follow, when used in this Agreement, shall
have the meanings indicated. "Effective Date" shall mean each date that the
Registration Statement and any post-effective amendment or amendments thereto
became or become effective. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto. "Rule 424" and
"Rule 430A" refer to such rules under the Act. To the extent not defined herein,
capitalized terms used herein have the meanings assigned to such terms in the
Pooling and Servicing Agreement.
2
<PAGE> 3
The Company agrees with the Underwriters as follows:
1. The Company agrees to sell and deliver the Class A
Certificates to the several Underwriters as hereinafter provided, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees to purchase,
severally and not jointly, from the Company the respective principal amount of
Class A Certificates set forth opposite such Underwriter's name in Schedule I
hereto. The Class A Certificates are to be purchased by the Underwriters at the
purchase price of % of the aggregate principal amount thereof plus accrued
interest on the principal amount thereof at the Pass-Through Rate (as defined in
the Prospectus) calculated from (and including) ____________, 1997, to (but
excluding) the Closing Date.
2. The Company understands that the Underwriters intend (i) to
make a public offering of their respective portions of the Class A Certificates
as soon after the Registration Statement and this Agreement have become
effective as in the judgment of the Representative is advisable and (ii)
initially to offer the Class A Certificates upon the terms set forth in the
Prospectus.
3. Payment for Class A Certificates shall be made to the
Company or to its order by wire transfer of same day funds at the office of
Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York
10022 at 9:00 A.M., New York City time, on __________, 1997 (the "Closing
Date"), or at such other time on the same or such other date, not later than the
fifth Business Day thereafter, as the Representative and the Company may agree
upon in writing. As used herein, the term "Business Day" means any day other
than a day on which banks are permitted or required to be closed in New York
City.
Payment for the Class A Certificates shall be made against
delivery to the Representative for the respective accounts of the several
Underwriters of the Class A Certificates registered in the name of Cede & Co. as
nominee of The Depository Trust Company and in such denominations, as permitted
by the Pooling and Servicing Agreement, as the Representative shall request in
writing
3
<PAGE> 4
not later than two full Business Days prior to the Closing Date, with any
transfer taxes payable in connection with the transfer to the Underwriters of
the Class A Certificates duly paid by the Company. The certificates for the
Class A Certificates will be made available for inspection and packaging by the
Representative at the office of Skadden, Arps, Slate, Meagher & Flom LLP, 919
Third Avenue, New York, New York 10022 not later than 1:00 P.M., New York City
time, on the Business Day prior to the Closing Date.
4. The Company represents and warrants to and agrees with
each Underwriter that:
(a) The Registration Statement on Form S-1 (no. 333-35525),
including the Prospectus and such amendments thereto as may have been required
on or prior to the date hereof, relating to the Class A Certificates, has been
filed with the Commission and such Registration Statement as amended has become
effective. With respect to the Registration Statement, the conditions to the use
of a registration statement on Form S-1 under the Act, as set forth in the
General Instructions to Form S-1, have been satisfied by the Company;
(b) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose has
been instituted or, to the knowledge of the Company, threatened by the
Commission, and on the Effective Date of the Registration Statement, the
Registration Statement and the Prospectus conformed in all respects to the
requirements of the Act and the Rules and Regulations, and did not include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and, on the Closing Date, the Registration Statement and the Prospectus will
conform in all respects to the requirements of the Act and the Rules and
Regulations, and neither of such documents will include any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished to
the Company in
4
<PAGE> 5
writing by any Underwriter through the Representative expressly for use therein;
(c) The computer tape with respect to the Receivables to be
sold to the Trust created as of the Cutoff Date (the "Computer Tape"), and made
available to the Representative by the Company, was complete and accurate in all
material respects as of the date thereof;
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its properties
and conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company;
(e) The Class A Certificates have been duly authorized, and,
when issued and delivered pursuant to the Pooling and Servicing Agreement, duly
authenticated by the Trustee and paid for by the Underwriters in accordance with
the terms of this Agreement, will be duly and validly issued, authenticated and
delivered and entitled to the benefits provided by the Pooling and Servicing
Agreement; each of the Pooling and Servicing Agreement, the Shortfall Amount
Agreement, the Purchase Agreement and this Agreement have been duly authorized
by the Company and, when executed and delivered by the Company and the other
parties thereto (in the case of the Pooling and Servicing Agreement, the
Shortfall Amount Agreement and the Purchase Agreement), each of the Pooling and
Servicing Agreement, the Shortfall Amount Agreement, the Purchase Agreement and
this Agreement will constitute a valid and binding agreement of the Company; the
Class A Certificates, the Pooling and Servicing Agreement, the Shortfall Amount
Agreement and the Purchase Agreement will conform to the descriptions thereof in
the Prospectus in all material respects;
(f) No consent, approval, authorization or order of, or
filing with, any court or governmental agency or body is required to be obtained
or made by the
5
<PAGE> 6
Company for the consummation of the transactions contemplated by this Agreement
or the Pooling and Servicing Agreement or the Shortfall Amount Agreement or the
Purchase Agreement except such as have been obtained and made under the Act,
such as may be required under state securities laws and the filing of any
financing statements required to perfect the Trust's interest in the
Receivables;
(g) The Company is not in violation of its Certificate of
Incorporation or By-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any agreement or
instrument to which it is a party or by which it or its properties is bound
which would have a material adverse effect on the transactions contemplated
herein or in the Pooling and Servicing Agreement, the Shortfall Amount Agreement
and the Purchase Agreement. The execution, delivery and performance of this
Agreement, the Pooling and Servicing Agreement, the Shortfall Amount Agreement
and the Purchase Agreement and the issuance and sale of the Class A Certificates
and compliance with the terms and provisions hereof and thereof will not result
in a breach or violation of any of the terms and provisions of, or constitute a
default under, any statute, rule, regulation or order of any governmental agency
or body or any court having jurisdiction over the Company or any of its
properties or any agreement or instrument to which the Company is a party or by
which the Company is bound or to which any of the properties of the Company is
subject, or the Certificate of Incorporation or By-laws of the Company; and the
Company has full power and authority to authorize and sell, and establish, the
Trust that will issue the Class A Certificates as contemplated by this Agreement
and to enter into this Agreement, the Pooling and Servicing Agreement, the
Shortfall Amount Agreement and the Purchase Agreement and consummate the
transactions contemplated hereby and thereby;
(h) Other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company is or may be a party
or to which any property of the Company is or may be the subject which, if
determined adversely to the Company, could individually or in the aggregate
reasonably be expected to have a material adverse effect on the
6
<PAGE> 7
general affairs, business, prospects, management, financial position,
stockholders' equity or results of operations of the Company or that would
reasonably be expected to materially adversely affect the interests of the
holders of the Class A Certificates; and there are no contracts or other
documents of a character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration Statement or the
Prospectus which are not filed or described as required; and
(i) By assignment and delivery of each of the Receivables to
the Trust as of the Closing Date, the Company will transfer all of its right,
title and interest in, to and under the Receivables to the Trust, subject to no
prior lien, mortgage, security interest, pledge, adverse claim, charge or other
encumbrance.
5. The Company covenants and agrees with the several
Underwriters that:
(a) Prior to the termination of the offering of the Class A
Certificates, the Company will not file or cause to be filed any amendment of
the Registration Statement or supplement to the Prospectus which shall be
reasonably disapproved of promptly by the Representative after reasonable notice
thereof. Subject to the foregoing sentence, if the Registration Statement has
become or becomes effective pursuant to Rule 430A, or filing of the Prospectus
is otherwise required under Rule 424(b), the Company will cause the Prospectus,
properly completed, and any supplement thereto, to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Underwriters of such
timely filing. The Company will promptly advise the Underwriters (i) when the
Prospectus, and any supplement thereto, shall have been filed (if required) with
the Commission pursuant to Rule 424(b), (ii) when, prior to termination of the
offering of the Class A Certificates, any amendment to the Registration
Statement shall have become effective, (iii) of any request by the Commission
for any amendment of the Registration Statement or supplement to the Prospectus
or for any additional information, (iv) of the receipt by the Company of
notification with respect to the issuance by the Commission of any stop order
suspending the effectiveness of the Registra-
7
<PAGE> 8
tion Statement or the institution or threatening of any proceeding for that
purpose and (v) of the receipt by the Company of notification with respect to
the suspension of the qualification of the Class A Certificates for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Company will use its reasonable best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as possible
the withdrawal thereof;
(b) The Company will deliver, at its expense, to the
Representative, two signed copies of the Registration Statement (as originally
filed) and each amendment thereto, in each case including exhibits, and to each
other Underwriter a conformed copy of the Registration Statement and each
amendment thereto, in each case without exhibits, and, during the period
mentioned in paragraph (e) below, to each of the Underwriters as many copies of
the Prospectus (including all amendments and supplements thereto) as the
Representative may reasonably request. The Company will furnish or cause to be
furnished to the Representative copies of all reports on Form SR required by
Rule 463 under the Act;
(c) The Company will if (i) during such period of time after
the first date of the public offering of the Class A Certificates as in the
opinion of counsel for the Underwriters a Prospectus relating to the Class A
Certificates is required by law to be delivered in connection with sales by an
Underwriter or dealer, (ii) any event shall occur as a result of which it is
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or (iii) it is necessary to amend or supplement the
Prospectus to comply with the applicable law, forthwith prepare and furnish, at
the expense of the Company, to the Underwriters and to the dealers (whose names
and addresses the Representative will furnish to the Company) to which Class A
Certificates may have been sold by the Representative on behalf of the
Underwriters and upon request by the Representative to any other dealers
identified by the Representative, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a
8
<PAGE> 9
purchaser, be misleading or so that the Prospectus will comply with the law;
(d) The Company will endeavor to qualify the Class A
Certificates for offer and sale under the securities or "Blue Sky" laws of such
jurisdictions as the Representative shall reasonably request and will continue
such qualification in effect so long as reasonably required for distribution of
the Class A Certificates and will pay all fees and expenses (including fees and
disbursements of counsel to the Underwriters) reasonably incurred in connection
with such qualification and in connection with the determination of the
eligibility of the Class A Certificates for investment under the laws of such
jurisdictions as the Representative may designate; provided, however, that the
Company shall not be obligated to qualify to do business in any jurisdiction in
which it is not currently so qualified; and provided further that the Company
shall not be required to file a general consent to service of process in any
jurisdiction;
(e) On or before ________, 1997, the Company will cause the
Trust to make generally available to Class A Certificateholders and to the
Representative as soon as practicable an earnings statement covering a period of
at least twelve months beginning with the first fiscal quarter of the Trust
occurring after the Effective Date of the Registration Statement, which shall
satisfy the provisions of Section 11(a) of the Act and Rule 158 of the
Commission promulgated thereunder;
(f) For the period from the date of this Agreement until the
retirement of the Class A Certificates the Servicer will furnish to the
Representative (x) copies of each certificate and the annual statements of
compliance delivered to the Trustee pursuant to Article III of the Pooling and
Servicing Agreement and the annual independent certified public accountant's
servicing reports furnished to the Trustee pursuant to Article III of the
Pooling and Servicing Agreement, by first-class mail as soon as practicable
after such statements and reports are furnished to the Trustee and (y) copies of
each amendment to the Pooling and Servicing Agreement, and on each Determination
Date or as soon thereafter as practicable, the Servicer shall give notice
substantially in the form of Schedule II hereto by telex or telecopy to
9
<PAGE> 10
the Representative of the Pool Factor as of the related Record Date;
(g) During the period beginning on the date hereof and
continuing to and including the Business Day following the Closing Date, the
Company will not offer, sell, contract to sell or otherwise dispose of any
securities of or guaranteed by the Company which are substantially similar to
the Class A Certificates without the prior written consent of the
Representative;
(h) The Company will register the Class A Certificates
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")
prior to _________, 1997;
(i) To the extent, if any, that the rating provided with
respect to the Class A Certificates by the rating agency or rating agencies
rating the Class A Certificates (the "Rating Agency") is conditional upon the
furnishing of documents or the taking of any other action by the Company agreed
upon on or prior to the Closing Date, the Company shall use its reasonable best
efforts to furnish such documents and take any such other action; and
(j) So long as any of the Class A Certificates are
outstanding, the Company will furnish to the Representative by first class mail
(i) as soon as practical after the end of the Company's fiscal year, copies of
all documents, records and financial statements required to be distributed to
Certificateholders (including Certificate Owners) or filed with the Commission
pursuant to the Exchange Act, or any order of the Commission thereunder and
(ii) from time to time, any other information concerning the Company filed with
any government or regulatory authority or national securities exchange which is
otherwise publicly available, as the Representative may reasonably request.
6. The Company will pay all costs and expenses incident to the
performance of its obligations under this Agreement, including, without limiting
the generality of the foregoing, all costs and expenses (i) incident to the
preparation, issuance, execution, authentication and delivery of the Class A
Certificates, (ii) incident to the preparation, printing and filing under the
Act of the
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<PAGE> 11
Registration Statement, the Prospectus and any preliminary prospectus (including
in each case all exhibits, amendments and supplements thereto), (iii) incurred
in connection with the registration or qualification and determination of
eligibility for investment of the Class A Certificates under the laws of such
jurisdictions as the Underwriters may designate (including fees and
disbursements of counsel for the Underwriters with respect thereto), (iv)
related to any filing with the National Association of Securities Dealers, Inc.,
(v) in connection with the printing (including word processing and duplication
costs) and delivery of this Agreement, the Pooling and Servicing Agreement, the
Shortfall Amount Agreement and any Blue Sky Memorandum and the furnishing to
Underwriters and dealers of copies of the Registration Statement and the
Prospectus as herein provided, (vi) the fees and disbursements of the Company's
counsel and accountants and that portion of the Underwriters' counsel fees (up
to $40,000) and disbursements that are chargeable to the Company, and (vii) any
fees and expenses payable to the Rating Agencies in connection with the rating
of the Class A Certificates.
7. The obligations of the several Underwriters to purchase and
pay for the Class A Certificates will be subject to the accuracy of the
representations and warranties on the part of the Company herein, to the
accuracy of the statements of officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder and to the following additional conditions precedent:
(a) At the time this Agreement is executed and delivered by
the Company and at the Closing Date, KPMG Peat Marwick shall have furnished to
the Representative letters dated, respectively, as of the date of this Agreement
and as of the Closing Date substantially in the forms of the drafts to which the
Representative previously agreed.
(b) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the Rules and Regulations and in accordance with Section 5(a) of this
Agreement; no stop order suspending the effectiveness of the Registration
Statement shall be in effect, and no proceedings for such purpose shall be pend-
11
<PAGE> 12
ing before or, to the knowledge of the Company, threatened by the Commission;
and all requests for additional information from the Commission with respect to
the Registration Statement shall have been complied with to the satisfaction of
the Representative.
(c) The Representative shall have received an officer's
certificate, dated the Closing Date, signed by the Chairman of the Board, the
President, or any Vice President and by a principal financial or accounting
officer of the Company representing and warranting that, as of the Closing Date,
except to the extent that they relate expressly to another date in which case
they will be true and correct as of such date on the Closing Date, the
representations and warranties of the Company in this Agreement are true and
correct, that the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or prior to the
Closing Date, that no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or, to the best of their knowledge, are contemplated by the
Commission.
(d) Subsequent to the execution and delivery of this
Agreement, there shall not have occurred (i) any change, or any development
involving a prospective change, in or affecting particularly the business or
properties of the Trust, the Company, Daimler-Benz North America Corporation
("DBNA") or the Servicer which, in the judgment of the Representative,
materially impairs the investment quality of the Class A Certificates or makes
it impractical or inadvisable to proceed with completion of the sale of and
payment for the Class A Certificates or (ii) any downgrading in the rating of
any debt securities of DBNA or any of its direct or indirect subsidiaries by any
"nationally recognized statistical rating organization" (as defined for purposes
of Rule 436(g) under the Act), or any public announcement that any such
organization has under surveillance or review its rating of any such debt
securities (other than an announcement with positive implications of a possible
upgrading, and no implication of a possible downgrading, of such rating).
(e) Morgan, Lewis & Bockius LLP, special counsel to the
Company, MBCC, the Servicer and DBNA,
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<PAGE> 13
shall have furnished to the Representative their written opinion, dated the
Closing Date, in form and substance satisfactory to the Representative, to the
effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware with full corporate power and authority to own
its properties and conduct its business as described in the Prospectus.
(ii) MBCC has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus.
(iii)DBNA has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
is duly qualified to transact business and is in good standing in the
State of New York.
(iv) The Pooling and Servicing Agreement, the
Shortfall Amount Agreement and the Purchase Agreement have been duly
authorized, executed and delivered by, and each constitutes a valid and
binding obligation of each of the Company, MBCC and the Servicer,
enforceable against each of the Company and the Servicer in accordance
with its terms.
(v) The Servicing Guaranty Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and
binding obligation of, DBNA, enforceable against DBNA in accordance
with its terms.
(vi) This Agreement has been duly authorized,
executed and delivered by each of the Company and DBNA.
(vii) Neither the execution, delivery and performance
of this Agreement, the Pooling and
13
<PAGE> 14
Servicing Agreement, the Shortfall Amount Agreement and the Purchase
Agreement by the Company, MBCC or DBNA, nor the execution, delivery and
performance of the Servicing Guaranty Agreement by DBNA, will conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the properties or assets of
the Company, MBCC or DBNA, as applicable, pursuant to the terms of the
Certificate of Incorporation or the By-Laws of the Company, MBCC or
DBNA, as applicable, any statute, rule or regulation or, to the best of
such counsel's knowledge, any order of any governmental agency or body
or any court having jurisdiction over the Company, MBCC or DBNA, as
applicable, or any of their respective properties or any agreement or
instrument known to such counsel to which the Company, MBCC or DBNA, as
applicable, is a party or by which any of them may be bound or to which
any of their properties may be subject.
(viii) To the best of such counsel's knowledge, no
authorization, approval or consent of any court or governmental agency
or authority is required by law in connection with the execution,
delivery and performance by the Company, MBCC, DBNA or the Servicer of
this Agreement, the Pooling and Servicing Agreement, the Shortfall
Amount Agreement or the Purchase Agreement, or the execution, delivery
or performance by DBNA of the Servicing Guaranty Agreement, except such
as may be required under the Act or the Rules and Regulations and state
securities laws, and except for such authorizations, approvals or
consents (specified in such opinion) as are in full force and effect as
of the Closing Date.
(ix) The Class A Certificates have been duly
authorized and, when executed and authenticated by the Trustee in
accordance with the Pooling and Servicing Agreement and delivered and
paid for pursuant to this Agreement, will be validly issued and
outstanding and entitled to the benefits provided by the Pooling and
Servicing Agreement.
(x) Although they do not assume any responsibility
for the accuracy, completeness or
14
<PAGE> 15
fairness of the statements contained in the Registration Statement or
the Prospectus, except for those referred to in the opinion in
subsection (xviii) of this Section 7(e), they have no reason to believe
that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to the Closing Date
(other than the financial statements and related schedules therein, as
to which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company or DBNA
prior to the Closing Date (other than the financial statements and
related schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading
or that, as of the Closing Date, either the Registration Statement or
the Prospectus or any further amendment or supplement thereto made by
the Company or DBNA prior to the Closing Date (other than the financial
statements and related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the
Registration Statement or the Prospectus which are not filed or
described as required.
(xi) Such counsel does not know of any contract or
other document of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which is not filed or described as
required.
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<PAGE> 16
(xii) To the best of such counsel's knowledge, there
are no legal or governmental proceedings pending or threatened to which
DBNA is a party or of which any property of DBNA is subject, (A) that
are required to be disclosed in the Registration Statement or (B)(1)
that assert the invalidity of all or part of this Agreement, the
Pooling and Servicing Agreement, the Shortfall Amount Agreement, the
Servicing Guaranty Agreement or the Purchase Agreement, (2) that seek
to prevent the issuance of the Class A Certificates, (3) that could
materially and adversely affect DBNA's obligations under this Agreement
or the Servicing Guaranty Agreement or (4) that seek to affect
adversely the federal or state income tax attributes of the Class A
Certificates.
(xiii) MBCC has full power and authority to sell and
assign the property to be sold and assigned to the Company pursuant to
the Purchase Agreement and has duly authorized such sale and assignment
to the Company by all necessary corporate action.
(xiv) The Company has full power and authority to
sell and assign the property to be sold and assigned to and deposited
with the Trustee as part of the Trust pursuant to the Pooling and
Servicing Agreement and has duly authorized such sale and assignment to
the Trustee by all necessary corporate action.
(xv) Such counsel knows of no claim by or on behalf
of any third party to the effect that any person other than MBCC is the
sole owner of any right, title or interest in the Receivables and the
other property to be transferred by it to the Company.
(xvi) To the best of such counsel's knowledge, the
Receivables are "chattel paper" as defined in the UCC.
(xvii) All filings necessary under the Uniform
Commercial Code as in effect in the State of New York (the "UCC") or
the State of Delaware (the "DE-UCC") or the State of Connecticut (the
"CT-UCC")
16
<PAGE> 17
to perfect both the transfer of the Receivables and the proceeds
thereof (within the meaning of Section 9-306 of the UCC or the DE-UCC
or the CT-UCC, whichever may be applicable (the "Applicable UCC")) by
MBCC to the Company pursuant to the Purchase Agreement and the transfer
of the Receivables and the proceeds thereof (within the meaning of
Section 9-306 of the Applicable UCC) by the Company to the Trustee
pursuant to the Pooling and Servicing Agreement have been made and,
provided that neither MBCC nor the Company relocates its chief
executive office in a state other than Connecticut or Delaware,
respectively, the Trustee maintains the list of Receivables for
inspection by interested parties, and no administrative errors are made
by state or local agencies affecting perfection, no other filings
(other than the filing of continuation statements) need be made to
maintain the perfection of the transfer of the Receivables and the
proceeds thereof (within the meaning of Section 9-306 of the Applicable
UCC) either to the Company pursuant to the Purchase Agreement or to the
Trustee pursuant to the Pooling and Servicing Agreement.
(xviii) The statements in the Registration Statement
and the Prospectus under the headings "ERISA Considerations" and
"Certain Legal Aspects of the Receivables," to the extent they
constitute descriptions of matters of law or legal conclusions with
respect thereto, have been prepared or reviewed by such counsel and are
correct in all material respects.
(xix)The Pooling and Servicing Agreement is not
required to be qualified under the Trust Indenture Act of 1939, as
amended, and the Trust is not required to be registered as an
"investment company" under the Investment Company Act of 1940, as
amended.
(xx) The Registration Statement has become effective
under the Act and no stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no
proceeding for that purpose has been instituted or, to the best of such
counsel's knowledge, threatened by the Commission; the Registration
Statement and the Pro-
17
<PAGE> 18
spectus and any further amendments and supplements thereto made by the
Company prior to the Closing Date (other than the financial statements
and related schedules therein or omitted therefrom, as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Act and the Rules and
Regulations.
(xxi) The Class A Certificates, this Agreement, the
Pooling and Servicing Agreement, the Shortfall Amount Agreement, the
Servicing Guaranty Agreement and the Purchase Agreement each conform in
all material respects with the descriptions thereof contained in the
Registration Statement and the Prospectus.
Such opinion may be made subject to the qualifications that
the enforceability of the terms of the Pooling and Servicing Agreement, the
Purchase Agreement, the Shortfall Amount Agreement and the Servicing Guaranty
Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to creditors' rights,
and the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
(f) Morgan, Lewis & Bockius LLP shall have furnished
their written opinion, dated the Closing Date, with respect to the
characterization of the transfer of the Receivables by the Servicer to the
Company and from the Company to the Trust and such opinion shall be in
substantially the form previously discussed with the Representative and its
counsel and in any event satisfactory in form and in substance to the
Representative and its counsel.
(g) Morgan, Lewis & Bockius LLP, special tax counsel
to the Company, shall have furnished to the Representative their written
opinion, dated the Closing Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) The Trust created by the Pooling and
Servicing Agreement will not be classified as a partnership or as an
associa-
18
<PAGE> 19
tion taxable as a corporation for federal income tax purposes but,
instead, under Subpart E, Part I of Subchapter J of the Internal
Revenue Code of 1986, as amended, the Trust will be treated as a
grantor trust and, subject to possible recharacterization of certain
fees paid by the Trust to the Company or the Servicer, each Class A
Certificate Owner will be treated for federal income tax purposes as an
owner of an undivided pro rata interest in the income (other than the
Retained Yield) and corpus attributable to the Trust.
(ii) The Trust will not be classified as a
separate entity subject to New York State income, franchise or other
taxes measured by income, profits, capital, or receipts (other than
sales, excise, or ad valorem taxes that might be imposed upon the sale
of a Financed Vehicle acquired upon default of a Receivable).
(iii) Class A Certificate Owners who would
not otherwise be subject to tax imposed by the State of New York will
not be subject to New York State income or franchise taxes with respect
to interest or other amounts (including payments under the Shortfall
Amount Agreement) which are allocable to such Class A Certificate
Owners solely as a result of such Class A Certificate Owners'
beneficial ownership of a Class A Certificate (other than a Class A
Certificate Owner's allocable share of any sales, excise, or ad valorem
taxes that might be imposed upon the sale of a Financed Vehicle
acquired upon default of a Receivable).
(iv) The statements in the Registration
Statement and Prospectus under the headings "Certain Federal Income Tax
Consequences," to the extent that they constitute descriptions of
matters of law or legal conclusions with respect thereto, have been
prepared or reviewed by such counsel and are correct in all material
respects.
19
<PAGE> 20
[(h) Fulbright & Jaworski, L.L.P., special
Texas tax counsel to the Company shall have furnished to the Representative
their written opinion, dated the Closing Date, in form and substance
satisfactory to the Representative, to the effect that:
(i) The Trust will not be classified as a separate
entity on which Texas franchise tax will be imposed; and the Trust will
not be subject to other Texas taxes measured by income, capital,
profits or receipts (other than sales, excise, or ad valorem taxes that
might be imposed upon the sale of a vehicle acquired upon default of a
Receivable).
(ii) Class A Certificate Owners who would not
otherwise be subject to tax in Texas will not be subject to Texas
income or franchise taxes with respect to interest or other amounts
(including payments under the Shortfall Amount Agreement) attributable
solely to the beneficial ownership of a Class A Certificate (other than
such Class A Certificate Owner's share of sales, excise, or ad valorem
taxes that might be imposed upon the sale of a vehicle acquired upon
default of a Receivable).]
[(i) Day, Berry & Howard, special Connecticut tax
counsel to the Company, shall have furnished to the Representative their written
opinion, dated the Closing Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) For Connecticut income and franchise tax
purposes, the Trust will not be classified as a separate entity subject
to Connecticut income, franchise or other taxes measured by income,
profits, capital, or receipts (other than sales, excise, or ad valorem
taxes that might be imposed upon the sale of a vehicle acquired upon
default of a Receivable).
(ii) Class A Certificate Owners who would not
otherwise be subject to tax in Connecticut will not be subject to
Connecticut income or franchise taxes with respect to interest or other
amounts (including payments under the Shortfall Amount Agreement)
attributable solely to the beneficial ownership of a Class A
Certificate (other than such Class A Certificate Owner's share of
sales, excise,
20
<PAGE> 21
or ad valorem taxes that might be imposed upon the sale of a vehicle
acquired upon default of a Receivable).]
[(j) Troutman Sanders, special Georgia tax
counsel to the Company, shall have furnished to the Representative their written
opinion, dated the Closing Date, in form and substance satisfactory to the
Representative, to the effect that:
(i) For Georgia income and franchise tax purposes,
the Trust will not be classified as a separate entity subject to
Georgia income, franchise or other taxes measured by income, profits,
capital, or receipts (other than sales, excise, or ad valorem taxes
that might be imposed upon the sale of a vehicle acquired upon default
of a Receivable).
(ii) Class A Certificate Owners who would not
otherwise be subject to tax in Georgia will not be subject to Georgia
income or franchise taxes with respect to interest or other amounts
(including payments under the Shortfall Amount Agreement) attributable
solely to the beneficial ownership of a Class A Certificate (other than
such Class A Certificate Owner's share of sales, excise, or ad valorem
taxes that might be imposed upon the sale of a vehicle acquired upon
default of a Receivable).]
(k) Robert Merck, Esq., General Counsel of MBCC,
shall have furnished to the Representative their written opinion, dated the
Closing Date, in form and substance satisfactory to the Representative, to the
effect that:
(i) MBCC has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or the ownership of
its property requires such qualification except where the failure to be
so qualified or in good standing would not have a material adverse
effect on MBCC.
21
<PAGE> 22
(ii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of
the State of Delaware with full corporate power and authority to own
its properties and conduct its business as described in the Prospectus,
and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business or the ownership
of its property requires such qualification except where the failure to
be so qualified or in good standing would not have a material adverse
effect on the Company.
(iii) The execution, delivery and performance of the
Pooling and Servicing Agreement, the Shortfall Amount Agreement and the
Purchase Agreement by MBCC will not conflict with or result in a breach
of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any of the properties or assets of MBCC pursuant to the terms of
the Certificate of Incorporation or the By-Laws of MBCC, any statute,
rule, regulation or order of any governmental agency or body or any
court having jurisdiction over MBCC or any of its properties or any
agreement or instrument to which MBCC is a party or by which MBCC or
any of its properties is bound.
(iv) No authorization, approval or consent of any
court or governmental agency or authority is necessary in connection
with the execution, delivery and performance by MBCC of the Pooling and
Servicing Agreement, the Shortfall Amount Agreement or the Purchase
Agreement, except such as may be required under the Act or the Rules
and Regulations and state securities laws, and except for such
authorizations, approvals or consents (specified in such opinion) as
are in full force and effect as of the latest Effective Date and the
Closing Date.
(v) There are no legal or governmental proceedings
pending to which MBCC is a party or of which any property of MBCC is
the subject, and no such proceedings are known by such counsel to be
threatened or contemplated by governmental authorities or threatened by
others, (A) that are required
22
<PAGE> 23
to be disclosed in the Registration Statement or (B)(1) asserting the
invalidity of all or part of the Pooling and Servicing Agreement, the
Shortfall Amount Agreement or the Purchase Agreement, (2) seeking to
prevent the issuance of the Class A Certificates, (3) that could
materially and adversely affect MBCC's obligations under the Purchase
Agreement, the Shortfall Amount Agreement or the Pooling and Servicing
Agreement, or (4) seeking to affect adversely the federal or state
income tax attributes of the Class A Certificates.
(vi) There are no legal or governmental proceedings
pending to which the Company is a party or of which any property of the
Company is the subject, and no such proceedings are known by such
counsel to be threatened or contemplated by governmental authorities or
threatened by others, (A) that are required to be disclosed in the
Registration Statement or (B)(1) asserting the invalidity of all or
part of the Pooling and Servicing Agreement or the Purchase Agreement,
(2) seeking to prevent the issuance of the Class A Certificates, (3)
that could materially and adversely affect the Company's obligations
under the Purchase Agreement or the Pooling and Servicing Agreement, or
(4) seeking to affect adversely the federal or state income tax
attributes of the Class A Certificates.
(vii) Such counsel is familiar with MBCC's standard
operating procedures relating to MBCC's acquisition of a perfected
first priority security interest in the vehicles financed by MBCC
pursuant to retail installment sale contracts in the ordinary course of
MBCC's business. Assuming that MBCC's standard procedures have been
followed with respect to the perfection of security interests in the
Financed Vehicles (and such counsel has no reason to believe that MBCC
has not followed its standard procedures in connection with the
perfection of security interest in the Financed Vehicles), MBCC has
acquired or will acquire a perfected first priority security interest
in each of the Financed Vehicles.
(viii) Immediately prior to the transfer of
Receivables by MBCC pursuant to the Purchase
23
<PAGE> 24
Agreement, MBCC was the sole owner of all right, title and interest in
the Receivables and the other property to be transferred by it to the
Company.
(ix) The Receivables are "chattel paper" as defined
in the UCC.
(l) The Representative shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date,
with respect to the validity of the Class A Certificates and such other related
matters as the Representative shall require and the Company shall have furnished
or caused to be furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass upon such matters.
(m) The Representative shall have received an
opinion addressed to the Underwriters, the Company and the Servicer of, of
Citibank, N.A., dated the Closing Date and satisfactory in form and substance to
the Representative and its counsel, to the effect that:
(i) Citibank, N.A. ("Citibank") is a national
banking association duly organized and validly existing
under the laws of the United States.
(ii) Citibank has the power and authority to enter
into and perform the Pooling and Servicing Agreement. The
execution, delivery and performance of the Pooling and
Servicing Agreement has been duly authorized by all requisite
action, and the Pooling and Servicing Agreement has been duly
executed and delivered by Citibank.
(iii) No consent, approval, authorization, order of
or filing with any court, governmental agency or body
(including without limitation, any banking regulatory agency
or body or arbitrator having jurisdiction over Citibank) is
required in connection with the execution and delivery by
Citibank of the Pooling and Servicing Agreement and the
performance by Citibank of the transactions thereunder.
(iv) The Pooling and Servicing Agreement, assuming
due authorization, execution and delivery
24
<PAGE> 25
thereof by the Company and the Servicer, constitutes a valid and
legally binding agreement of Citibank and is enforceable against
Citibank in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting the enforcement of creditors' rights generally
and the rights of creditors of banks in particular and by general
principles of equity.
(v) The Class A Certificates have been duly executed,
authenticated and delivered by the Trustee.
(vi) If Citibank were acting as Servicer under the
Pooling and Servicing Agreement as of the date of this Agreement,
Citibank would have the corporate power and authority to perform the
obligations of the Servicer as provided in the Pooling and Servicing
Agreement.
(n) The Representative shall have received a letter
or letters from each counsel delivering any written opinion to any Rating Agency
in connection with the transaction described herein which is not otherwise
described in this Agreement allowing the Underwriters to rely on such opinion as
if it were addressed to the Underwriters.
(o) The Representative shall have received an
officer's certificate, dated the Closing Date, of the Chairman of the Board, the
President or any Vice President and by a principal financial or accounting
officer of each of the Company and the Servicer in which each such officer shall
state that, the representations and warranties of the Company or the Servicer,
as applicable, contained in the Pooling and Servicing Agreement and the
representations and warranties of MBCC or the Company, as applicable, contained
in the Purchase Agreement are true and correct in all material respects and that
the Company or the Servicer, as applicable, has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied under such
agreements at or prior to the Closing Date in all material respects.
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<PAGE> 26
(p) The Class A Certificates shall have been rated
"Aaa" by Moody's Investors Service, Inc. and "AAA" by Standard & Poor's Ratings
Services, a Division of The McGraw-Hill Companies, Inc.
(q) On the Closing Date, the representations and
warranties of the Company in the Pooling and Servicing Agreement will be true
and correct.
(r) Any taxes, fees and other governmental charges
which are due and payable in connection with the execution, delivery and
performance of this Agreement, the Pooling and Servicing Agreement, the
Shortfall Amount Agreement and the Class A Certificates shall have been paid by
the Company at or prior to the Closing Date.
8. The Company and DBNA agree to jointly and severally
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, the legal fees and other
expenses reasonably incurred in connection with investigating, preparing or
defending any suit, action or proceeding or any claim asserted, except as
otherwise provided below regarding the limitation on use of counsel) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished such amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information furnished to the Company or DBNA in writing by any Underwriter
through the Representative expressly for use therein; provided that the
foregoing indemnity with respect to any preliminary prospectus shall not inure
to the benefit of any Underwriter (or to the benefit of any person controlling
such Underwriter) from whom the person asserting any losses, claims or damages
purchased Class A Certificates if such untrue statement or omission or alleged
untrue statement or
26
<PAGE> 27
omission made in such preliminary prospectus is eliminated or remedied in the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) and, if the furnishing of a copy of the
Prospectus (as so amended or supplemented) to such person was required by law or
was requested in writing by the Company, a copy of the Prospectus (as so amended
or supplemented) shall not have been furnished to such person at or prior to the
written confirmation of the sale of such Class A Certificates to such person.
Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each director and officer of the
Company who signed the Registration Statement, and DBNA and each person who
controls the Company or DBNA within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company and DBNA to each Underwriter, but only with reference to
information furnished to the Company or DBNA in writing by such Underwriter
through the Representative expressly for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (in-
27
<PAGE> 28
cluding any impleaded parties) include both the Indemnifying Person and the
Indemnified Person and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them, in
which case such counsel for the Indemnified Person shall be reasonably
satisfactory to the Indemnifying Person. It is understood that the Indemnifying
Person shall not, in connection with any proceeding or related proceeding in the
same jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to one local counsel in each applicable jurisdiction) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any such separate firm for the Underwriters and such control
persons of Underwriters shall be designated in writing by the Representative and
any such separate firm for the Company or DBNA or either of their directors,
officers who sign the Registration Statement or control persons shall be
designated in writing by DBNA. The Indemnifying Person shall not be liable for
any settlement of any claim or proceeding effected without its written consent.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for fees and expenses of counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement. No Indemnifying Person shall, without the prior written
consent of the Indemnified Person, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement includes an unconditional release of
such Indemnified Person from all liability on claims that are the subject matter
of such proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 8 is unavailable other than in accordance with its
terms to an Indemnified Person in respect of any losses, claims, damages
28
<PAGE> 29
or liabilities referred to therein, then each Indemnifying Person under such
paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and DBNA on
the one hand and the Underwriters on the other hand from the offering of the
Class A Certificates or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and DBNA on the one hand and the Underwriters on
the other in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company and DBNA on the
one hand and the Underwriters on the other shall be deemed to be in the same
respective proportions as the net proceeds from the offering (before deducting
expenses) received by the Company and DBNA and the total underwriting discounts
and the commissions received by the Underwriters, in each case as set forth in
the table on the cover of the Prospectus, bear to the aggregate public offering
price of the Class A Certificates. The relative fault of the Company and DBNA on
the one hand and the Underwriters on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or DBNA or by any of the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and DBNA and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 8 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Person as a result of
the losses, claims, damages and liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the
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<PAGE> 30
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, in no event
shall an Underwriter be required to contribute any amount in excess of the
amount by which the total price at which the Class A Certificates underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages that such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 8 are several in proportion
to the respective principal amount of Class A Certificates set forth opposite
their names in Schedule I hereto, and not joint.
The indemnity and contribution agreements contained in this
Section 8 are in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this
Section 8 and the representations and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by or on
behalf of the Company or DBNA, or any of their officers or directors or any
other person controlling the Company or DBNA and (iii) acceptance of and payment
for any of the Class A Certificates.
9. Notwithstanding anything herein contained, this Agreement
may be terminated in the absolute discretion of the Representative, by notice
given to the Company, if after the execution and delivery of this Agreement and
prior to the Closing Date (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, the New York Stock Exchange or
the American Stock Exchange; (ii) trading of any securities of or guaranteed by
DBNA shall have been suspended on any exchange or in any over-the-counter
market; (iii) a
30
<PAGE> 31
general moratorium on commercial banking activities in New York shall have been
declared by either Federal or New York State authorities; or (iv) there shall
have occurred any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in the judgment of the
Representative is material and adverse and which, in the judgment of the
Representative, makes it impracticable to market the Class A Certificates on the
terms and in the manner contemplated in the Prospectus.
10. This Agreement shall become effective upon the later of
(x) execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If on the Closing Date any one or more of the Underwriters
shall fail or refuse to purchase Class A Certificates which it or they have
agreed to purchase hereunder on such date, and the aggregate principal amount of
Class A Certificates which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase is not more than one-tenth of the aggregate
principal amount of the Class A Certificates to be purchased on such date, the
other Underwriters shall be obligated severally in the proportions that the
principal amount of Class A Certificates set forth opposite their respective
names in Schedule I bears to the aggregate principal amount of Class A
Certificates set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as the Representative may specify, to
purchase the Class A Certificates which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the principal amount of Class A Certificates that any
Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant
to this Section 10 by an amount in excess of one-ninth of such principal amount
of Class A Certificates without the written consent of such Underwriter. If on
the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Class A Certificates which it or they have agreed to purchase hereunder
on such date, and the aggregate principal amount of Class A Certificates with
respect to which such default occurs is more than one-tenth of the aggregate
31
<PAGE> 32
principal amount of Class A Certificates to be purchased on such date, and
arrangements satisfactory to the Representative and the Company for the purchase
of such Class A Certificates are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any
non-defaulting Underwriter or the Company. In any such case either the
Representative or the Company shall have the right to postpone the Closing Date,
but in no event for longer than seven days, in order that the required changes,
if any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken under this paragraph
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
11. If this Agreement shall be terminated by the Underwriters,
or any of them, because of any failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this Agreement, or
if for any reason the Company shall be unable to perform its obligations under
this Agreement or any condition of the Underwriters' obligations cannot be
fulfilled, the Company agrees to reimburse the Underwriters or such Underwriters
as have so terminated this Agreement with respect to themselves, severally, for
all out-of-pocket expenses (including the fees and expenses of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
12. Any action by the Underwriters hereunder may be taken by
the Representative alone on behalf of the Underwriters, and any such action
taken by the Representative alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed, delivered by hand or transmitted by
any standard form of telecommunication. Notices to the Underwriters shall be
given to the Representative, c/o J.P. Morgan Securities Inc., 60 Wall Street,
New York, New York 10260 (Facsimile No.: 212-648-5909), Attention: Syndicate
Desk. Notices to the Company shall be given to it at 1201 North Market Street,
Suite 1406, Wilmington, Delaware 19801 (Facsimile No.: 302-426-6520), Attention:
President. Notices to DBNA shall be given to it at 375
32
<PAGE> 33
Park Avenue, New York, New York 10152 (Facsimile No.: 212-308-4252), Attention:
Treasurer.
13. This Agreement shall inure to the benefit of and be
binding upon the Company, DBNA, the Underwriters, any controlling persons
referred to herein and their respective successors and assigns. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any other person, firm or corporation any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. No purchaser of Class A Certificates from any Underwriter shall be
deemed to be a successor by reason merely of such purchase.
14. This Agreement may be signed in counterparts, each of
which shall be an original and all of which together shall constitute one and
the same instrument. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
CONFLICTS OF LAWS PROVISIONS THEREOF.
33
<PAGE> 34
If the foregoing is in accordance with your understanding of
our agreement, kindly sign and return to us the enclosed duplicate hereof,
whereupon it will become a binding agreement among the Company, DBNA and the
Underwriters in accordance with its terms.
Very truly yours,
DAIMLER-BENZ VEHICLE RECEIVABLES
CORPORATION
By:___________________________
Name:
Title:
DAIMLER-BENZ NORTH AMERICA
CORPORATION
By:___________________________
Name:
Title:
By:___________________________
Name:
Title:
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
J.P. MORGAN SECURITIES INC.
As Representative of the
Underwriters
By:_______________________
Name:
Title:
34
<PAGE> 35
SCHEDULE I
UNDERWRITERS
Principal Amount
J.P. Morgan Securities Inc........... $
-------------
$
=============
<PAGE> 36
SCHEDULE II
FORM OF SERVICER'S CERTIFICATE
J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Attention:
Re: Pooling and Servicing Agreement dated as
of , 1997 (the "Pooling and
Servicing Agreement") between Daimler-Benz
Vehicle Receivables Corporation, as Sell-
er, Mercedes-Benz Credit Corporation, in
its individual capacity and as Servicer,
and Citibank, N.A., as Trustee, Payahead
Agent, Class A Agent, Class B Agent
Determination Date to which this Certificate relates:
___________, 19__
For Monthly Period ending on _________, 19__
1. The undersigned Servicing Officer does
hereby certify that the Pool Factor is __________.
2. Capitalized terms used in this Certificate shall have the
same meanings as in the Pooling and Servicing Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand as of the
above-referenced Determination Date.
MERCEDES-BENZ CREDIT
CORPORATION, as Servicer
By:_______________________
Servicing Officer
<PAGE> 1
DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION
Seller
MERCEDES-BENZ CREDIT CORPORATION
Servicer and in its individual capacity
and
CITIBANK, N.A.
Trustee, Payahead Agent,
Class A Agent and Class B Agent
-------------------------------
POOLING AND SERVICING AGREEMENT
-------------------------------
Dated as of , 1997
Daimler-Benz Auto Grantor Trust 1997-A
% Asset Backed Certificates, Class A
% Asset Backed Certificates, Class B
<PAGE> 2
POOLING AND SERVICING AGREEMENT dated as of , 1997 (the
"Agreement"), among DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION, a Delaware
corporation, as Seller, MERCEDES-BENZ CREDIT CORPORATION, a Delaware
corporation, as Servicer and in its individual capacity, and CITIBANK, N.A., a
national banking association, as trustee hereunder (the "Trustee"), as payahead
agent with respect to the Payahead Account (the "Payahead Agent"), as collateral
agent with respect to the Class A Reserve Fund (the "Class A Agent") and, as
collateral agent with respect to the Class B Reserve Fund (the "Class B Agent").
In consideration of the premises and of the mutual agreements
herein contained, and other good and valuable consideration, the receipt of
which is acknowledged, the parties hereto, intending to be legally bound, agree
as follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, whenever
capitalized shall have the following meanings:
"Accounts" means collectively the Collection Account, the
Certificate Account, the Reserve Funds and the Payahead Account.
"Accredited Investor" means an "accredited investor" within
the meaning of Rule 501(a)(1), (2), (3), or (7) under the Act.
"Act" shall mean the Securities Act of 1933, as amended.
"Actuarial Method" means generally the method of allocating a
fixed level payment between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is the product of
one-twelfth of the APR on the Receivable multiplied by the scheduled principal
balance.
<PAGE> 3
"Advance" means the amount, as of the last day of a Collection
Period, which is required to be advanced by the Servicer with respect to a
Receivable pursuant to Section 4.4(a) hereof. When used as a verb, "Advance"
shall have a correlative meaning.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with such specified Person. For 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.
"Amount Financed" in respect of a Receivable means the amount
originally advanced under such Receivable toward the purchase price of the
related Financed Vehicle and related costs.
"APR" of a Receivable means "the annual percentage rate" of
interest stated on such Receivable.
"Authorized Officer" means any officer within the Corporate
Trust Office of the Trustee, the Payahead Agent, the Class A Agent or the Class
B Agent, as the case may be, including any vice president, assistant vice
president, senior trust officer, trust officer, secretary, assistant secretary
or any other officer of the Trustee, the Payahead Agent, the Class A Agent or
the Class B Agent, as the case may be, 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.
"Available Interest" means, for any Distribution Date, the sum
of the following amounts with respect to the preceding Collection Period: (i)
that portion of all collections on Receivables (including amounts withdrawn from
Payahead Balances pursuant to Section 4.4(a) but excluding amounts added to
Payahead Balances) allocable to interest due on such Receivables during such
Collection Period; (ii) all Liquidation Proceeds to the
2
<PAGE> 4
extent allocable to interest due thereon and any Recoveries; (iii) all Advances
made by the Servicer of interest due on Receivables; (iv) the Purchase Amount of
each Receivable that became a Purchased Receivable under an obligation that
arose during the related Collection Period to the extent allocable to accrued
interest thereon; and (v) the portion of the Shortfall Amounts, if any,
allocable to interest received by the Trustee; provided, however, that in
calculating the Available Interest the following will be excluded: (i) amounts
received on Receivables (including Purchase Amounts) to the extent that
unreimbursed Advances of interest had previously been made by the Servicer; (ii)
Recoveries with respect to a particular Receivable to the extent of any
unreimbursed Advances; (iii) Liquidation Proceeds with respect to a particular
Receivable to the extent of any unreimbursed Advances of interest; and (iv) the
Excess Amounts, if any, paid by Obligors during such Collection Period with
respect to Prepaid Receivables.
"Available Principal" means, for any Distribution Date, the
sum of the following amounts with respect to the preceding Collection Period:
(i) that portion of all collections on Receivables (including amounts withdrawn
from Payahead Balances pursuant to Section 4.4(a) but excluding amounts added to
Payahead Balances) allocable to principal; (ii) all Liquidation Proceeds
allocable to principal; (iii) all Advances made by the Servicer of principal due
on Receivables; (iv) to the extent allocable to principal, the Purchase Amount
of each Receivable that became a Purchased Receivable under an obligation that
arose during such Collection Period; and (v) the portion of the Shortfall
Amounts, if any, allocable to principal received by the Trustee; provided,
however, that in calculating the Available Principal the following will be
excluded: (i) amounts received on Receivables (including Purchase Amounts) to
the extent that unreimbursed Advances of principal had previously been made by
the Servicer; (ii) Liquidation Proceeds with respect to a particular Receivable
to the extent of any unreimbursed Advances of principal; and (iii) the Excess
Amounts, if any, paid by Obligors during such Collection Period with respect to
Prepaid Receivables.
"Book Entry Certificates" means beneficial interests in the
Class A Certificates or Class B Certificates as described in Section 6.8, the
ownership of which
3
<PAGE> 5
shall be evidenced, and transfers of which shall be made, through book entries
by a Clearing Agency as described in Section 6.8.
"Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions or trust companies in New York, New York
shall be authorized or obligated by law, executive order, or governmental decree
to remain closed.
"Certificate" means any Class A Certificate or Class B
Certificate.
"Certificate Account" means the account or accounts
established and maintained as such pursuant to Section 4.1.
"Certificate Owner" means, with respect to a Book Entry
Certificate, the Person who is the owner of such Book Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant, in accordance with the rules, regulations and procedures of such
Clearing Agency) and with respect to a Definitive Certificate, the
Certificateholder.
"Certificate Register" means the register maintained by the
Certificate Registrar for the registration of Certificates and of transfers and
exchanges of Certificates as provided in Section 6.3.
"Certificate Registrar" means the Trustee or any successor
pursuant to Section 6.3.
"Certificateholder" or "Holder" means the Person in whose name
a Certificate shall be registered in the Certificate Register as well as the
Seller as holder of the Retained Yield, except that, solely for the purpose of
giving any consent, request, demand, vote or waiver pursuant to this Agreement,
the interest evidenced by any Certificate or interest in the Retained Yield
registered in the name of the Seller, the Servicer, or any Person actually known
to an Authorized Officer of the Trustee to be an Affiliate of the Seller or the
Servicer, shall not be taken into account in determining whether the requisite
percentage necessary to effect any such
4
<PAGE> 6
consent, request, demand, vote or waiver shall have been obtained.
"Class" means either the Class A Certificates or the Class B
Certificates.
"Class A Agent" has the meaning specified in Section 4.7.
"Class A Certificate" means a certificate executed by the
Trustee on behalf of the Trust and authenticated by the Trustee, substantially
in the form of Exhibit A hereto.
"Class A Certificateholder" or "Class A Holder" means the
Person in whose name a Class A Certificate shall be registered in the
Certificate Register, except that, solely for the purpose of giving any consent,
request, demand or waiver pursuant to this Agreement, the interest evidenced by
any Class A Certificate registered in the name of the Seller, the Servicer, or
any Person actually known to an Authorized Officer of the Trustee to be an
Affiliate of the Seller or the Servicer, shall not be taken into account in
determining whether the requisite percentage necessary to effect any such
consent, request, demand or waiver shall have been obtained.
"Class A Certificate Owner" means, with respect to a Book
Entry Certificate representing a beneficial interest in the Class A
Certificates, the Person who is the owner of such Book Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant in accordance with the rules, regulations and procedures of such
Clearing Agency) and, with respect to a Definitive Certificate, the Class A
Certificateholder.
"Class A Distributable Amount" means, with respect to any
Distribution Date, the sum of Class A Principal and Class A Interest for such
Distribution Date and the Class A Interest Carryover Shortfall and Class A
Principal Carryover Shortfall as of the close of business on the preceding
Distribution Date.
"Class A Interest" means, with respect to any Distribution
Date, an amount equal to thirty (30) days of
5
<PAGE> 7
interest at the Pass-Through Rate on the Class A Principal Balance on the first
day of the related Collection Period (reduced by the amount of principal
distributions to be made on the Distribution Date in such Collection Period).
"Class A Interest Carryover Shortfall" means, as of the close
of business on any Distribution Date, the excess, if any, of (x) the Class A
Interest for such Distribution Date plus any outstanding Class A Interest
Carryover Shortfall from the preceding Distribution Date over (y) the amount of
interest that the Class A Certificateholders actually received on such current
Distribution Date (plus thirty (30) days' interest on the amount of such excess,
to the extent permitted by law, at the Pass-Through Rate).
"Class A Percentage" means %.
"Class A Pool Factor" means, as of a Distribution Date, a
seven-digit decimal figure equal to the Class A Principal Balance as of the
close of business on such Distribution Date divided by the Original Class A
Principal Balance.
"Class A Principal" means, with respect to any Distribution
Date, the sum of the Class A Percentage of: (i) the principal portion of all
Scheduled Payments due on the Receivables during the preceding Collection
Period; (ii) the Principal Balance of each Receivable that became a Prepaid
Receivable during the preceding Collection Period (without duplication of
amounts included in clause (i) above or clause (iv) below); (iii) the Principal
Balance of each Receivable that became a Purchased Receivable under an
obligation that arose during the preceding Collection Period (without
duplication of amounts referred to in clause (i)); and (iv) the Principal
Balance of each Receivable which became a Defaulted Receivable during the
preceding Collection Period (without duplication of amounts referred to in
clause (i) or (ii) above). In addition, on the Final Scheduled Distribution
Date, "Class A Principal" will include the lesser of (x) the Class A Percentage
of any payments of principal due and remaining unpaid on each Receivable in the
Trust as of the Final Scheduled Maturity Date (except to the extent previously
Advanced) and (y) the portion of such amount that is necessary (after giving
effect to the
6
<PAGE> 8
other amounts to be distributed to the Class A Certificateholders on such
Distribution Date and allocable to principal) to reduce the Class A Principal
Balance to zero.
"Class A Principal Balance" means, initially, the Original
Class A Principal Balance and, thereafter, the Original Class A Principal
Balance, reduced by all amounts distributed to the Class A Certificateholders
and allocable to principal.
"Class A Principal Carryover Shortfall" means, as of the close
of business on any Distribution Date, the excess of (x) the Class A Principal
plus any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over (y) the amount of principal that the Holders of the Class
A Certificates actually received on such current Distribution Date.
"Class A Reserve Fund" means the Class A Reserve Fund,
established and maintained as such pursuant to Section 4.7, for the Class A
Certificates.
"Class A Reserve Fund Property" has the meaning specified in
Section 4.7(a).
"Class A Reserve Initial Deposit" means, with respect to the
Closing Date, $ .
"Class B Agent" has the meaning specified in Section 4.7.
"Class B Certificate" means a certificate executed by the
Trustee on behalf of the Trust and authenticated by the Trustee, substantially
in the form of Exhibit B hereto.
"Class B Certificateholder" or "Class B Holder" means the
Person in whose name a Class B Certificate shall be registered in the
Certificate Register, except that, solely for the purpose of giving any consent,
request, demand or waiver pursuant to this Agreement, the interest evidenced by
any Class B Certificate registered in the name of the Seller, the Servicer, or
any Person actually known to an Authorized Officer of the Trustee to be an
Affiliate of the Seller or the Servicer, shall not be taken into account in
determining whether the requi-
7
<PAGE> 9
site percentage necessary to effect any such consent, request, demand or waiver
shall have been obtained.
"Class B Certificate Owner" means, with respect to a Book
Entry Certificate representing a beneficial interest in the Class B
Certificates, the Person who is the owner of such Book Entry Certificate, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly or as an indirect
participant in accordance with the rules, regulations and procedures of such
Clearing Agency) and, with respect to a Definitive Certificate, the Class B
Certificateholder.
"Class B Distributable Amount" means, with respect to any
Distribution Date, the sum of the Class B Principal, Class B Interest, Class B
Interest Carryover Shortfall, and Class B Principal Carryover Shortfall.
"Class B Interest" means, with respect to any Distribution
Date, thirty (30) days of interest at the Pass-Through Rate on the Class B
Principal Balance on the first day of the related Collection Period (reduced by
the amount of principal distributions to be made on the Distribution Date in
such Collection Period).
"Class B Interest Carryover Shortfall" means, as of the close
of business on any Distribution Date, the excess, if any, of (x) the Class B
Interest for such Distribution Date plus any outstanding Class B Interest
Carryover Shortfall from the preceding Distribution Date over (y) the amount of
interest that the Class B Certificateholders actually received on such current
Distribution Date (plus thirty (30) days' interest on the amount of such excess,
to the extent permitted by law, at the Pass-Through Rate).
"Class B Percentage" means %.
"Class B Pool Factor" means, as of a Distribution Date, a
seven-digit decimal figure equal to the Class B Principal Balance as of the
close of business on such Distribution Date divided by the Original Class B
Principal Balance.
"Class B Principal" means, with respect to any Distribution
Date, the sum of the Class B Percentage of:
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<PAGE> 10
(i) the principal portion of all Scheduled Payments due on the Receivables
during the preceding Collection Period; (ii) the Principal Balance of each
Receivable that became a Prepaid Receivable during the preceding Collection
Period (without duplication of amounts included in clause (i) above or clause
(iv) below); (iii) the Principal Balance of each Receivable that became a
Purchased Receivable under an obligation that arose during the preceding
Collection Period (without duplication of amounts included in clause (i)); and
(iv) the Principal Balance of each Receivable that became a Defaulted Receivable
during the preceding Collection Period (without duplication of amounts referred
to in clause (i) or (ii) above). In addition, on the Final Scheduled
Distribution Date the "Class B Principal" will include the lesser of (x) the
Class B Percentage of any payments of principal due and remaining unpaid on each
Receivable in the Trust as of the Final Scheduled Maturity Date (except to the
extent previously Advanced) and (y) the portion of such amount that is necessary
(after giving effect to the other amounts to be distributed to the Class B
Certificateholder on such Distribution Date and allocable to principal) to
reduce the Class B Principal Balance to zero, and, in the case of clauses (x)
and (y) above, remaining after any required distribution of the amount described
in clause (x) or (y) of the definition of "Class A Principal".
"Class B Principal Balance" means, initially, the Original
Class B Principal Balance and, thereafter, the Original Class B Principal
Balance, reduced by all amounts distributed to the Class B Certificateholders
and allocable to principal.
"Class B Principal Carryover Shortfall" means, as of the close
of business on any Distribution Date, the excess of (x) the Class B Principal
plus any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over (y) the amount of principal that the Holder of the Class
B Certificate actually received on such current Distribution Date.
"Class B Reserve Fund" means the Class B Reserve Fund,
established and maintained as such pursuant to Section 4.7, for the Class B
Certificateholders.
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<PAGE> 11
"Class B Reserve Fund Property" has the meaning specified in
Section 4.7(a).
"Class B Reserve Initial Deposit" means, with respect to the
Closing Date, $0, which amount may be increased upon sale of the Class B
Certificates and receipt of an Opinion of Counsel to the effect that such
increase would not adversely affect the status of the Trust as a grantor trust
for federal income tax purposes.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended. The initial Clearing Agency shall be The Depository Trust
Company.
"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 the date of the initial issuance of the
Certificates hereunder.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collection Account" means the account or accounts established
and maintained as such pursuant to Section 4.1.
"Collection Account Property" has the meaning specified in
Section 4.2(a).
"Collection Period" means each calendar month during the term
of this Agreement or, in the case of the initial Collection Period, the period
from the Cutoff Date to and including the last day of the month preceding the
initial Distribution Date.
"Commission" means the Securities and Exchange Commission, or
any successor thereto.
"Computer Tape" means the computer tape generated by MBCC
which provides information relating to the
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<PAGE> 12
Receivables and which was used by MBCC in selecting the Receivables conveyed to
the Trust hereunder.
"Corporate Trust Office" means the principal office of the
Trustee, the Payahead Agent, the Class A Agent or the Class B Agent, as the case
may be, at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
120 Wall Street, New York, New York 10043, Attention: Corporate Trust
Administration, or at such other address as the Trustee, the Payahead Agent, the
Class A Agent or the Class B Agent, as the case may be, may designate from time
to time by notice to the Certificateholders, the Seller and the Servicer, or the
principal corporate trust office of any successor Trustee, Payahead Agent, Class
A Agent or the Class B Agent, as the case may be, (the address of which the
successor Trustee, Payahead Agent, Class A Agent or the Class B Agent, as the
case may be, will notify the Certificateholders, the Seller and the Servicer).
"Cutoff Date" means the opening of business on
, 1997.
"DBNA" means Daimler-Benz North America Corporation, a
Delaware corporation, and its successors and assigns.
"Dealer" means, with respect to a Receivable, the seller of
the related Financed Vehicle, who originated and assigned the Receivable
relating to such Financed Vehicle to MBCC under a Dealer Agreement.
"Dealer Agreement" means an agreement between MBCC and a
Dealer relating to the assignment of Receivables to MBCC and all documents and
instruments relating thereto.
"Defaulted Receivable" means a Receivable which, by its terms,
is in default and as to which the Servicer has determined, in accordance with
its customary servicing procedures, that eventual payment in full is unlikely or
the Servicer has repossessed and disposed of the related Financed Vehicle.
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<PAGE> 13
"Definitive Certificates" means definitive fully registered
Class A Certificates or Class B Certificates as described in Section 6.8.
"Delivery" with respect to Eligible Investments
means:
(a)(i) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations to the extent
constituting "instruments" within the meaning of Section 9-105(1)(i) of the UCC,
transfer thereof to the Investment Agent by physical delivery of such
instruments to the Investment Agent in the State of New York endorsed to, or
registered in the name of, the Investment Agent or endorsed in blank, (ii) with
respect to "money" as defined in Section 1-201(24) of the UCC, delivery thereof
to the Investment Agent in the State of New York, (iii) with respect to a
"certificated security" (as defined in Section 8-102(1)(a) of the UCC) transfer
thereof (A) by physical delivery of such certificated security to the Investment
Agent or its financial intermediary in the State of New York, endorsed to, or
registered in the name of, the Investment Agent or endorsed in blank, (B) when a
financial intermediary (as defined in Section 8-313(4) of the UCC) of the
Investment Agent, which has physical possession of such certificated security
and such certificated security is either endorsed to, or registered in the name
of, such financial intermediary or endorsed in blank, makes entries on its books
and records identifying such certificated security as belonging solely and
exclusively to the Investment Agent and sends a confirmation of the purchase of
such certificated security by the Investment Agent or (C) when a "clearing
corporation" (as defined in Section 8-102(3) of the UCC) or its "custodian bank"
(as defined in Section 8-102(4) of the UCC) has physical possession of such
certificated security and such security is either in bearer form, in registered
form registered to the clearing corporation or to such custodian bank or a
nominee of any of them subject to the clearing corporation's exclusive control,
or endorsed to such clearing corporation or custodian bank or endorsed in blank,
and the making by such clearing corporation of appropriate entries on its books
reducing the appropriate securities account of the transferor and increasing the
appropriate securities account of the financial intermediary of the Investment
Agent by the amount of such certificated security, the
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<PAGE> 14
identification by the clearing corporation of the certificated securities for
the sole and exclusive account of the financial intermediary, the maintenance in
the State of New York of such certificated securities by such clearing
corporation or such custodian bank or the nominee of either of them subject to
the clearing corporation's exclusive control, the sending of a confirmation to
the Investment Agent by the financial intermediary of the purchase by the
Investment Agent of such securities and the making by such financial
intermediary of entries on its books and records identifying such certificated
securities as belonging solely and exclusively to the Investment Agent (all of
the foregoing, "Physical Property"); and such additional or alternative
procedures as may hereafter become appropriate to effect the complete transfer
of ownership of any such securities to the Investment Agent consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any securities issued by the U.S.
Treasury, the Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that are book entry securities held through the Federal
Reserve System pursuant to Federal book entry regulations, the following
procedures, all in accordance with applicable law, including applicable Federal
regulations and Articles 8 and 9 of the UCC: book entry registration of such
securities to an appropriate book entry account maintained with a Federal
Reserve Bank by a financial intermediary which is also a "depository" pursuant
to applicable Federal regulations and issuance by such financial intermediary of
a deposit advice or other written confirmation of such book entry registration
to the Investment Agent of the purchase by the Investment Agent of such book
entry securities; the making by such financial intermediary of entries in its
books and records identifying such book entry securities held through the
Federal Reserve System pursuant to Federal book entry regulations as belonging
solely and exclusively to the Investment Agent and indicating that such
custodian holds such securities solely as agent for the Investment Agent and the
sending of a confirmation to the Investment Agent by such financial intermediary
of a confirmation of the purchase by the Investment Agent of such book entry
security; and such additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such securities to
the
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<PAGE> 15
Investment Agent consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any securities that are uncertificated
securities under Article 8 of the UCC, registration on the books and records of
the issuer of such securities in the name of the financial intermediary, the
sending of the appropriate transaction statement by the issuer to the financial
intermediary, the sending of a confirmation to the Investment Agent by the
financial intermediary of the purchase by the Investment Agent of such
uncertificated securities, the making by such financial intermediary of entries
on its books and records identifying such uncertificated securities as belonging
solely and exclusively to the Investment Agent; and such additional or
alternative procedures as may hereafter become appropriate to effect complete
transfer of ownership of any such securities to the Investment Agent consistent
with changes in applicable law or regulations or interpretation thereof.
"Depository Agreement" means the agreement among the Seller,
the Servicer, the Trustee and the initial Clearing Agency, dated , 1997,
substantially in the form attached hereto as Exhibit D.
"Determination Date" with respect to any Collection Period,
means the earlier of (i) the sixteenth calendar day of the next succeeding
calendar month and (ii) the second Business Day preceding the next succeeding
Distribution Date.
"Distribution Date" means the 20th day of each month (or, if
the 20th day is not a Business Day, the next following Business Day), commencing
, 1997.
"Due Period" means, with respect to each Receivable, each
monthly period ending on the day preceding the day on which a payment is due on
the Receivable.
"Eligible Bank" means any depository institution with trust
powers (which may be the Trustee), organized under the laws of the United States
of America or any one of the states thereof or the District of Columbia, which
has a net worth in excess of $50,000,000, the deposits of which are insured to
the full extent permitted by law by the Federal Deposit Insurance Corporation,
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<PAGE> 16
which is subject to supervision and examination by Federal or state banking
authorities and which has (i) a rating of P-1 from Moody's and A-1+ from S&P
with respect to short-term deposit obligations, or (ii) if such institution has
issued long-term unsecured debt obligations, a rating of A2 or higher from
Moody's and AAA from S&P with respect to long-term unsecured debt obligations.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Bank or (b) a segregated trust account with the 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 trust powers and acting as
trustee for funds deposited in such account, so long as the long-term unsecured
debt of such depository institution shall have a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade
(which, for Moody's, is Baa3 or higher, and for S&P is BBB- or higher).
"Eligible Investments" means (i) obligations issued by the
United States of America or its agencies or instrumentalities and supported by
the full faith and credit of the United States of America as to timely payment
of principal and interest; (ii) demand and time deposits in, bankers'
acceptances issued by, 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 and subject to supervision and examination by federal or state
banking or depository institution authorities, or any depository institution or
trust company incorporated under the laws of any foreign jurisdiction that has a
branch or agency located in the United States of America and which depository
institution, trust company or branch is subject to supervision and examination
by federal or state banking or depository institution authorities; provided,
however, that, at the time of the investment or contractual commitment to invest
therein, the commercial paper of such depository institution or trust company
has a credit rating of at least P-1 from Moody's and A-1+ from S&P; (iii)
commercial paper having, at the time of the investment or contractual commitment
to invest therein, a credit rating of at least P-1 from Moody's and A-l+ from
S&P; (iv) investments in money market funds registered
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<PAGE> 17
under the Investment Company Act of 1940, as amended, that, at the time of the
investment or contractual commitment to invest therein, are rated in the highest
investment category of each Rating Agency (AAAm or AAAm-g by S&P and P-1 or Aaa
by Moody's) or otherwise approved in writing by each Rating Agency (including
funds for which the Trustee or any of its Affiliates is investment manager or
advisor); and (v) any other investment otherwise reviewed by each Rating Agency
and which would not result in a lowering of or a withdrawal of the then current
rating of the Class A Certificates and, if rated, the Class B Certificates.
"Eligible Servicer" means (a) any subsidiary of DBNA or (b)
any Person which, at the time of its appointment as Servicer or as subservicer,
(i) has a net worth of not less than $50,000,000, (ii) is servicing a portfolio
of motor vehicle installment contracts and/or motor vehicle loans, (iii) is
legally qualified, and has the capacity, to service the Receivables, (iv) has
demonstrated the ability to service a portfolio of motor vehicle installment
contracts and/or motor vehicle loans similar to the Receivables professionally
and competently in accordance with standards of skill and care that are
consistent with prudent industry standards, and (v) is qualified and entitled to
use, pursuant to a license or other written agreement, and agrees to maintain
the confidentiality of, the software which the Servicer or any subservicer uses
in connection with performing its duties and responsibilities under this
Agreement or the related subservicing agreement or obtains rights to use, or
develops at its own expense, software which is adequate to perform its duties
and responsibilities under this Agreement or the related subservicing agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Servicing Termination" means an event specified in
Section 9.1.
"Excess Amount" means, with respect to any Receivable which
becomes a Prepaid Receivable in any Collection Period, the amount (if positive)
calculated by the Servicer equal to the excess of (i) the amount received from
the related Obligor in connection with such prepayment over (ii)(a) the
Principal Balance of such Re-
16
<PAGE> 18
ceivable as of the first day of such Collection Period plus (b) one month's
interest on such Principal Balance at the APR of such Receivable.
"Final Scheduled Distribution Date" means the , 2002
Distribution Date.
"Final Scheduled Maturity Date" means the last day of the
Collection Period immediately preceding the Final Scheduled Distribution Date.
"Financed Vehicle" means a new or used Mercedes-Benz
automobile, together with all accessions thereto, securing an Obligor's
indebtedness under a Receivable.
"Investment Agent" means with respect to Eligible Investments
(i) in the Collection Account, the Trustee, (ii) in the Payahead Account, the
Payahead Agent, (iii) in the Class A Reserve Fund, the Class A Agent, and (iv)
in the Class B Reserve Fund, the Class B Agent.
"Lien" means a security interest, lien, charge, pledge, equity
or encumbrance of any kind, other than tax liens, mechanics' or materialmen's
liens, judicial liens and any liens that may attach to a Financed Vehicle by
operation of law.
"Liquidation Proceeds" means, with respect to a Defaulted
Receivable, the monies collected from whatever source, during the Collection
Period in which such Receivable became a Defaulted Receivable net of the sum of
(i) any expenses incurred by the Servicer in connection with collection of such
Receivable and the disposition of the Financed Vehicle and (ii) any amounts
required by law to be remitted to the Obligor. Liquidation Proceeds shall be
allocated first to accrued and unpaid interest on the Receivable and then to the
unpaid principal balance thereof.
"MBCC" means Mercedes-Benz Credit Corporation, a Delaware
corporation, and its successors and assigns.
"Monthly Remittance Condition" has the meaning specified in
Section 4.1(d).
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<PAGE> 19
"Moody's" means Moody's Investors Service, Inc. or its
successor.
"Obligor" with respect to any Receivable means the purchaser
or co-purchasers of the related Financed Vehicle purchased in part or in whole
by the execution and delivery of such Receivable or any other Person who owes or
may be liable for payments under such Receivable.
"Officer's Certificate" means a certificate signed by the
chairman, the president, any executive vice president, vice president or the
treasurer of the Seller or the Servicer, as the case may be, and delivered to
the Trustee.
"Opinion of Counsel" means a written opinion of counsel (who,
in the case of counsel to the Seller or the Servicer, may be an employee of or
outside counsel to the Seller or the Servicer) which counsel shall be acceptable
to the Trustee.
"Optional Purchase Percentage" means 10%.
"Original Class A Principal Balance" means $
.
"Original Class B Principal Balance" means $
.
"Original Pool Balance" means $ .
"Outstanding Advances" means, with respect to a Receivable,
the sum, as of the close of business on the last day of any Collection Period,
of all Advances pursuant to Section 4.4(a) with respect to such Receivable, as
reduced by repayments to the Servicer of such Advances.
"Pass-Through Rate" means % per annum.
"Payahead" means, with respect to a Receivable, the amount
computed in accordance with Section 4.3 with respect to such Receivable.
"Payahead Account" means the account established and
maintained as such pursuant to Section 4.1(b).
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<PAGE> 20
"Payahead Agent" means Citibank, N.A., a national banking
association, in its capacity as payahead agent with respect to the Payahead
Account.
"Payahead Balance" on a Receivable means the sum, as of the
close of business on the last day of a Collection Period, of all Payaheads made
by or on behalf of the Obligor with respect to such Receivable (including any
amount paid by or on behalf of the Obligor prior to the Cutoff Date that is due
on or after the Cutoff Date and was not used to reduce the principal balance
(calculated on the Actuarial Method) of such Receivable), as reduced by
applications of previous Payaheads with respect to such Receivable, pursuant to
Sections 4.3 and 4.4.
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, trust, unincorporated organization, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.
"Physical Property" has the meaning assigned to such term in
the definition of "Delivery" above.
"Pool Balance" means, as of any date, the aggregate
outstanding Principal Balance of the Receivables (excluding Defaulted
Receivables) as of the close of business on such date.
"Prepaid Receivable" shall mean each Receivable which during a
Collection Period is prepaid in full or accelerated under certain circumstances,
or with respect to which the related Financed Vehicle is repossessed and sold or
becomes a total loss.
"Principal Balance" means, with respect to any Receivable as
of any date, the Amount Financed minus the sum of the following amounts: (i)
that portion of all Scheduled Payments due on or prior to such date and, with
respect to periods prior to the initial Collection Period, the amount indicated
in such Receivable as required to be paid by the Obligor in each such period,
whether or not paid, allocable to principal in accordance with the Actuarial
Method, and (ii) any prepayment in full applied by the Servicer to reduce the
unpaid principal balance of
19
<PAGE> 21
such Receivable. The Principal Balance of any Receivable for any Collection
Period after the Collection Period in which it becomes a Defaulted Receivable
shall be zero.
"Purchase Agreement" means the Purchase Agreement dated as of ,
1997, by and between the Seller and MBCC, as amended, modified or supplemented,
relating to the purchase of the Receivables by the Seller from MBCC.
"Purchase Amount" means, with respect to any Distribution Date and a
Receivable to be repurchased by the Seller or purchased by the Servicer on such
Distribution Date, an amount equal to the sum of (a) the Principal Balance of
such Receivable as of the first day of the Collection Period preceding the
Collection Period in which such Distribution Date occurs, and (b) the amount of
accrued interest on such Principal Balance at the related APR from the date a
payment was last made by or on behalf of the Obligor through the due date for
payment of such Receivable in the Collection Period preceding the Collection
Period in which such Distribution Date occurs and, in the case of clauses (a)
and (b), after giving effect to the receipt of monies collected on such
Receivable in such preceding Collection Period, Payaheads applied to the
Scheduled Payments on such Receivable in such Collection Period and any Payahead
Balance with respect to such Receivable.
"Purchased Receivable" means, on any date of determination, a
Receivable as to which payment of the Purchase Amount has been made by the
Seller pursuant to Section 2.5 hereof or the Servicer pursuant to Section 3.6 or
Section 11.2 hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Rating Agency" means either S&P or Moody's, and together the
"Rating Agencies."
"Receivable" means each retail installment contract for a Financed
Vehicle described in the Schedule of Receivables and all rights and obligations
thereunder, but excluding Purchased Receivables.
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<PAGE> 22
"Receivable File", with respect to a Receivable, means the
electronic entries, documents, instruments and writings specified in Section
2.6.
"Record Date" means, with respect to any Distribution Date, the
nineteenth calendar day of the current month; provided, however, that if
Definitive Certificates are issued to a Person other than the Seller pursuant to
Section 6.10, or if Definitive Certificates are transferred by the Seller, the
Record Date for the related Class of Certificates for any Distribution Date
shall be the last day of the Collection Period immediately preceding the month
in which such Distribution Date occurs.
"Recoveries" with respect to any Collection Period, means all monies
received by the Servicer with respect to any Defaulted Receivable during any
Collection Period following the Collection Period in which such Receivable
became a Defaulted Receivable, net of the sum of (i) any expenses incurred by
the Servicer in connection with the collection of such Receivable and the
disposition of the Financed Vehicle (to the extent not previously reimbursed)
and (ii) any amounts required by law to be remitted to the Obligor.
"Required Rating" means a rating on (i) short-term unsecured debt
obligations of P-1 by Moody's and (ii) short-term unsecured debt obligations of
A-1+ by S&P; and any requirement that short-term unsecured debt obligations have
the "Required Rating" shall mean that such short-term unsecured debt obligations
have the foregoing required ratings from each of such Rating Agencies.
"Reserve Fund" means each of the Class A Reserve Fund and the Class
B Reserve Fund, established and maintained as such pursuant to Section 4.7.
"Residual Certificate" has the meaning specified in Section 6.1.
"Retained Yield" means the portion of the interest accruing on each
Receivable for each Due Period for such Receivable, equal to interest at the
Spread Rate for such Receivable.
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<PAGE> 23
"Rule 144A" means Rule 144A under the Act.
"S&P" means Standard & Poor's Ratings Services, a Division of The
McGraw-Hill Companies, Inc., or its successor.
"Schedule of Receivables" means the list identifying the Receivables
attached hereto as Schedule I as supplemented or amended from time to time.
"Scheduled Payment" means, for any Collection Period for any
Receivable, the amount indicated in such Receivable as required to be paid by
the Obligor in such Collection Period (without giving effect to deferments of
payments pursuant to Section 3.2 or any rescheduling in any insolvency or
similar proceedings or any Payaheads).
"Seller" means Daimler-Benz Vehicle Receivables Corporation, a
Delaware corporation, in its capacity as seller of the Receivables to the Trust
under this Agreement, and each successor thereto (in the same capacity) pursuant
to Section 7.3.
"Servicer" means MBCC, a Delaware corporation, in its capacity as
servicer of the Receivables under this Agreement, each successor thereto (in the
same capacity) pursuant to Section 8.3, and each successor Servicer appointed
and acting pursuant to Section 9.2.
"Servicer's Certificate" has the meaning specified in Section 3.8.
"Servicing Fee" means, with respect to any Distribution Date, the
fee payable to the Servicer for services rendered during the related Collection
Period, determined pursuant to and defined in Section 3.7.
"Servicing Guaranty Agreement" means an agreement, substantially in
the form of Exhibit F hereto, between DBNA and the Trustee.
"Servicing Officer" means any officer of the Servicer involved in,
or responsible for, the administration and servicing of the Receivables, whose
name appears on a list of servicing officers attached to an Officer's
Certificate furnished to the Trustee by the Servicer, as
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such list may be amended from time to time by the Servicer in writing.
"Servicing Rate" means 1.00% per annum.
"Shortfall Amount" means, with respect to any Receivable which
becomes a Prepaid Receivable (excluding any Defaulted Receivable) in any
Collection Period, the amount (if positive) calculated by the Servicer equal to
the excess of (i) the sum of (x) the Principal Balance of such Receivable as of
the first day of such Collection Period plus (y) one month's interest on such
Principal Balance at the APR of such Receivable over (ii) the amount received
from the related Obligor in connection with such prepayment.
"Shortfall Amount Agreement" means the Agreement dated as of ,
1997, by and between the Seller and MBCC, as amended, modified or supplemented
from time to time.
"Specified Class A Reserve Balance" with respect to any Distribution
Date will equal $ ; except where on any Distribution Date (i) the
annualized average for the preceding three Collection Periods (or such shorter
number of Collection Periods as have elapsed since the Cutoff Date) of the
ratios of net losses (i.e., the net balances of all Defaulted Receivables
arising in the applicable Collection Period, less any Liquidation Proceeds or
Recoveries received in such Collection Period) to the Pool Balance as of the
first day of each such Collection Period exceeds % or (ii) the average for
the preceding three Collection Periods (or such shorter number of Collection
Periods as have elapsed since the Cutoff Date) of the ratios of the balance of
Receivables that are delinquent 60 days or more to such outstanding Pool Balance
exceeds %, then the Specified Class A Reserve Balance for such Distribution
Date will equal $ ; provided, however, that the Seller may reduce the
Specified Class A Reserve Balance if the Rating Agencies confirm in writing to
the Class A Agent and the Seller prior to such reduction that such reduction
will not result in a lowering of or a withdrawal of the then current rating of
the Class A Certificates.
"Specified Class B Reserve Balance" with respect to any Distribution
Date means initially zero and
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shall remain zero for so long as the Seller holds the Class B Certificates and
thereafter shall mean an amount determined by the Seller in consultation with
the Rating Agencies in order to achieve the desired rating for the Class B
Certificates.
"Spread Rate" means, with respect to each Receivable, a rate equal
to the excess, if any, of (i) the APR of such Receivable over (ii) the sum of
the Pass-Through Rate plus the Servicing Rate.
"Subsidiary" means any corporation at least a majority of whose
securities having ordinary voting power for the election of directors (other
than securities having such power only by reason of the happening of a
contingency) are at all times owned or controlled directly or indirectly by
DBNA.
"Supplemental Servicing Fee" means the fee payable to the Servicer
for services rendered during the related Collection Period, determined pursuant
to and defined in Section 3.7.
"Total Available Amount" means, for any Distribution Date, the sum
of the Available Interest and the Available Principal.
"Trust" means the Daimler-Benz Auto Grantor Trust 1997-A created by
this Agreement.
"Trust Property" means: (i) the Receivables; (ii) all monies due
thereunder on or after the Cutoff Date (including Payaheads attributable to
amounts then due, but excluding Excess Amounts); (iii) all amounts and property
from time to time held in or credited to the Collection Account and the
Certificate Account; (iv) all of the Seller's security interests in the Financed
Vehicles; (v) all of the Seller's rights under the Shortfall Amount Agreement;
(vi) all of the Seller's rights to receive proceeds from claims on physical
damage, credit life and disability insurance policies covering the Financed
Vehicles or the Obligors; (vii) all rights to receive payments under the
circumstances specified herein from the Class A Reserve Fund, the Class B
Reserve Fund; (viii) all of the Seller's rights of recourse against Dealers
arising out of breaches by Dealers with respect to the Receivables; (ix) all of
the Seller's rights to
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all documents contained in the Receivable Files; (x) certain rights under the
Purchase Agreement, including the right of the Seller to cause MBCC to
repurchase Receivables from time to time from the Seller under certain
circumstances specified therein; (xi) all property (including the right to
receive future Liquidation Proceeds and Recoveries) that secures a Receivable
and that shall have been acquired by or on behalf of the Trustee; (xii) the
Servicing Guaranty Agreement; and (xiii) all proceeds (within the meaning of
Section 9-306 of the UCC) of the foregoing.
"Trustee" means Citibank, N.A., a national banking association, as
Trustee under this Agreement, or any successor, and any successor Trustee
appointed and acting pursuant to Section 10.11.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction.
SECTION 1.2. Usage of Terms. With respect to all terms used in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the terms "include"
or "including" mean "include without limitation" or "including without
limitation."
SECTION 1.3. Calculations. All calculations of the amount of
interest accrued on the Certificates during any Collection Period and all
calculations of the amount of the Servicing Fee payable with respect to a
Collection Period shall be made on the basis of a 360-day year consisting of
twelve 30-day months.
SECTION 1.4. References. All references to the first day of a
Collection Period shall refer to the opening of business on such day. All
references to the last day of a Collection Period shall refer to the close of
business on such day. All references herein to the
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close of business shall mean the close of business, New York time.
SECTION 1.5. Section References. All section references shall be to
Sections in this Agreement unless otherwise specified.
SECTION 1.6. Action by or Consent of Certificateholders. Whenever
any provision of this Agreement refers to action to be taken, or consented to,
by Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consented to by Certificateholders.
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ARTICLE II
The Trust and Trust Property
SECTION 2.1. Creation of Trust. Upon the execution of this Agreement
by the parties hereto, there is hereby created the Daimler-Benz Auto Grantor
Trust 1997-A.
SECTION 2.2. Conveyance of Trust Property. In consideration of the
Trustee's delivery to, or upon the written order of, the Seller of authenticated
Certificates, in authorized denominations, in an aggregate amount equal to the
Original Pool Balance, the Seller hereby irrevocably sells, transfers, assigns
and conveys to the Trustee, in trust for the benefit of Certificateholders, upon
the terms and conditions hereof, all right, title and interest of the Seller,
whether now owned or hereafter acquired, in and to and under the Trust Property,
without recourse. The sale, transfer, assignment and conveyance made hereunder
shall not constitute and is not intended to result in an assumption by the
Trustee, any Certificateholder or any Certificate Owner of any obligation of the
Seller to the Obligors, the Dealers or any other Person in connection with the
Receivables and the other Trust Property or any agreement, document or
instrument related thereto.
It is the intention of the Seller and the Trustee that the transfer
of the Trust Property contemplated herein constitute a sale of the Trust
Property, conveying good title to the Trust Property from the Seller to the
Trust. However, in the event that such transfer is deemed to be a pledge to
secure the payment of the Certificates, the Seller hereby grants to the Trustee
on behalf of the Trust for the benefit of the Certificateholders a first
priority security interest in all of the Seller's right, title and interest in
the Trust Property, and all proceeds thereof, to secure the payment of the
Certificates, and in such event, this Agreement shall constitute a security
agreement under applicable law.
SECTION 2.3. Acceptance by Trustee. The Trustee does hereby accept
all consideration conveyed by the Seller pursuant to Section 2.2, and declares
that the Trustee shall hold such consideration upon the trusts
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herein set forth for the benefit of all present and future Certificateholders,
subject to the terms and provisions of this Agreement.
SECTION 2.4. Representations and Warranties of the Seller as to the
Receivables. The Seller makes the following representations and warranties as to
the Receivables on which the Trustee relies in accepting the Receivables in
trust and executing and authenticating the Certificates. Such representations
and warranties speak as of the Closing Date, but shall survive the sale,
transfer, and assignment of the Receivables to the Trustee:
(i) Characteristics of Receivables. Each Receivable (a) was
originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business,
was fully and properly executed by the parties thereto, has been purchased
by the Seller from MBCC, which in turn purchased such Receivable from such
Dealer under an existing Dealer Agreement with MBCC, has been validly
assigned by such Dealer to MBCC, which in turn has validly assigned such
Receivable to the Seller, (b) contains customary and enforceable
provisions such that the rights and remedies of the holder thereof shall
be adequate for realization against the collateral of the benefits of the
security, (c) provides for level monthly payments (provided that the
payment in the first or last month in the life of the Receivable may be
minimally different from the level payment) that fully amortize the Amount
Financed by maturity and yields interest at the APR of such Receivable,
(d) is a retail installment contract, (e) is secured by a Financed
Vehicle, and (f) except to the extent such Receivable may become a Prepaid
Receivable, provides for allocation of payments in accordance with the
Actuarial Method.
(ii) Schedule of Receivables. The information set forth in the
Schedule of Receivables was true and correct in all material respects as
of the opening of business on the Cutoff Date, and no selection procedures
believed by the Seller to be adverse to the Certificateholders were
utilized in selecting the Receivables.
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(iii) Compliance with Law. Each Receivable and the sale of the
related Financed Vehicle complied at the time it was originated or made,
and complies at the Closing Date, in all material respects with all
requirements of applicable federal, State, and local laws, and regulations
thereunder, including, without limitation, usury laws, the Federal Truth
in Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson Moss Warranty Act, the Federal Reserve
Board's Regulations B and Z, and State adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and other consumer
credit laws and equal credit opportunity and disclosure laws.
(iv) Binding Obligation. To the best of the Seller's knowledge
each Receivable represents the legal, valid, and binding payment
obligation in writing of the related Obligor, enforceable by the holder
thereof in accordance with its terms except as enforceability may be
limited by bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation or other similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
(v) No Government Obligor. Neither the United States of
America nor any State or any agency, department, or instrumentality of the
United States of America or any State is an Obligor.
(vi) Security Interest in Financed Vehicle. To the best of the
Seller's knowledge, immediately prior to the sale, assignment, and
transfer of each Receivable by MBCC to the Seller, such Receivable was
secured by a validly perfected first priority security interest in the
related Financed Vehicle in favor of MBCC as secured party. Such security
interest was validly assigned by MBCC to the Seller and is being assigned
by the Seller to the Trustee pursuant to this Agreement except that no
certificate of title or certificate of ownership with respect to such
Financed Vehicle has been or will be amended to identify the Seller or the
Trustee as a secured party. At such time as enforcement
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of such security interest is sought, there shall exist a valid, subsisting
and enforceable first priority security interest in such Financed Vehicle
for the benefit of the Trustee. The foregoing representations and
warranties with respect to perfection and enforceability of a security
interest in a Financed Vehicle do not cover statutory or other liens
arising after the Closing Date by operation of law or any rights of third
parties arising after the Closing Date as a result of the fraud or forgery
of the vehicle owner or administrative error by state recording officials
which are prior to such security interest.
(vii) No Defenses. No right of rescission, setoff,
counterclaim, or defense has been asserted or, to the best of the
Seller's knowledge, threatened with respect to any Receivable.
(viii) No Liens. To the best of the Seller's knowledge, no
liens or claims have been filed for work, labor, or materials relating to
a Financed Vehicle that are liens prior to, or equal or on a parity with,
the security interest in the Financed Vehicle granted by the related
Receivable.
(ix) No Default; Repossession. Except for payment defaults
continuing for a period of not more than thirty days as of the Cutoff
Date, to the best of the Seller's knowledge, no default, breach,
violation, or event permitting acceleration under the terms of any
Receivable, and no event that with notice or the lapse of time would
constitute such a default, breach, violation, or event permitting
acceleration under the terms of any Receivable has occurred; and no
Financed Vehicle was repossessed on or prior to the Cutoff Date.
(x) Insurance. MBCC, in accordance with its customary
procedures, has determined that each Obligor has obtained or agreed to
obtain physical damage insurance covering such Obligor's Financed Vehicle.
(xi) Title. It is the intention of the Seller that the
transfer and assignment of the Receivables herein contemplated constitute
a sale of
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the Receivables from the Seller to the Trust and that the beneficial
interest in and title to the Receivables not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against
the Seller under any bankruptcy law. No Receivable has been sold,
transferred, assigned, or pledged by the Seller to any Person other than
the Trustee. The Seller is transferring title to each Receivable free and
clear of all Liens and rights of others and has perfected such transfer
under the UCC.
(xii) Valid Assignment. No Receivable was originated in, or is
subject to the laws of, any jurisdiction under which the sale, transfer,
and assignment of such Receivable under this Agreement is unlawful, void,
or voidable. The Seller has not entered into any agreement with any
Obligor that prohibits, restricts or conditions the assignment of any
portion of the Receivables.
(xiii) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the Trustee
a first priority perfected security interest in the Receivables have been
made.
(xiv) Chattel Paper. Each Receivable constitutes "chattel
paper" as defined in the UCC.
(xv) One Original. There is only one original executed copy of
each Receivable.
(xvi) Principal Balance. Each Receivable had a remaining
Principal Balance as of the Cutoff Date of not more than $ and not
less than $ .
(xvii) No Bankrupt Obligors. To the best of the Seller's
knowledge, no Obligor was, as of the Cutoff Date, the subject of a
proceeding under the Bankruptcy Code of the United States or was bank-
rupt.
(xviii) New and Used Vehicles. Approximately % of the
aggregate Principal Balance of the Receivables, constituting % of the
Receiv-
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ables as of the Cutoff Date, relate to new Financed Vehicles, and
approximately % of the aggregate Principal Balance of the Receivables,
constituting % of the Receivables as of the Cutoff Date, relate to used
Financed Vehicles.
(xix) Maturity of Receivables. Each Receivable had a remaining
maturity, as of the Cutoff Date, of not more than ___ months, and an
original maturity of not more than ___ months.
(xx) Annual Percentage Rate. Each Receivable has an APR of at
least % and not more than %.
(xxi) Payments. No Receivable had a payment that was more than
30 days overdue as of the Cutoff Date.
(xxii) Billing Address. The Obligor under each Receivable had
a current billing address in the United States as of the Cutoff Date.
SECTION 2.5. Repurchase upon Breach. The Seller, the Servicer, or
the Trustee, as the case may be, shall inform the other parties to this
Agreement and MBCC promptly, in writing, upon the discovery of any breach or
failure to be true of the representations and warranties made by the Seller
pursuant to Section 2.4 (and, in the case of subsections 2.4(iv), (vi), (vii),
(ix) and (xvii) any breach or failure which would have occurred if such warranty
had not been made to the best knowledge of the Seller). Unless any such breach
or failure shall have been cured by the last day of the Collection Period which
includes the 60th day after the date on which the Seller becomes aware of, or
receives written notice from the Trustee or the Servicer of, such breach or
failure, the Seller shall repurchase from the Trustee any Receivable, the
interests of the Trust and the Certificateholders in which are materially and
adversely affected by the breach or failure, on the Distribution Date
immediately following such Collection Period but with effect from the first day
of the Collection Period in which such Distribution Date occurs. In
consideration of the purchase of a Receivable hereunder, the Seller shall remit
the Purchase Amount of such Receivable in the manner specified in Section 4.5.
The sole remedy of the Trust, the Trustee, and
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the Certificateholders with respect to a breach or failure to be true of the
representations and warranties made by the Seller pursuant to Section 2.4 shall
be to require the Seller to repurchase the relevant Receivable pursuant to this
Section 2.5 or to enforce the obligation of MBCC to the Seller to repurchase
such Receivable pursuant to the Purchase Agreement.
SECTION 2.6. Custody of Receivable Files. To assure uniform quality
in servicing the Receivables and to reduce administrative costs, the Trustee,
upon the execution and delivery of this Agreement, revocably appoints the
Servicer, and the Servicer accepts such appointment, to act as custodian on
behalf of the Trustee of the following documents or instruments, which are
hereby constructively delivered to the Trustee with respect to each Receivable
(collectively, a "Receivable File"):
(i) the original of the Receivable;
(ii) the original credit application fully executed by the
related Obligor or a photocopy thereof;
(iii) the original certificate of title or such documents that
the Servicer or MBCC shall keep on file, in accordance with its customary
procedures, evidencing the security interest of MBCC in the Financed
Vehicle; and
(iv) any and all other documents that the Servicer or the
Seller shall keep on file, in accordance with its customary procedures,
relating to a Receivable, an Obligor, or a Financed Vehicle.
On the Closing Date, the Servicer shall provide an Officer's
Certificate to the Trustee confirming that the Servicer has received on behalf
of the Trustee all the documents and instruments necessary for the Servicer to
act as the custodian of the Trustee for the purposes referred to herein, and the
Trustee is hereby authorized to rely on such Officer's Certificate.
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SECTION 2.7. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as custodian, shall
hold the Receivable Files on behalf of the Trustee for the use and benefit of
all present and future Certificateholders and maintain such accurate and
complete accounts, records, and computer systems pertaining to each Receivable
File as shall enable the Servicer and the Trustee to comply with the terms and
provisions of this Agreement. In performing its duties as custodian, the
Servicer shall act with reasonable care, using that degree of skill and
attention that the Servicer exercises with respect to the receivable files
relating to all comparable automobile receivables that the Servicer services for
itself or others. In accordance with its customary practices with respect to its
retail installment contracts, the Servicer shall conduct, or cause to be
conducted, periodic audits of the Receivable Files held by it under this
Agreement, and of the related accounts, records, and computer systems, in such a
manner as shall enable the Trustee to verify the accuracy of the Servicer's
record keeping. The Servicer shall promptly report to the Trustee any failure on
its part to hold the Receivable Files and maintain its accounts, records, and
computer systems as herein provided and promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by the Trustee of the Receivable Files.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Receivable File at one of its offices specified in Schedule II to
this Agreement, or at such other office as shall be specified to the Trustee by
written notice not later than 90 days after any change in location. The Servicer
shall make available to the Trustee or its duly authorized representatives,
attorneys, or auditors a list of locations of the Receivable Files, the
Receivable Files, and the related accounts, records, and computer systems
maintained by the Servicer at such times as the Trustee shall instruct.
(c) Release of Documents. Upon written instructions from the
Trustee, the Servicer shall release any document in the Receivable Files to the
Trustee, the Trustee's agent, or the Trustee's designee, as the case may be, at
such place or places as the Trustee may desig-
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nate, as soon thereafter as is practicable and prior to the occurrence of an
Event of Servicing Termination or an event which with the passage of time and
delivery of notice would constitute an Event of Servicing Termination, so long
as doing so will not adversely affect the Servicer's ability to perform its
obligations under this Agreement. Any document so released shall be handled by
the Trustee with due care and returned to the Servicer for safekeeping as soon
as the Trustee or its agent or designee, as the case may be, shall have no
further need therefor and in any event at such time as may be required by the
Servicer to perform its obligations under this Agreement.
(d) Title to Receivables. The Servicer agrees that, in respect of
any Receivable held by the Servicer as custodian hereunder, the Servicer will
not at any time have or in any way attempt to assert any interest in such
Receivable or the related Receivable File, other than solely for the purpose of
collecting or enforcing the Receivable for the benefit of the Trust and that the
entire equitable interest in such Receivable and the related Receivable File
shall at all times be vested in the Trust.
SECTION 2.8. Instructions; Authority to Act. The Servicer shall be
deemed to have received proper instructions with respect to the Receivable Files
upon its receipt of written instructions signed by an Authorized Officer of the
Trustee. A certified copy of excerpts of certain resolutions of the Board of
Directors of the Trustee shall constitute conclusive evidence of the authority
of any such Authorized Officer to act and shall be considered in full force and
effect until receipt by the Servicer of written notice to the contrary given by
the Trustee.
SECTION 2.9. Custodian's Indemnification. The Servicer, in its
capacity as custodian, shall indemnify and hold harmless the Trustee, its
officers, directors, employees and agents, the Trust and the Certificateholders
from and against any and all liabilities, obligations, losses, compensatory
damages, payments, costs or expenses (including legal fees if any) of any kind
whatsoever that may be imposed on, incurred, or asserted against the Trustee,
the Trust or the Certificateholders as the result of any act or omission by the
Servicer
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relating to the maintenance and custody of the Receivable Files; provided,
however, that the Servicer shall not be liable hereunder to the extent, but only
to the extent, that such liabilities, obligations, losses, compensatory damages,
payments, costs or expenses result from the willful misfeasance, bad faith,
errors in judgment or negligence of the Trustee or from the compliance by the
Servicer with instructions given by the Trustee to the Servicer pursuant hereto;
and provided, further, that such indemnification shall not extend to any credit
losses on any Receivables.
SECTION 2.10. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section
2.10. If the Servicer shall resign as Servicer under Section 8.5 or if all of
the rights and obligations of the Servicer shall have been terminated under
Section 9.1, the appointment of the Servicer as custodian hereunder may be
terminated by the Trustee or by the Holders of Class A Certificates and Class B
Certificates evidencing not less than a majority of the sum of the Class A
Principal Balance and the Class B Principal Balance, in the same manner as the
Trustee or such Holders may terminate the rights and obligations of the Servicer
under Section 9.1 or the Servicer may resign as custodian in the same manner as
it may resign as Servicer under Section 8.5. As soon as practicable after any
termination or resignation of such appointment, the Servicer (at its own
expense) shall deliver, or cause to be delivered, the Receivable Files and the
related accounts and records maintained by the Servicer to the Trustee, the
Trustee's agent or the Trustee's designee at such place or places as the Trustee
may reasonably designate.
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ARTICLE III
Administration and Servicing of the Trust Property
SECTION 3.1. Duties of Servicer. (a) The Servicer, acting alone
and/or through subservicers as provided in this Section, shall administer the
Receivables with reasonable care. The Servicer's duties shall include, but not
be limited to, the collection and posting of all payments, responding to
inquiries by Obligors on the Receivables, or by federal, state, or local
governmental authorities, investigating delinquencies, reporting tax information
to Obligors, furnishing monthly and annual statements to the Trustee with
respect to distributions and providing collection and repossession services in
the event of Obligor default. The Servicer shall also administer and enforce all
rights and responsibilities of the holder of the Receivables provided for in the
Dealer Agreements, to the extent that such Dealer Agreements relate to the
Receivables, the Financed Vehicles or the Obligors. In performing its duties as
Servicer hereunder, the Servicer will exercise that degree of skill and
attention that the Servicer exercises with respect to all comparable automobile
receivables that it services for itself or others. Subject to Section 3.2, the
Servicer shall follow its customary standards, policies and procedures in
performing its duties as Servicer. Without limiting the generality of the
foregoing, the Servicer is hereby authorized and empowered by the Trustee to
execute and deliver, on behalf of itself, the Trust, the Trustee, and the
Certificateholders, any and all instruments of satisfaction or cancellation, or
of partial or full release or discharge, and all other comparable instruments,
with respect to the Receivables or to the Financed Vehicles, all in accordance
with this Agreement; provided, however, that notwithstanding the foregoing, the
Servicer shall not, except pursuant to an order from a court of competent
jurisdiction, release an Obligor from payment of any unpaid amount under any
Receivable or waive the right to collect the unpaid balance (including accrued
interest) of any Receivable from the Obligor, except in connection with a de
minimis deficiency which the Servicer would not attempt to collect in accordance
with its customary procedures, in which case the Servicer shall indemnify the
Trust for such deficiency. If the Servicer shall commence a legal proceeding to
enforce a Receivable, the Trustee shall
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thereupon be deemed to have automatically assigned such Receivable to the
Servicer, which assignment shall be solely for purposes of collection. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may not
enforce a Receivable on the ground that it shall not be a real party in interest
or a holder entitled to enforce the Receivable, the Trustee shall, at the
Servicer's expense and direction, take steps to enforce the Receivable,
including bringing suit in its name or the name of the Certificateholders. The
Trustee shall furnish the Servicer with any powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties hereunder. The Servicer, at its
expense, shall obtain on behalf of the Trust or the Trustee all licenses, if
any, required by the laws of any jurisdiction to be held by the Trust or the
Trustee in connection with ownership of the Receivables, and shall make all
filings and pay all fees as may be required in connection therewith during the
term hereof.
The Servicer may enter into subservicing agreements with one or more
subservicers for the servicing and administration of certain of the Receivables;
provided, however, that any such subservicer shall be and shall remain, for so
long as it is acting as subservicer, an Eligible Servicer, and any fees paid to
such subservicer shall be paid by the Servicer and not out of the proceeds of
the Trust, and any such subservicer shall agree to service the Receivables in a
manner consistent with the terms of this Agreement.
(b) References in this Agreement to actions taken, to be taken,
permitted to be taken, or restrictions on actions permitted to be taken by the
Servicer in servicing the Receivables and other actions taken, to be taken,
permitted to be taken, or restrictions on actions to be taken with respect to
the Trust Property shall include actions taken, to be taken, permitted to be
taken, or restrictions on actions permitted to be taken by a subservicer on
behalf of the Servicer and references herein to payments received by the
Servicer shall include payments received by a subservicer, irrespective of
whether such payments are actually deposited in the Collection Account by such
subservicer. Any such subservicing agreement will contain terms and provisions
substantially identical to the terms and provisions of this
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Agreement and such other terms and provisions as are not inconsistent with this
Agreement and as the Servicer and the subservicer have agreed.
(c) The Servicer shall be entitled to terminate any subservicing
agreement in accordance with the terms and conditions of such subservicing
agreement and without any limitation by virtue of this Agreement; provided,
however, that, in the event of termination of any subservicing agreement by the
Servicer, the Servicer shall either act directly as servicer of the related
Receivables or enter into a subservicing agreement with a successor subservicer
which will be bound by the terms of the related subservicing agreement.
(d) As a condition to the appointment of any subservicer, the
Servicer shall notify the Trustee, the Seller and the Rating Agencies in writing
before such assignment becomes effective and such subservicer shall be required
to execute and deliver an instrument in which it agrees that, for so long as it
acts as subservicer of the Receivables and the other Trust Property being
serviced by it, the covenants, conditions, indemnities, duties, obligations and
other terms and provisions of this Agreement applicable to the Servicer
hereunder shall be applicable to it as subservicer, that it shall be required to
perform its obligations as subservicer for the benefit of the Trust as if it
were Servicer hereunder (subject, however, to the right of the Servicer to
direct the performance of such obligations in accordance with this Agreement)
and that, notwithstanding any provision of a subservicing agreement to the
contrary, such subservicer shall be directly liable to the Trustee and the Trust
(notwithstanding any failure by the Servicer to perform its duties and
obligations hereunder) for the failure by such subservicer to perform its
obligations hereunder or under any subservicing agreement, and that
(notwithstanding any failure by the Servicer to perform its duties and
obligations hereunder) the Trustee may enforce the provisions of this Agreement
and any subservicing agreement against the subservicer for the benefit of the
Trust and the Certificateholders, without diminution of such obligations or
liabilities by virtue of any subservicing agreement, by virtue of any
indemnification provided thereunder or by virtue of the fact that the Servicer
is primarily responsible hereunder for the performance of such duties and
obligations, as if a subservicer alone
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were servicing and administering, under this Agreement, the Receivables and the
other Trust Property being serviced by it under the subservicing agreement.
(e) Notwithstanding any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer or a subservicer or reference to actions taken through such Persons or
otherwise, the Servicer shall remain obligated and liable to the Trust, the
Trustee and the Certificateholders for the servicing and administering of the
Receivables and the other Trust Property in accordance with the provisions of
this Agreement (including for the deposit of payments received by a subservicer,
irrespective of whether such payments are actually remitted to the Servicer or
deposited in the Collection Account by such subservicer, provided that if such
amounts are so deposited, the Servicer shall have no further obligation to do
so) without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from a
subservicer, to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Receivables and the
other Trust Property. The Servicer shall be entitled to enter into any agreement
with a subservicer for indemnification of the Servicer and nothing contained in
this Agreement shall be deemed to limit or modify such indemnification.
(f) In the event the Servicer shall for any reason no longer be
acting as such (including by reason of the occurrence of an Event of Servicing
Termination), the successor Servicer may, in its discretion, thereupon assume
all of the rights and obligations of the outgoing Servicer under a subservicing
agreement. In such event, the successor Servicer shall be deemed to have assumed
all of the Servicer's interest therein and to have replaced the outgoing
Servicer as a party to such subservicing agreement to the same extent as if such
subservicing agreement had been assigned to the successor Servicer, except that
the outgoing Servicer shall not thereby be relieved of any liability or
obligation on the part of the outgoing Servicer to the subservicer under such
subservicing agreement. The outgoing Servicer shall, upon request of the
Trustee, but at the expense of the outgoing Servicer, deliver to the successor
Servicer all documents and records relating to each such
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subservicing agreement and the Receivables and the other Trust Property then
being serviced thereunder and an accounting of amounts collected and held by it
and otherwise use its best efforts to effect the orderly and efficient transfer
of the subservicing agreement to the successor Servicer. In the event that the
successor Servicer elects not to assume a subservicing agreement, such
subservicing agreement shall be immediately cancelable by the successor Servicer
upon written notice to the subservicer and the outgoing Servicer, at its
expense, shall cause the subservicer to deliver to the successor Servicer all
documents and records relating to the Receivables and the other Trust Property
being serviced thereunder and all amounts held (or thereafter received) by such
subservicer (together with an accounting of such amounts) and shall otherwise
use its best efforts to effect the orderly and efficient transfer of servicing
of the Receivables and the other Trust Property being serviced by such
subservicer to the successor Servicer.
SECTION 3.2. Collection of Receivable Payments. The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due and shall
follow such collection procedures as it follows with respect to all comparable
automobile receivables that it services for itself and others. The Servicer will
not increase or decrease the number or amount of any Scheduled Payment, or the
Amount Financed under a Receivable or the APR of a Receivable, or extend,
rewrite or otherwise modify the payment terms of a Receivable; provided,
however, that the Servicer may extend a Receivable for credit related reasons
that would be acceptable to the Servicer with respect to comparable automobile
receivables that it services for itself and others and in accordance with its
customary standards, policies and procedures if the cumulative extensions with
respect to any Receivable shall not cause the term of such Receivable to extend
beyond the Final Scheduled Maturity Date; provided, further, that such
extensions will not be made if the extensions would modify the terms of such
Receivable in such a manner so as to constitute a cancellation of such
Receivable and the creation of a new Receivable for federal income tax purposes.
In the event that the Servicer fails to comply with the provisions of the
preceding sentence, the Servicer shall be required to purchase the Receivable or
Receivables affected thereby,
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for the Purchase Amount, in the manner specified in Section 3.6 as of the first
day of the Collection Period following the Collection Period in which such
failure occurs.
SECTION 3.3. Realization upon Receivables. On behalf of the Trust,
the Servicer shall charge off a delinquent Receivable in accordance with its
customary standards and shall use its best efforts to repossess and liquidate
the Financed Vehicle securing any Defaulted Receivable as soon as feasible after
default, in accordance with the standard of care required by Section 3.1. In
taking such action, the Servicer shall follow such customary and usual practices
and procedures as it shall deem necessary or advisable in its servicing of
comparable automobile receivables, and as are otherwise consistent with the
standard of care required under Section 3.1, which shall include the exercise of
any rights of recourse to Dealers under the Dealer Agreements. The Servicer
shall be entitled to recover all reasonable expenses incurred by it in the
course of repossessing and liquidating a Financed Vehicle into cash proceeds,
but only out of the cash proceeds of such Financed Vehicle and any deficiency
obtained from the Obligor. The foregoing shall be subject to the provision that,
in any case in which a Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with the repair or the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession will increase the Liquidation Proceeds of the related
Receivable by an amount equal to or greater than the amount of such expenses.
If the Servicer elects to commence a legal proceeding to enforce a
Dealer Agreement, the act of commencement shall be deemed to be an automatic
assignment from the Trustee to the Servicer of the rights of recourse under such
Dealer Agreement. If, however, in any enforcement suit or legal proceeding, it
is held that the Servicer may not enforce a Dealer Agreement on the grounds that
it is not a real party in interest or a Person entitled to enforce the Dealer
Agreement, the Trustee, at the Servicer's expense, shall take such steps as the
Servicer deems necessary to enforce the Dealer Agreement, including bringing
suit in its name or the names of the Certificateholders.
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SECTION 3.4. Maintenance of Security Interests in Financed Vehicles.
The Servicer, in accordance with the standard of care required under Section
3.1, shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle.
The Trustee, on behalf of the Trust, hereby authorizes the Servicer, and the
Servicer hereby agrees, to take such steps as are necessary and customary in
accordance with the Servicer's ordinary procedures to re-perfect such security
interest in the event the Servicer receives notice of the relocation of a
Financed Vehicle to a location in the United States of America or Canada or for
any other reason.
SECTION 3.5. Covenants of Servicer. The Servicer makes the following
covenants on which the Trustee relies in accepting the Trust Property in trust
and in executing and authenticating the Certificates:
(i) Security Interest to Remain in Force. The Servicer will not
release the Financed Vehicle securing a Receivable from the security
interest granted by the Receivable in whole or in part, except as
contemplated herein or voluntarily allow an Obligor to relocate outside
the United States of America or Canada.
(ii) No Impairment. The Servicer will not (nor will it permit any
subservicer to) impair in any material respect the rights of the
Certificateholders in the Receivables or, subject to clause (iii) and (iv)
below, otherwise amend or alter the terms thereof if, as a result of such
amendment or alteration, the interests of the Trust and the
Certificateholders hereunder would be materially adversely affected.
(iii) Amendments. The Servicer will not increase or decrease the
number or amount of Scheduled Payments or the Amount Financed under a
Receivable, or extend, rewrite or otherwise modify the payment terms of a
Receivable, except pursuant to Section 3.2.
(iv) Extensions. The Servicer will not extend a Receivable except in
accordance with Section 3.2.
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SECTION 3.6. Purchase by Servicer upon Breach. The Seller, the
Servicer or the Trustee, as the case may be, shall inform the other parties to
this Agreement promptly, in writing, upon the discovery of any breach of Section
3.2, 3.4 or 3.5. Subject to Section 3.2, unless the breach shall have been cured
by the last day of the Collection Period which includes the 60th day after the
date on which the Servicer becomes aware of, or receives written notice of, such
breach or failure, the Servicer shall purchase from the Trustee the Receivable
or Receivables, the interests of the Trust and the Certificateholders in which
are materially and adversely affected by the breach or failure, on the
Distribution Date immediately following such Collection Period but with effect
from the first day of the Collection Period in which such Distribution Date
occurs. In consideration of the purchase of a Receivable hereunder, the Servicer
shall remit the Purchase Amount of such Receivable in the manner specified in
Section 4.5. Except as provided in Section 8.2, the sole remedy of the Trust,
the Trustee, or the Certificateholders against the Servicer with respect to a
breach pursuant to Section 3.2, 3.4 or 3.5 shall be to require the Servicer to
purchase Receivables pursuant to this Section 3.6.
SECTION 3.7. Servicing Compensation. The "Servicing Fee" with
respect to a Collection Period shall be an amount equal to one-twelfth of the
product of the Servicing Rate and the Pool Balance as of the first day of such
Collection Period. If it is acceptable to each Rating Agency without a reduction
in the rating of the Class A Certificates, the Servicing Fee in respect of a
Collection Period (together with any portion of a Servicing Fee that remains
unpaid from prior Collection Periods) at the option of the Servicer may be paid
at or as soon as possible after the beginning of such Collection Period out of
collections for such Collection Period. As additional servicing compensation,
the Servicer shall also be entitled to all administrative fees and charges
(including late fees and charges) collected (from whatever source) on the
Receivables (the "Supplemental Servicing Fee") and, to the extent not required
to be deposited in the Class A Reserve Fund pursuant to subsection 4.7(g),
investment earnings on amounts on deposit in the Collection Account and the
Payahead Account. The Servicer shall be required to pay all expenses incurred by
it in connection with its activities hereunder (in-
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cluding fees and expenses of the Trustee (and any custodian appointed by the
Trustee) and independent accountants, any subservicer, taxes imposed on the
Servicer or any subservicer (to the extent not paid by such subservicer), and
expenses incurred in connection with distributions and reports to the
Certificateholders) except expenses incurred in connection with realizing upon
Receivables under Section 3.3.
SECTION 3.8. Servicer's Certificate. On or before the Determination
Date immediately preceding each Distribution Date, the Servicer shall deliver to
the Trustee, the Payahead Agent, the Class A Agent, the Class B Agent and the
Seller a certificate of a Servicing Officer substantially in the form of Exhibit
C hereto (a "Servicer's Certificate") and attached to a Servicer's report, in
form and substance acceptable to the Trustee, containing all information
necessary to make the transfers and distributions pursuant to Sections 4.3, 4.4,
4.5 and 4.6, and all information necessary for the Trustee to send statements to
Certificateholders pursuant to Section 4.9. The Servicer also shall separately
identify (by account number of the Receivable as it appears in the related
Schedule of Receivables) in a written notice to the Trustee and the Seller the
Receivables to be repurchased by the Seller or to be purchased by the Servicer,
as the case may be, on the related Distribution Date, and each Receivable which
became a Defaulted Receivable during the related Collection Period.
SECTION 3.9. Annual Statement as to Compliance. (a) The Servicer
shall deliver to the Trustee, on or before March 31 of each year, commencing
March 31, 1999, an Officer's Certificate, stating that (i) a review of the
activities of the Servicer during the preceding calendar year (or longer period,
in the case of the first such Officer's Certificate) and of its performance of
its obligations under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year (or longer period, in the case of the first such
certificate), or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. A copy of such certificate may be obtained by any
Certificateholder by a request in
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writing to the Trustee addressed to the Corporate Trust Office.
(b) The Servicer shall deliver to the Trustee and the Seller
promptly upon having knowledge thereof, but in no event later than five Business
Days thereafter, written notice in an Officer's Certificate of any event which
constitutes or, with the giving of notice or lapse of time, or both, would
become, an Event of Servicing Termination under Section 9.1.
SECTION 3.10. Annual Independent Certified Public Accountants'
Reports. The Servicer shall cause a firm of independent certified public
accountants (who may also render other services to the Servicer, the Seller or
MBCC) to deliver to the Trustee on or before March 31 of each year, commencing
March 31, 1999, a report addressed to the Board of Directors of the Servicer and
to the Trustee with respect to the preceding calendar year (or longer period, in
the case of the first such report) to the effect that such firm has audited the
financial statements of the Servicer and issued its report thereon and that such
audit (1) was made in accordance with generally accepted auditing standards, (2)
included tests relating to automobile retail installment contracts serviced for
others in accordance with the requirements of the Uniform Single Audit Program
for Mortgage Bankers (the "Program"), to the extent the procedures in such
Program are applicable to the servicing obligations set forth in this Agreement,
and (3) except as described in the report, disclosed no exceptions or errors in
the records relating to automobile retail installment contracts serviced for
others that, in the firm's opinion, paragraph four of such Program requires such
firm to report. Such report shall also indicate that the firm is independent
with respect to the Seller and the Servicer within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public Accountants. A
copy of such report may be obtained by any Certificateholder by a request in
writing to the Trustee addressed to the Corporate Trust Office.
SECTION 3.11. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide the Trustee and the
Certificateholders with access to the Receivable Files (in the case of the
Certificateholders, where the Certificateholder shall be
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required by applicable statutes or regulations to have access to such
documentation). Such access shall be afforded without charge, but only upon
reasonable request and during normal business hours at the offices of the
Servicer, and, prior to the occurrence of an Event of Servicing Termination or
an event which with the passage of time and delivery of notice would constitute
an Event of Servicing Termination, only to the extent that such access does not
disrupt the Servicer's normal business operations and does not adversely affect
the Servicer's ability to perform its obligations under this Agreement. Nothing
in this Section shall affect the obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section. Any Certificateholder,
by its acceptance of a Certificate, shall be deemed to have agreed to keep all
information obtained by it pursuant to this Section confidential except as may
be required by applicable law and not to use any such information except as
permitted by, or to enforce, this Agreement.
SECTION 3.12. Reports to the Commission. The Servicer shall, on
behalf of the Trust, cause to be filed with the Commission any periodic reports
required to be filed under the provisions of the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder.
The Seller shall, at its expense, cooperate in any reasonable request made by
the Servicer in connection with such filings. The Servicer shall provide copies
of any such reports to the Trustee.
SECTION 3.13. Reports to the Rating Agency. The Servicer shall
deliver to each Rating Agency, at such address as each Rating Agency may
request, a copy of all reports or notices furnished or delivered pursuant to
this Article and a copy of any amendments, supplements or modifications to this
Agreement and any subservicing agreement and any other information reasonably
requested by such Rating Agency to monitor this transaction.
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ARTICLE IV
Distributions; Reserve Funds;
Statements to Certificateholders
SECTION 4.1. Accounts. (a) The Trustee shall establish the Collection
Account and the Certificate Account in the name of the Trustee for the benefit
of the Certificateholders. The Collection Account and the Certificate Account
shall at all times each be an Eligible Deposit Account and shall each be
initially established and maintained with the Trustee. If the Servicer is
required to remit collections pursuant to the first sentence of Section 4.2, all
amounts held in the Collection Account shall, to the extent permitted by
applicable law, rules and regulations, be invested, as directed in writing by
the Servicer, by the bank or trust company then maintaining the Collection
Account in Eligible Investments that mature not later than the Distribution Date
for the Collection Period to which such amounts relate, and such Eligible
Investments shall be held to maturity; provided, however, that it is understood
and agreed that neither the Trustee nor the Payahead Agent shall be liable for
any loss arising from investments in Eligible Investments. On each Distribution
Date, all interest and other income (net of losses and investment expenses) on
funds on deposit in the Collection Account during the preceding Collection
Period shall be withdrawn from the Collection Account at the direction of the
Servicer and, so long as MBCC is the Servicer, deposited in the Class A Reserve
Fund in an amount not to exceed the aggregate Shortfall Amount for the related
Collection Period to the extent specified in Section 4.7(g) and any remaining
investment income shall be paid to the Servicer. Amounts in the Certificate
Account shall not be invested.
(b) The Trustee shall establish the Payahead Account in the name of
the Payahead Agent for the benefit of the Obligors. The Payahead Account shall
at all times be an Eligible Deposit Account and shall be initially established
and maintained with the Payahead Agent. All amounts held in the Payahead Account
shall be invested, as directed in writing by the Servicer, by the bank or trust
company then maintaining the Payahead Account in Eligible Investments that
mature not later than the Distribution Date for the Collection Period to which
such amounts relate and such Eligible Investments shall be
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held to maturity; provided, however, that it is understood and agreed that
neither the Trustee nor the Payahead Agent shall be liable for any loss arising
from investments in Eligible Investments. On each Distribution Date, all
interest and other income (net of losses and investment expenses) on funds on
deposit in the Payahead Account during the preceding Collection Period shall be
withdrawn from the Payahead Account at the direction of the Servicer and, so
long as MBCC is the Servicer, deposited in the Class A Reserve Fund in an amount
not to exceed the aggregate Shortfall Amount for the related Collection Period
to the extent specified in Section 4.7(g) and any remaining investment income
shall be paid to the Servicer. In no event shall the Payahead Account be
property of the Trust or security for the Certificates.
(c) Reserved
(d) Notwithstanding the provisions of clause (b) above and of
Section 4.6(a)(ii), for so long as (i) MBCC is the Servicer, (ii) the Servicing
Guaranty Agreement is in full force and effect and the rating of DBNA's
short-term unsecured debt is at least P-1 by Moody's and at least A-1 by S&P,
and (iii) no Event of Servicing Termination shall have occurred (each, a
"Monthly Remittance Condition"), Payaheads need not be remitted to and deposited
in the Payahead Account but instead may be held by the Servicer. So long as such
Monthly Remittance Conditions are met, the Servicer shall not be required to
segregate or otherwise hold separate any Payaheads remitted to the Servicer as
aforesaid but shall be required to remit Payaheads to the Certificate Account in
accordance with Section 4.6(a)(ii). At any time a Monthly Remittance Condition
is not met, the Servicer shall deposit in the Payahead Account, as soon as
practicable but in no event after the close of business on the second Business
Day after such Monthly Remittance Condition ceases to be met or, if later, the
close of business on the second Business Day after receipt thereof the amount of
any Payaheads then held or received by it. Notwithstanding the foregoing, if a
Monthly Remittance Condition is not satisfied the Servicer may utilize, with
respect to Payaheads, an alternative remittance schedule (which may include the
remittance schedule utilized by the Servicer before the Monthly Remittance
Condition became unsatisfied), if the Servicer provides to the Payahead Agent
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written confirmation from the Rating Agencies that such alternative remittance
schedule will not result in the downgrading or withdrawal by the Rating Agencies
of the ratings then assigned to the Class A Certificates. The Payahead Agent
shall not be deemed to have knowledge of any event or circumstance under clause
(iii) of the first sentence of this Section 4.1(d) that would require remittance
of the Payaheads to the Payahead Account unless the Payahead Agent has received
notice of such event or circumstance from the Seller or the Servicer in an
Officer's Certificate or from the Holders of Certificates (excluding from such
calculation any Certificates held by the Seller or its Affiliates) evidencing
not less than 25% of the sum of the Class A Principal Balance and the Class B
Principal Balance (excluding from such calculation any Certificates held by the
Seller or its Affiliates) or unless an Authorized Officer in the Corporate Trust
Office with knowledge hereof and familiarity herewith has actual knowledge of
such event or circumstance.
(e) The Servicer shall be permitted to remit to any Obligor,
upon the request of such Obligor, the Payahead Balance with respect to such
Obligor's Receivable or such lesser amount requested by such Obligor, in
accordance with the Servicer's customary standards, policies and procedures, to
the extent that such amount is not then due on such Receivable. The Payahead
Agent shall remit to any Obligor, upon request of the Servicer following receipt
by the Servicer of such a request by the Obligor, the Payahead Balance with
respect to such Obligor's Receivable, or such lesser amount requested by such
Obligor, or the Servicer, as applicable, to the extent that such amount is not
then due on such Receivable. Upon any such remittance, such Payahead Balance
shall be reduced by the amount of such remittance.
SECTION 4.2. Collections. (a) The Servicer shall remit to the
Collection Account (i) all payments by or on behalf of the Obligors with respect
to the Receivables (excluding amounts received by the Servicer with respect to
Excess Amounts, Payaheads and Supplemental Servicing Fees) and (ii) all
Liquidation Proceeds and Recoveries, received by the Servicer during any
Collection Period (such amounts and the proceeds thereof, "Collection Account
Property"), as soon as practicable, but in no event after the close of business
on the second
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Business Day after receipt thereof. MBCC, so long as it is acting as the
Servicer, may make remittances of collections on a less frequent basis than that
specified in the immediately preceding sentence so long as, and only for so long
as, specific terms and conditions set forth below in this Section 4.2 are
fulfilled. Accordingly, notwithstanding the provisions of the first sentence of
this Section 4.2, the Servicer shall remit collections received during a
Collection Period to the Collection Account in immediately available funds on
the related Distribution Date but only for so long as each Monthly Remittance
Condition is satisfied. Notwithstanding the foregoing, if a Monthly Remittance
Condition is not satisfied the Servicer may utilize an alternative remittance
schedule (which may include the remittance schedule utilized by the Servicer
before the Monthly Remittance Condition became unsatisfied), if the Servicer
provides to the Trustee written confirmation from the Rating Agencies that such
alternative remittance schedule will not result in the downgrading or withdrawal
by the Rating Agencies of the ratings then assigned to the Class A Certificates.
The Trustee shall not be deemed to have knowledge of any event or circumstance
under clause (iii) of the definition of Monthly Remittance Condition that would
require remittance by the Servicer to the Collection Account pursuant to the
first sentence of this Section 4.2(a) unless the Trustee has received notice of
such event or circumstance from the Seller or the Servicer in an Officer's
Certificate or from the Holders of Certificates (excluding from such calculation
any Certificates held by the Seller or its Affiliates) evidencing not less than
25% of the sum of the Class A Principal Balance and the Class B Principal
Balance (excluding from such calculation any Certificates held by the Seller or
its Affiliates) or an Authorized Officer in the Corporate Trust Office with
knowledge hereof or familiarity herewith has actual knowledge of such event or
circumstance.
(b) Notwithstanding the provisions of Section 4.2(a) hereof, the
Servicer may retain, or will be entitled to be reimbursed, from amounts
otherwise payable into, or on deposit in, the Collection Account with respect to
a Collection Period any amounts previously deposited in the Collection Account
but later determined to have resulted from mistaken deposits or postings or
checks returned unpaid for insufficient funds or other reasons, in each case,
with respect to which the Servicer
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has not been previously reimbursed hereunder. The amount to be retained or
reimbursed hereunder shall not be included in collections with respect to the
related Distribution Date.
SECTION 4.3. Application of Collections. For the purposes of this
Agreement, all collections with respect to each Receivable (other than amounts
received by the Servicer with respect to Excess Amounts and the Supplemental
Servicing Fee) in each Collection Period shall be applied by the Servicer as
follows:
Payments by or on behalf of the Obligor with respect to such
Receivable shall be applied first, to reduce Outstanding Advances as
described in Section 4.4(a) below. Next, any excess shall be applied to
the Scheduled Payment for such Collection Period in respect of such
Receivable. Any remaining excess shall be applied to prepay the
Receivable, but only if the sum of such excess and the existing Payahead
Balance in respect of such Receivable shall be sufficient to prepay such
Receivable in full. Otherwise, any such remaining excess shall constitute
a Payahead, and shall increase the Payahead Balance.
SECTION 4.4. Advances. (a) As of the last day of each Collection
Period other than the Collection Period in which a Receivable is paid in full,
if the payments during such Collection Period by or on behalf of the Obligor on
or in respect of a Receivable after application under Section 4.3 shall be less
than the Scheduled Payment in respect of such Receivable, the Payahead Balance
for such Receivable shall be applied to the extent of the shortfall, and such
Payahead Balance shall be reduced accordingly. Next, subject to Section 4.4(b),
an Advance shall be made by the Servicer to the extent of any remaining
shortfall in respect of such Receivable. Outstanding Advances with respect to a
Receivable shall be reduced by subsequent payments by or on behalf of the
related Obligor, collections of Liquidation Proceeds and Recoveries in respect
of the related Receivable, and payment of the Purchase Amount.
If the Servicer shall determine that an Outstanding Advance with
respect to any Receivable shall not be recoverable as described in the preceding
paragraph,
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the Servicer shall be reimbursed from any collections credited to payments made
on other Receivables in the Trust (including Liquidation Proceeds and
Recoveries), and Outstanding Advances with respect to such Receivable shall be
reduced accordingly.
(b) The Servicer may elect not to make an Advance with respect to a
Receivable to the extent that the Servicer, in its sole discretion, does not
expect to recover such Advance from subsequent payments on such Receivable.
SECTION 4.5. Additional Deposits. Advances pursuant to Section
4.4(a), Purchase Amounts pursuant to Sections 2.5 and 3.6 and amounts to be
deposited by the Servicer pursuant to Section 11.2 with respect to a Collection
Period shall be deposited in the Collection Account in immediately available
funds no later than 10:00 a.m., New York City time, on the Distribution Date
related to such Collection Period. The Trustee shall deposit in the Certificate
Account on such Distribution Date the aggregate of any amounts received from the
Class A Reserve Fund pursuant to Section 4.7(f) and amounts otherwise received
pursuant to the Shortfall Amount Agreement on the date of receipt thereof.
SECTION 4.6. Distributions. (a) On each Distribution Date, the
Trustee shall cause to be made the following transfers and distributions in the
amounts set forth in the Servicer's Certificate for such Distribution Date:
(i) From the Collection Account to the Certificate
Account, in immediately available funds, the Total Available Amount then
on deposit in the Collection Account; provided, however, that in the event
that the Servicer is required to make deposits to the Collection Account
pursuant to the first sentence of Section 4.2(a), the amount of the funds
transferred from the Collection Account to the Certificate Account will
include only those funds that were deposited in the Collection Account for
the Collection Period related to such Distribution Date.
(ii) From the Payahead Account, or from the Servicer
in the event the provisions of
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Section 4.1(d) above are applicable, to the Certificate Account, in
immediately available funds, (x) the aggregate portion of Payaheads
constituting Scheduled Payments or prepayments in full for the Collection
Period related to such Distribution Date, required by Sections 4.3 and
4.4(a), and (y) the Payahead Balance, if any, relating to any Purchased
Receivable.
(iii) From the Collection Account to the Servicer, in
immediately available funds, repayment of Outstanding Advances, made
pursuant to Section 4.4(a), to the extent of amounts available hereunder
for such purpose.
(b) The Servicer shall on each Determination Date calculate the
Total Available Amount, the Available Interest, the Available Principal, the
Shortfall Amount, the Class A Distributable Amount, the Class B Distributable
Amount and the Retained Yield, and, based on the Total Available Amount and the
other distributions to be made on such Distribution Date, determine the amount
distributable to Certificateholders of each Class and to the Seller as Retained
Yield.
(c) On each Distribution Date, the Trustee (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date pursuant to Section 3.9) shall, subject to Section 4.6(d) hereof, make the
following distributions in the following order of priority:
(i) first, to the Servicer, from the Available
Interest (pro rata from the Class A Percentage and the Class B Percentage
of Available Interest), the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods;
(ii) second, to the Class A Certificateholders, an
amount equal to the sum of the Class A Interest and any outstanding Class
A Interest Carryover Shortfall as of the close of business on the
preceding Distribution Date, such amount to be paid (A) first, from the
Class A Percentage of Available Interest (as such Available Interest has
been reduced by Servicing Fee payments), (B) second, to the extent such
amount is insufficient, from the
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Class A Reserve Fund; (C) third, to the extent such amounts are
insufficient, from the Class B Percentage of Available Interest (as such
Available Interest has been reduced by Servicing Fee payments) and (D)
fourth, to the extent such amounts are insufficient, from the Class B
Percentage of Available Principal.
(iii) third, to the Class B Certificateholders, an
amount equal to the sum of the Class B Interest and any outstanding Class
B Interest Carryover Shortfall as of the close of business on the
preceding Distribution Date, such amount to be paid (A) first, from
Available Interest (as such Available Interest has been reduced by
payments pursuant to clauses (i) and (ii) above), and (B) second, to the
extent such amount is insufficient, from the Class B Reserve Fund;
(iv) fourth, to the Class A Certificateholders, an
amount equal to the sum of the Class A Principal for such Distribution
Date and any outstanding Class A Principal Carryover Shortfall as of the
close of business on the preceding Distribution Date, such amount to be
paid (A) first, from the Class A Percentage of the Available Principal,
(B) second, to the extent such amount is insufficient, from Available
Interest (as reduced by distributions pursuant to clauses (i), (ii), and
(iii) above), (C) third, to the extent such amounts are insufficient, from
the Class A Reserve Fund, and (D) fourth, to the extent such amounts are
insufficient, from the Class B Percentage of Available Principal;
(v) fifth, to the Class B Certificateholders, an
amount equal to the sum of the Class B Principal and any outstanding Class
B Principal Carryover Shortfall as of the close of business on the
preceding Distribution Date, such amount to be paid (A) first, from the
Class B Percentage of Available Principal, (B) second, to the extent such
amount is insufficient, from remaining Available Interest (as reduced by
distributions pursuant to clauses (i), (ii), (iii) and (iv) above), and
(C) third, to the extent such amounts are insufficient, from the Class B
Reserve Fund; and
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(vi) sixth, to the extent there are remaining funds
consisting of Available Interest, an amount equal to the Retained Yield
for such Distribution Date, plus any Retained Yield remaining unpaid from
prior Distribution Dates, shall be paid:
(A) first, to the Class A Reserve Fund in an
amount equal to the excess of the Specified Class A Reserve Balance
over the amount on deposit therein after giving effect to any
deposit thereto on such Distribution Date pursuant to Section
4.7(g);
(B) second, to the Class B Reserve Fund in
an amount equal to the excess of the Specified Class B Reserve
Balance over the amount on deposit therein; and
(C) third, to the Seller in payment of the
Retained Yield.
(d) The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates shall be and hereby are
subordinated, to the extent set forth in Section 4.6(c), to the rights of the
Class A Certificateholders to receive distributions in respect of the Class A
Certificates and the rights of the Servicer to receive the Servicing Fee (and
any accrued and unpaid Servicing Fee from prior Collection Periods) in the event
of delinquency or defaults on the Receivables. The rights of the Seller to
receive distributions in respect of the Retained Yield shall be and hereby are
subordinated, to the extent set forth in Section 4.6(c), to the rights of the
Class A Certificateholders to receive distributions in respect of the Class A
Certificates, the rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates, and the rights of the
Servicer to receive the Servicing Fee (and any accrued and unpaid Servicing Fee
from prior Collection Periods) in the event of delinquency or defaults on the
Receivables. Upon the written instructions of the Servicer included in the
Servicer's Certificate delivered on the related Determination Date pursuant to
Section 3.8, the Class A Agent and the Class B Agent shall release amounts
available in the Class A Reserve Fund and the Class B Reserve Fund,
respectively, as provided in Section 4.6(c) and distribute such amounts
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to the Trustee for application in accordance with Section 4.6(c).
(e) Subject to Section 11.1 with respect to the final payment upon
retirement of each Certificate, the Servicer shall on each Distribution Date
instruct the Trustee to distribute to each Certificateholder of record on the
preceding Record Date either by wire transfer, in immediately available funds to
the account of such Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder is the Seller or a
Clearing Agency that shall have provided to the Servicer appropriate
instructions prior to such Distribution Date, or, if not, by check mailed to
such Certificateholder (such check to be mailed as soon as reasonably
practicable on or after such Distribution Date) at the address of such
Certificateholder appearing in the Certificate Register, the amounts to be
distributed to such Certificateholder pursuant to such Holder's Certificates.
SECTION 4.7. Subordination; Reserve Funds; Priority of
Distributions.
(a) (i) In order to effectuate the subordination provided for
herein and to provide for the payment of Shortfall Amounts, there shall be
established by the Seller and maintained by each of the Class A Agent and
the Class B Agent separate Eligible Deposit Accounts to include the money
and other property deposited and held therein pursuant to this subsection
4.7(a)(i) and subsections 4.7(a)(ii) and 4.7(b) (the "Class A Reserve
Fund" and the "Class B Reserve Fund," respectively). On the date of
issuance of the Certificates, the Seller shall deposit the Class A Reserve
Initial Deposit, if any, into the Class A Reserve Fund, and the Class B
Reserve Initial Deposit, if any, into the Class B Reserve Fund. Neither
the Class A Reserve Fund nor the Class B Reserve Fund shall be part of the
Trust. Each of the Class A Certificateholders, on behalf of itself and its
successors and assigns (including, but not limited to, any future Holder
of a Class A Certificate), hereby appoints Citibank, N.A., acting in its
capacity as agent for the purposes of this Section 4.7 and not as Trustee,
as its agent with respect to the Class A Reserve Fund and the Class A
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Reserve Fund Property (the "Class A Agent"), and the Class A Agent hereby
accepts such appointment. Each of the Class B Certificateholders, on
behalf of itself and its successors and assigns (including, but not
limited to, any future Holder of a Class B Certificate), hereby appoints
Citibank, N.A., acting in its capacity as agent for the purposes of this
Section 4.7 and not as Trustee, as its agent with respect to the Class B
Reserve Fund and the Class B Reserve Fund Property (the "Class B Agent"),
and the Class B Agent hereby accepts such appointment.
(ii) In order to provide for the prompt payment to the
Class A Certificateholders and the Class B Certificateholders, in
accordance with Sections 4.6(c) and 4.6(d), to give effect to the
subordination provided for herein, and to assure availability of the
amounts maintained in the Class A Reserve Fund and the Class B Reserve
Fund:
(A) The Seller, as owner of the Retained Yield, on
behalf of itself and its successors and assigns, hereby collaterally
assigns, conveys, and transfers to the Class A Agent, the Class A
Reserve Initial Deposit and all proceeds thereof (but excluding
investment earnings attributable to Class A Reserve Fund Property
and proceeds attributable thereto), and grants a security interest
to the Class A Agent and its successors and assigns, in the Class A
Reserve Initial Deposit and all proceeds thereof (but excluding
investment earnings attributable to Class A Reserve Fund Property
and proceeds attributable thereto); and
(B) The Seller, as owner of the Retained Yield, on
behalf of itself and its successors and assigns, hereby collaterally
assigns, conveys, and transfers to the Class A Agent, all its right,
title, and interest in and to the Class A Reserve Fund, and all
proceeds of the foregoing, including, without limitation, all other
amounts and Eligible Investments (but excluding investment earnings
attributable to Class A Reserve Fund Property and proceeds
attributable thereto) held from time to time in the Class A Reserve
Fund, and
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grants a security interest to the Class A Agent and its successors
and assigns, in and to the Class A Reserve Fund, and all proceeds of
the foregoing, including without limitation, all other amounts and
Eligible Investments (but excluding investment earnings attributable
to Class A Reserve Fund Property and proceeds attributable thereto)
held from time to time in the Class A Reserve Fund, in each case, to
secure the payment of the Class A Distributable Amount provided for
in Section 4.6 and this Section;
(all of the foregoing non-excluded amounts, subject to the limitations set
forth below, the "Class A Reserve Fund Property"), to have and to hold all
the aforesaid property, rights and privileges unto the Class A Agent, its
successors and assigns, in trust for the uses and purposes, and subject to
the terms and provisions, set forth in this Section 4.7. The Class A Agent
hereby acknowledges such transfer and accepts the trust hereunder and
shall hold and distribute the Class A Reserve Fund Property in accordance
with the terms and provisions of this Section 4.7; and
(C) In the event a Class B Reserve Initial Deposit
is made, the Seller, as owner of the Retained Yield, on behalf of
itself and its successors and assigns, shall collaterally assign,
convey, and transfer to the Class B Agent, the Class B Reserve
Initial Deposit and all proceeds thereof (but excluding investment
earnings attributable to Class B Reserve Fund Property and proceeds
attributable thereto), and grant a security interest to the Class B
Agent and its successors and assigns, in the Class B Reserve Initial
Deposit and all proceeds thereof (but excluding investment earnings
attributable to Class B Reserve Fund Property and proceeds
attributable thereto);
(D) The Seller, as owner of the Retained Yield, on
behalf of itself and its successors and assigns, hereby collaterally
assigns, conveys, and transfers to the Class B Agent, all its right,
title, and interest in
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and to the Class B Reserve Fund, and all proceeds of the foregoing,
including, without limitation, all other amounts and Eligible
Investments (but excluding investment earnings attributable to Class
B Reserve Fund Property and proceeds attributable thereto) held from
time to time in the Class B Reserve Fund, and grants a security
interest to the Class B Agent, in and to the Class B Reserve Fund,
and all proceeds of the foregoing, including without limitation, all
other amounts and Eligible Investments (but excluding investment
earnings attributable to Class B Reserve Fund Property and proceeds
attributable thereto) held from time to time in the Class B Reserve
Fund,in each case, to secure the payment of the Class B
Distributable Amount provided for in Section 4.6 and this Section;
(all of the foregoing non-excluded amounts, subject to the limitations set
forth below, the "Class B Reserve Fund Property"), to have and to hold all
the aforesaid property, rights and privileges unto the Class B Agent, its
successors and assigns, in trust for the uses and purposes, and subject to
the terms and provisions, set forth in this Section 4.7. The Class B Agent
hereby acknowledges such transfer and accepts the trust hereunder and
shall hold and distribute the Class B Reserve Fund Property in accordance
with the terms and provisions of this Section 4.7.
(iii) The trusts established pursuant to this Section
4.7 shall not under any circumstances be deemed to be part of or otherwise
included in the Trust. Any amounts deposited in the Class A Reserve Fund
or the Class B Reserve Fund will be deemed to have been paid to the
Seller. For federal income tax purposes, the Seller shall treat all
amounts deposited in the Class A Reserve Fund or Class B Reserve Fund that
would have been distributed to the Seller as Retained Yield but for the
application of Section 4.6(c)(vi) as having been received by the Seller
and shall treat all the income earned on the Class A Reserve Fund or Class
B Reserve Fund as its income.
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(b) If, on any Distribution Date, the principal amount of
Class A Reserve Fund Property (after taking into account any withdrawals from
and deposits into the Class A Reserve Fund pursuant to Sections 4.6 and 4.7) is
greater than the Specified Class A Reserve Balance for such Distribution Date,
the Class A Agent shall upon the written instruction of the Servicer, release
such excess from the Class A Reserve Fund and (i) if the principal amount of the
Class B Reserve Fund Property (after taking into account any withdrawals from
and deposits in the Class B Reserve Fund pursuant to Section 4.6) is less than
the Specified Class B Reserve Balance for such Distribution Date, deposit such
excess, to the extent of such shortfall, in the Class B Reserve Fund and (ii) to
the extent that the principal amount of the Class B Reserve Fund Property (after
taking into account any withdrawals from and deposits in the Class B Reserve
Fund pursuant to Section 4.6) is equal to or greater than the Specified Class B
Reserve Balance for such Distribution Date, release to the Trustee and the
Trustee, at the instruction of the Servicer, shall distribute to the Seller, the
amount of the excess. Amounts properly released from the Class A Reserve Fund
and deposited in the Class B Reserve Fund or distributed to the Seller pursuant
to Section 4.6(c) or this Section 4.7(b), either directly from the Certificate
Account without deposit in the Class A Reserve Fund and/or the Class B Reserve
Fund or from the Class A Reserve Fund and/or the Class B Reserve Fund, shall be
deemed released from the trust established by this Section 4.7, and neither the
Trustee, the Class A Certificateholders, nor the Class B Certificateholders
shall have any further claim upon any such distributed amounts. The delivery of
the Servicer's Certificate pursuant to Section 3.8 shall, unless otherwise
specified by the Servicer, be deemed an appropriate written instruction for
purposes of this Section 4.7(b).
(c) If, on any Distribution Date, the principal amount of
Class B Reserve Fund Property (after taking into account any withdrawals from
and deposits in the Class B Reserve Fund pursuant to Section 4.6) is greater
than the Class B Specified Reserve Balance for such Distribution Date, the Class
B Agent shall upon the written instruction of the Servicer, release such excess
from the Class B Reserve Fund to the Trustee and the Trustee, at the instruction
of the Servicer, shall dis-
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tribute to the Seller, the amount of the excess. Amounts properly distributed to
the Seller pursuant to Section 4.6(c) or this Section 4.7(c), either directly
from the Certificate Account without deposit in the Class B Reserve Fund or from
the Class B Reserve Fund, shall be deemed released from the trust established by
this Section 4.7, and neither the Trustee, the Class A Certificateholders nor
the Class B Certificateholders shall in any event thereafter have any claim to
any such distributed amounts. The delivery of the Servicer's Certificate
pursuant to Section 3.8 shall, unless otherwise specified by the Servicer, be
deemed an appropriate written instruction for purposes of this Section 4.7(c).
(d) (i) Amounts held in the Class A Reserve Fund and the Class
B Reserve Fund shall be invested in Eligible Investments in the manner
specified in Section 4.1(a), in accordance with written instructions from
the Seller, and such investments shall not be sold or disposed of prior to
their maturity (provided, however, that it is understood and agreed that
the Class A Agent and the Class B Agent shall not be liable for any loss
arising from investments in Eligible Investments) ; provided, however,
that to the extent permitted by the Rating Agencies, funds on deposit in
the Class A Reserve Fund and the Class B Reserve Fund may be invested in
Eligible Investments that mature later than the next succeeding
Distribution Date. All such investments shall be made in the name of the
Class A Agent or the Class B Agent, as applicable, or its nominee and all
income and gain realized thereon shall be solely for the benefit of the
Seller and shall be payable by the Class A Agent or the Class B Agent, as
applicable, to the Seller on each Distribution Date.
(ii) Each of the Seller and the Servicer agrees to
take or cause to be taken such further actions, to execute, deliver and
file or cause to be executed, delivered and filed such further documents
and instruments (including, without limitation, any UCC financing
statements or this Agreement) as may be determined to be necessary, in the
Opinion of Counsel of the Seller delivered to the Class A Agent and/or the
Class B Agent, in order to perfect the security interests created by this
Section 4.7 and otherwise fully to effectuate the
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purposes, terms and conditions of this Section 4.7. The Seller and the
Servicer shall:
(A) promptly execute, deliver and file any
financing statements, amendments, continuation statements,
assignments, certificates and other documents with respect to such
interests and perform all such other acts as may be necessary in
order to perfect or to maintain the perfection of the Trustee's
security interest; and
(B) make the necessary filings of financing
statements or amendments thereto within five days after the
occurrence of any of the following: (1) any change in their
respective corporate names or any trade names, (2) any change in the
location of their respective chief executive offices or principal
places of business and (3) any merger or consolidation or other
change in their respective identities or corporate structures; and
shall promptly notify the Trustee of any such filings.
(iii) Investment earnings attributable to the Class A
Reserve Fund Property and the Class B Reserve Fund Property and proceeds
therefrom shall be held by the Class A Agent and the Class B Agent,
respectively, for the benefit of the Seller. Investment earnings
attributable to the Class A Reserve Fund Property and the Class B Reserve
Fund Property shall not be available to satisfy the subordination
provisions of this Agreement and shall not otherwise be subject to any
claims or rights of the Class A Certificateholders, the Class B
Certificateholders or the Servicer. The Class A Agent and the Class B
Agent shall cause all investment earnings received on or prior to each
Distribution Date and attributable to the Class A Reserve Fund Property
and the Class B Reserve Fund Property, respectively, to be distributed on
such Distribution Date to the Seller. Losses if any, on investments in the
Class A Reserve Fund or the Class B Reserve Fund shall be charged first
against undistributed investment earnings attributable to the Class A
Reserve Fund Property or Class B Reserve Fund Property, as the case may
be, and then against the principal
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amount of the applicable Class A Reserve Fund Property or Class B Reserve
Fund Property.
(iv) The Class A Agent and the Class B Agent shall not
enter into any subordination or intercreditor agreement with respect to
the Class A Reserve Fund Property or the Class B Reserve Fund Property,
respectively.
(e) Upon termination of this Agreement in accordance with Section
11.1 or 11.2, all remaining Class A Reserve Fund Property and Class B Reserve
Fund Property shall, upon written instruction of either the Servicer or the
Seller, be paid to the Seller.
(f) If with respect to any Collection Period there are positive
Shortfall Amounts, the Class A Agent, not later than 12:00 noon, New York City
time, on the related Distribution Date, shall, upon the written direction of the
Servicer, withdraw from the Class A Reserve Fund and deposit into the
Certificate Account, an amount equal to such Shortfall Amounts.
The delivery of the Servicer's Certificate pursuant to Section 3.8
shall, unless otherwise specified by the Servicer, be deemed an appropriate
written instruction for purposes of this Section 4.7(f). MBCC shall retain all
Excess Amounts, which amounts will not be assets of the Trust; provided,
however, that to the extent specified in Section 4.7(g), MBCC shall deposit such
Excess Amounts or the applicable portion thereof in the Class A Reserve Fund.
(g) On each Distribution Date, after giving effect to any
withdrawals from the Class A Reserve Fund pursuant to Section 4.6 and 4.7(f) on
such Distribution Date, MBCC shall deposit into the Class A Reserve Fund an
amount equal to the aggregate Shortfall Amounts for the related Collection
Period. If MBCC shall fail to make such deposit to the Class A Reserve Fund on
any Distribution Date, (i) the Servicer shall deposit all interest and other
income (net of losses and investment expenses) on deposit in the Collection
Account and Payahead Account as specified in Section 4.1(a) and (b) and (ii)
MBCC shall deposit Excess Amounts as specified in Section 4.7(f); provided,
however, that the aggregate amount to be deposited in the Class A Reserve Fund
on any Distribu-
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tion Date pursuant to this Section 4.7(g) shall not exceed the aggregate
Shortfall Amounts for the related Collection Period.
SECTION 4.8. Net Deposits. As an administrative convenience, the
Seller, the Servicer, the Payahead Agent, the Class A Agent and the Class B
Agent may make any remittance pursuant to this Article IV with respect to a
Collection Period net of distributions to be made to the Seller, the Servicer,
the Payahead Agent, the Class A Agent or the Class B Agent with respect to such
Collection Period. Nonetheless, each such party shall account for all of the
above described remittances and distributions as if the amounts were deposited
and/or transferred separately.
SECTION 4.9. Statements to Class A Certificateholders and Class B
Certificateholders. (a) On each Distribution Date, the Trustee shall include
with each distribution to each Class A Certificateholder and Class B
Certificateholder of record, a statement, prepared by the Servicer, based on
information in the Servicer's Certificate furnished pursuant to Section 3.9,
setting forth for the Collection Period relating to such Distribution Date the
following information:
(i) the amount of the distribution to Class A
Certificateholders and Class B Certificateholders, respectively, allocable
to principal;
(ii) the amount of the distribution to Class A
Certificateholders and Class B Certificateholders, respectively, allocable
to interest;
(iii) the amount of the Servicing Fee and Supplemental
Servicing Fee paid to the Servicer with respect to the related Collection
Period and the Certificateholders' Class A Percentage or Class B
Percentage, as applicable, of the Servicing Fee and Supplemental Servicing
Fee;
(iv) the Class A Principal Balance, the Class A Pool
Factor, the Class B Pool Factor, and the Class B Principal Balance as of
such Distribution Date, after giving effect to payments
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allocated to principal reported under clause (i) above;
(v) the Pool Balance as of the close of business on
the last day of the preceding Collection Period;
(vi) the amount of the Class A Interest Carryover
Shortfall, Class A Principal Carryover Shortfall, Class B Interest
Carryover Shortfall, and Class B Principal Carryover Short- fall, if any,
for such Distribution Date;
(vii) the amount, if any, otherwise distributable to
the Seller that is distributed to Class A Certificateholders and/or Class
B Certificateholders on such Distribution Date;
(viii) the balance of the Class A Reserve Fund
Property and Class B Reserve Fund Property on such Distribution Date,
after giving effect to changes therein on such Distribution Date; and
(ix) the aggregate Purchase Amount of Receivables
repurchased by the Seller or purchased by the Servicer.
Each amount set forth pursuant to clauses (i), (ii), (iii) and (vii) above shall
be expressed in the aggregate and as a dollar amount per $1,000 of original
denomination of the Certificates.
Within a reasonable period of time after the end of each calendar
year, the Trustee shall furnish to the Servicer a report stating each Person
that shall have been a Class A Certificateholder or Class B Certificateholder
during any portion of the preceding calendar year and the period of such
portion, and within a reasonable period of time after the end of each calendar
year, but not later than the latest date permitted by law, the Servicer shall
furnish a report or reports to the Trustee and the Trustee shall furnish, or
cause to be furnished, to each Person who at any time during such calendar year
shall have been a Class A Certificateholder or Class B Certificateholder, such
report as to the sum of the amounts determined in clauses (i), (ii), (iii) and
(vii)
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above for such calendar year, or, in the event such Person shall have been a
Class A Certificateholder or Class B Certificateholder during a portion of such
calendar year, for the applicable portion of such year, and such other
information as is available to the Servicer as the Servicer deems necessary or
desirable to enable the Class A Certificateholders and Class B
Certificateholders to prepare their federal income tax returns.
SECTION 4.10. Delivery of Eligible Investments. Each Investment
Agent agrees that with respect to Eligible Investments credited to any Account:
(A) Any Eligible Investment that is held in
deposit accounts shall be held solely in the name of such Investment
Agent at one or more depository institutions having the Required
Rating. Each such deposit account shall be subject to the exclusive
custody and control of such Investment Agent, and such Investment
Agent shall have sole signature authority with respect thereto.
(B) Any Eligible Investment that constitutes
Physical Property shall be delivered to such Investment Agent in
accordance with paragraph (a) of the definition of "Delivery" and
shall be held, pending maturity or disposition, solely by such
Investment Agent or a financial intermediary (as such term is
defined in Section 8-313(4) of the UCC) acting solely for such
Investment Agent.
(C) Any Eligible Investment that is a book entry
security held through the Federal Reserve System pursuant to federal
book entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be
maintained by such Investment Agent or its nominee, pending maturity
or disposition, through continued book entry registration of such
Eligible Investment as described in such paragraph.
(D) Any Eligible Investment that is an
"uncertificated security" under Article VIII of the UCC and that is
not gov-
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erned by clause (C) above shall be delivered to such Investment
Agent or its nominee in accordance with paragraph (c) of the
definition of "Delivery" and shall be maintained by such Investment
Agent or its nominee, pending maturity or disposition, through
continued registration of such Investment Agent's (or its nominee's)
ownership of such security.
(E) Property of a type which is not capable of
being delivered to such Investment Agent in accordance with the
definition of "Delivery" shall not constitute an Eligible
Investment.
Effective upon Delivery of any Eligible Investment in the form of
Physical Property, book entry securities, or uncertificated securities, such
Investment Agent shall be deemed to have represented that it has purchased such
Eligible Investment for value, in good faith, and without notice of any adverse
claim thereto.
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ARTICLE V
Reserved
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ARTICLE VI
The Certificates
SECTION 6.1. The Certificates. The Trustee shall, upon written order
or request signed in the name of the Seller by one of its officers authorized to
do so and delivered to an Authorized Officer of the Trustee, execute on behalf
of the Trust, authenticate and deliver the Certificates to or upon the order of
the Seller in the aggregate principal amount and denominations as set forth in
such written order or request. The Class A Certificates and Class B Certificates
(if sold pursuant to an effective registration statement under the Act) shall be
issuable in minimum denominations of $1,000 and integral multiples thereof and
the Class B Certificates shall (unless issued in minimum denominations of $1,000
as set forth above) be issuable in minimum denominations of $100,000 or in any
amount in excess thereof; provided, however, that one Class A Certificate and
one Class B Certificate may be issued in a denomination that represents the
residual amount of the Original Class A Principal Balance and the Original Class
B Principal Balance, respectively (each, a "Residual Certificate"). Upon initial
issuance, the Class A Certificates and the Class B Certificates shall be
substantially in the form of Exhibit A and Exhibit B, respectively, in an
aggregate amount equal to the Original Class A Principal Balance and the
Original Class B Principal Balance, respectively. The Certificates shall be
executed by the Trustee on behalf of the Trust by manual or facsimile signature
of an Authorized Officer of the Trustee under the Trustee's seal imprinted
thereon and attested by the manual or facsimile signature of an Authorized
Officer of the Trustee. Certificates bearing the manual or facsimile signatures
of individuals who were, at the time when such signatures shall have been
affixed, authorized to sign on behalf of the Trust, shall be valid and binding
obligations of the Trustee, notwithstanding that such individuals shall have
ceased to be so authorized prior to the authentication and delivery of such
Certificates or did not hold such offices at the date of such Certificates.
SECTION 6.2. Authentication of Certificates. No Certificate shall
entitle the Holder thereof to any benefit under this Agreement, or shall be
valid for any purpose, unless there shall appear on such Certificate a
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certificate of authentication, substantially in the form set forth in the forms
of Certificates attached hereto as Exhibit A and Exhibit B, executed by the
Trustee by manual signature. Such authentication shall constitute conclusive
evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder. All Certificates shall be dated the date
of their authentication.
SECTION 6.3. Registration of Transfer and Exchange of Certificates.
(a) The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 6.7, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Certificate
Registrar shall provide for the registration of Certificates and of transfers
and exchanges of Certificates as herein provided. The Trustee shall be the
initial Certificate Registrar.
(b) The Class B Certificates shall initially be retained by the
Seller. No transfer of a Class B Certificate shall be made unless the
registration requirements of the Act and any applicable state securities laws
are complied with, or such transfer is exempt from the registration requirements
under said Act and laws. Neither the Seller nor the Trustee is under an
obligation to register any of the Class B Certificates under the Act or any
other securities law.
(c) No registration of transfer of a Class B Certificate shall be
made (i) unless the registration requirements of the Act and any applicable
state securities laws are complied with; (ii) unless such transfer is made
pursuant to an exemption from the registration requirements of the Act and any
applicable state securities laws and the Class B Certificateholder desiring to
effect such transfer and such Certificateholder's prospective transferee each
certifies in writing to the Seller and the Trustee the facts surrounding such
transfer and provides both the Seller and the Trustee with a written Opinion of
Counsel in form and substance satisfactory to the Seller and the Trustee that
such transfer may be made pursuant to an exemption from said Act or laws, which
Opinion of Counsel shall not be an expense of the Seller or the Trustee; or
(iii) until the Certificate Registrar shall have received a transfer certificate
in the form of Exhibit G-1 hereto signed by the transferor
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of such Certificate and either (x) if the transfer is being made to a QIB in
reliance on Rule 144A, a representation letter in the form of Exhibit G-2 hereto
signed by the purchaser of such Certificate, (y) if the transfer is being made
to an Accredited Investor, a representation letter in the form of Exhibit G-3
hereto signed by the purchaser of such Certificate or (z) if the transfer is
being made pursuant to Regulation S, a representation letter in the form of
Exhibit G-4 hereto signed by the purchaser of such Certificate, and such
certifications, legal opinions and other information as the Certificate
Registrar may reasonably require to confirm that the proposed transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Act, in each case acceptable to and in form
satisfactory to the Certificate Registrar and upon which it may conclusively
rely. Each Class B Certificate issued in connection with a registration of
transfer or exchange of such Certificate on or after the date of this Agreement
shall bear a legend in the form of Exhibit G-5 hereto.
(d) Notwithstanding anything to the contrary contained herein, in no
event shall a Class B Certificate or any interest therein be transferred to a
U.S. Person (within the meaning of Regulation S under the Act) unless the
prospective transferee shall have provided to the Seller and the Certificate
Registrar either (i) a certification in the form of Exhibit G-2 or Exhibit G-3,
as applicable, hereto, or (ii) an Opinion of Counsel (which may be internal
counsel), reasonably satisfactory to the Certificate Registrar, from the
prospective transferee of such Class B Certificate that either no "prohibited
transaction" under ERISA or the Code will occur in connection with such
prospective transferee's acquisition and holding of the Class B Certificate or
that the acquisition and holding of the Class B Certificate by such prospective
transferee is subject to a statutory or administrative exemption, specified in
such Opinion of Counsel, from the "prohibited transaction" provisions of ERISA
and the Code. The Certificate Registrar shall have no responsibility for
monitoring compliance with the preceding sentence at any time when the Class B
Certificates are evidenced by Book Entry Certificates. Any such Opinion of
Counsel shall be obtained at the expense of the prospective transferor or
transferee, and not at the expense of the Seller, the Trustee, the Servicer or
the
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Certificate Registrar, and shall be delivered to the Seller and the Certificate
Registrar prior to or contemporaneously with any such transfer. In addition, no
transfer of a Class B Certificate will be permitted if the Certificate Registrar
makes a good faith determination that, as a result of such transfer, 25% or more
in principal amount of the Class B Certificates would be held by benefit plan
investors, and such restriction on transfer may be included as an assumption on
which an Opinion of Counsel relating to "prohibited transactions" is based. For
purposes of the immediately preceding sentence, in determining the total
principal amount of Class B Certificates, any Class B Certificates held by a
Person (other than a benefit plan investor) who has discretionary authority or
control with respect to the assets of the Trust or any Person who provides
investment advice for a fee (direct or indirect) with respect to such assets, or
an affiliate of such a Person, shall be disregarded.
(e) The initial transfer of any Class B Certificate shall not be
made unless the Seller shall have given the Rating Agencies and the Trustee
prior written notice of such proposed transfer, and the Rating Agencies shall
have notified the Seller and the Trustee, in writing, that such proposed
transfer will not result in the qualification, downgrading or withdrawal of the
ratings then assigned to the Class A Certificates by the Rating Agencies.
(f) Upon surrender for registration of transfer of any Certificate
at the Corporate Trust Office, the Trustee shall execute, authenticate, and
deliver, in the name of the designated transferee or transferees, one or more
new Certificates in authorized denominations of a like aggregate amount dated
the date of authentication by the Trustee. At the option of a Holder,
Certificates may be exchanged for other Certificates of authorized denominations
of a like aggregate amount upon surrender of the Certificates to be exchanged at
the Corporate Trust Office.
(g) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Trustee and the Certificate Registrar duly executed by
the Holder thereof or his attorney duly
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authorized in writing. Each Certificate surrendered for registration of transfer
and exchange shall be cancelled and subsequently disposed of by the Trustee.
(h) No service charge shall be made for any registration of transfer
or exchange of Certificates, but the Trustee may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates.
SECTION 6.4. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate shall be surrendered to the Certificate Registrar,
or if the Certificate Registrar shall receive evidence to its satisfaction of
the destruction, loss, or theft of any Certificate and (b) there shall be
delivered to the Certificate Registrar and the Trustee such security or
indemnity as may be required to save each of them harmless, then in the absence
of notice that such Certificate shall have been acquired by a bona fide
purchaser, the Trustee on behalf of the Trust shall execute, and the Trustee
shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost, or stolen Certificate, a new Certificate of like
tenor and denomination. In connection with the issuance of any new Certificate
under this Section 6.4, the Trustee may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
herewith. Any replacement Certificate issued pursuant to this Section 6.4 shall
constitute conclusive evidence of ownership in the Trust, as if originally
issued, whether or not the lost, stolen, or destroyed Certificate shall be found
at any time.
SECTION 6.5. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee, the Certificate Registrar
and any of their respective agents may treat the Person in whose name any
Certificate shall be registered as the owner of such Certificate for the purpose
of receiving distributions pursuant to Section 4.6 and for all other purposes
whatsoever, and the Trustee, the Certificate Registrar and any of their
respective agents shall not be bound by any notice to the contrary.
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SECTION 6.6. Access to List of Certificateholders' Names and
Addresses. The Trustee shall furnish or cause to be furnished to the Servicer,
within fifteen days after receipt by the Trustee of a request therefor from the
Servicer in writing, in such form as the Servicer may reasonably require, a list
of the names and addresses of the Certificateholders as of the most recent
Record Date. If three or more Certificateholders of either Class, or one or more
Holders of Class A Certificates aggregating not less than 25% of the Class A
Principal Balance, or Holders of Class B Certificates aggregating not less than
25% of the Class B Principal Balance, apply in writing to the Trustee, and such
application states that the applicants desire to communicate with other
Certificateholders of such Class with respect to their rights under this
Agreement or under the Certificates and such application shall be accompanied by
a copy of the communication that such applicants propose to transmit, then the
Trustee shall, within five Business Days after the receipt of such application,
request from the Clearing Agency and make available to such Certificateholders
when received from the Clearing Agency and during normal business hours, access
to the current list of Certificateholders and Clearing Agency Participants with
respect to such Class. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed to hold neither the Seller, the
Servicer nor the Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 6.7. Maintenance of Office or Agency. The Trustee shall
maintain, or cause to be maintained, at its expense, in New York, New York, an
office or agency where Certificates may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Trustee in
respect of the Certificates and this Agreement may be served. The Trustee
initially designates the Corporate Trust Office as its office for such purposes.
The Trustee shall give prompt written notice to the Servicer and to
Certificateholders of any change in the location of any such office or agency.
SECTION 6.8. Book Entry Certificates. The Class A Certificates will,
upon original issuance, be issued in book entry form. The Class B Certificates
will, upon original issuance, be issued to the Seller in
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the form of a single Definitive Certificate. Such Definitive Certificate may be
exchanged for Book Entry Certificates if the Class B Certificates are issued (x)
publicly, (y) in reliance on Rule 144A, or (z) otherwise, at the option of the
Seller in accordance with the rules of the applicable Clearing Agency; provided,
however, that the Residual Certificate of each Class will be issued as a
Definitive Certificate. Such Book Entry Certificates will be issued in the form
of typewritten Class A Certificates and Class B Certificates representing the
Book Entry Certificates of such Class, to be delivered to The Depository Trust
Company, the initial Clearing Agency, by, or on behalf of, the Seller. The Class
A Certificates and Class B Certificates delivered to The Depository Trust
Company shall initially be registered on the Certificate Register in the name of
Cede & Co., the nominee of the initial Clearing Agency, and no Certificate Owner
will receive a definitive certificate representing such Certificate Owner's
interest in the Class A Certificates and/or Class B Certificates, except as
provided in Section 6.10. Unless and until definitive, fully registered Class A
Certificates have been issued to Class A Certificate Owners and following the
issuance of Book Entry Certificates representing the Class B Certificates,
unless and until definitive, fully registered Class B Certificates have been
issued to Class B Certificate Owners pursuant to Section 6.10:
(i) the provisions of this Section 6.8 shall be in
full force and effect;
(ii) the Seller, the Servicer, the Certificate
Registrar, and the Trustee may deal with the Clearing Agency for all
purposes (including the making of distributions on the relevant
Certificates) as the authorized representative of such Certificate Owners;
(iii) to the extent that the provisions of this
Section 6.8 conflict with any other provisions of this Agreement, the
provisions of this Section 6.8 shall control;
(iv) the rights of such Certificate Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Certifi-
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cate Owners and the Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the Depository Agreement, unless and until
Definitive Certificates are issued pursuant to Section 6.10, the initial
Clearing Agency will make book entry transfers among the Clearing Agency
Participants and receive and transmit distributions of principal and
interest on the relevant Certificates to such Clearing Agency
Participants; and
(v) whenever this Agreement requires or permits
actions to be taken based upon instructions or directions of Holders of
Class A Certificates and/or Class B Certificates evidencing a specified
percentage of the Class A Principal Balance and the Class B Principal
Balance, respectively, the Clearing Agency shall be deemed to represent
such percentage only to the extent that it has received instructions to
such effect from Certificate Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in Class A Certificates and/or Class B Certificates,
as relevant, and has delivered such instructions to the Trustee.
SECTION 6.9. Notices to Clearing Agency. Whenever notice or other
communication to the Class A Certificateholders or, following the issuance of
Book Entry Certificates representing the Class B Certificates, the Class B
Certificateholders is required under this Agreement, other than to the Holder of
the Residual Certificate, unless and until Definitive Certificates shall have
been issued to Certificate Owners pursuant to Section 6.10, the Trustee and the
Servicer shall give such notice or other communication to the Clearing Agency.
SECTION 6.10. Definitive Certificates. If (i)(A) the Seller advises
the Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities under the Depository Agreement and (B)
the Trustee or the Seller is unable to locate a qualified successor, (ii) the
Seller 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
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Servicing Termination, Certificate Owners representing beneficial interests
aggregating not less than a majority of the aggregate outstanding Class A
Principal Balance with respect to the Class A Certificates or, if the Class B
Certificates are then Book Entry Certificates, Certificates Owners representing
beneficial interests aggregating not less than a majority of the aggregate
outstanding Class B Principal Balance with respect to the Class B Certificates,
advise the Trustee and the Clearing Agency through the Clearing Agency
Participants in writing that the continuation of a book entry system through the
Clearing Agency is no longer in the best interests of such Certificate Owners,
then the Trustee shall notify the Clearing Agency and request that the Clearing
Agency notify all Certificate Owners of the relevant Class of the occurrence of
any such event and of the availability of Definitive Certificates to Certificate
Owners of such Class requesting the same and that the Record Date for such
Definitive Certificates for any Distribution Date subsequent to the issuance of
such Definitive Certificates will be the last day of the Collection Period
immediately preceding the month in which such Distribution Date occurs. Upon
surrender to the Trustee of the Class A Certificates or the Class B Certificates
by the Clearing Agency, accompanied by registration instructions from the
Clearing Agency for registration, the Trustee shall issue the Definitive
Certificates and deliver such Definitive Certificates in accordance with the
instructions of the Clearing Agency. Neither the Seller, the Certificate
Registrar nor 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 Certificates, the Trustee
shall recognize the registered Holders of the Definitive Certificates as
Certificateholders hereunder. Neither the Trustee nor the Seller shall be liable
if the Trustee or the Seller is unable to locate a qualified successor Clearing
Agency. None of the Seller, the Servicer or the Trustee will have any liability
for any aspect of the records relating to or payment made on account of
beneficial ownership interests of the Class A Certificates or Class B
Certificates held by Cede & Co., as nominee of The Depository Trust Company, or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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ARTICLE VII
The Seller
SECTION 7.1. Representations and Warranties of Seller. The Seller
makes the following representations and warranties on which the Trustee is
relying in accepting the Receivables and the other Trust Property in trust and
in executing and authenticating the Certificates. The representations and
warranties speak as of the execution and delivery of this Agreement and shall
survive the sale of the Receivables and the other Trust Property to the Trustee:
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties shall be
currently owned and such business is currently conducted, and had at all
relevant times, and has, power, authority, and legal right to acquire and
own the Receivables.
(ii) Due Qualification. The Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications, except where the failure of the Seller to so qualify or
obtain such licenses or approvals would not have a material adverse effect
on the Seller, the Trust or any Receivable.
(iii) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and to carry out its terms. The Seller
has full power and authority to sell and assign the property to be sold
and assigned to and deposited with the Trust as Trust Property and has
duly authorized such sale and assignment to the Trust by all necessary
corporate action; and the execution, delivery, and performance of this
Agreement have been duly authorized by the Seller by all necessary
corporate action.
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(iv) Valid Sale; Binding Obligation. This Agreement effects a valid
sale, transfer, and assignment of the Receivables and the other Trust
Property conveyed by the Seller to the Trust hereunder, enforceable
against creditors of and purchasers from the Seller; and this Agreement
constitutes a legal, valid, and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
conservatorship, receivership, liquidation or other similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
(v) No Violation. The execution, delivery and performance by the
Seller of this Agreement and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Seller, or conflict
with, or breach any of the terms or provisions of, or constitute (with or
without notice or lapse of time) a default under, any indenture,
agreement, mortgage, deed of trust or other instrument to which the Seller
is a party or by which the Seller is bound or any of its properties are
subject, or result in the creation or imposition of any lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than this Agreement),
or violate any law, order, rule, or regulation, applicable to the Seller
or its properties, of any federal or state regulatory body, any court,
administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(vi) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Seller, threatened, before any court,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties: (a)
asserting the invalidity of this Agreement or the Certificates, (b)
seeking to prevent the issuance of the
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Certificates or the consummation of any of the transactions contemplated
by this Agreement, (c) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or
the Certificates, or (d) that may adversely affect the federal or state
income, excise franchise or similar tax attributes of the Certificates.
SECTION 7.2. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(i) The Seller shall indemnify and hold harmless the Trustee
and the Trust from and against any taxes that may at any time be asserted
against the Trustee or the Trust with respect to, and as of the date of,
the sale of the Receivables to the Trust or the issuance and original sale
of the Certificates, including any sales, gross receipts, general
corporation, tangible personal property, privilege, or license taxes (but,
in the case of the Trust, not including any taxes asserted with respect to
ownership of the Receivables or income, franchise or other taxes measured
by net income, arising out of distributions on the Certificates or any
other transactions contemplated by this Agreement) and costs and expenses
in defending against the same.
(ii) The Seller shall indemnify and hold harmless the Trustee
from and against any loss, liability, or expense incurred by reason of (a)
the Seller's willful misfeasance, bad faith, or negligence (other than
errors in judgment) in the performance of its duties under this Agreement,
and (b) the Seller's violation of federal or state securities laws in
connection with the registration or the sale of the Certificates.
Notwithstanding the foregoing, such indemnification shall not extend
to any credit losses on any Receivables.
Indemnification under this Section 7.2 shall survive the termination
of this Agreement and shall
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include, without limitation, reasonable fees and expenses of counsel and
expenses of litigation. If the Seller shall have made any indemnity payment to
the Trustee pursuant to this Section and the Trustee thereafter shall collect
any of such amounts from others, the Trustee shall repay such amounts to the
Seller, without interest (except to the extent such amounts from others include
interest).
SECTION 7.3. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (i) into which the Seller may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Seller shall be a party or (iii) that may succeed by purchase and
assumption to all or substantially all of the business of the Seller, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Seller under this Agreement, will be the
successor to the Seller under this Agreement without the execution or filing of
any document or any further act on the part of any of the parties to this
Agreement; provided, however, that (x) the Seller shall have delivered to the
Trustee an Officer's Certificate and an Opinion of Counsel each stating that
such merger, conversion, consolidation or succession and such agreement of
assumption comply with this Section 7.3, and (y) the Seller shall have delivered
to the Trustee an Opinion of Counsel either (A) stating that, in the opinion of
such Counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary to fully
preserve and protect the interest of the Trustee in the Receivables and the
other Trust Property, and reciting the details of such filings, or (B) stating
that, in the opinion of such Counsel, no such action shall be necessary to fully
preserve and protect such interest. The Seller shall provide notice of any
merger, conversion, consolidation, or succession pursuant to this Section 7.3,
any amendment to the Articles of Incorporation of the Seller or of the issuance
of any other securities by the Seller to the Rating Agencies. Notwithstanding
anything herein to the contrary, the execution of the foregoing agreement of
assumption and compliance with clauses (x) or (y) above shall be conditions to
the consummation of the transactions referred to in clauses (i), (ii), or (iii)
above.
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SECTION 7.4. Limitation on Liability of Seller. The Seller may rely
and shall be protected in acting or refraining from acting upon any resolution,
certificate of auditors or accountants or any other certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
appraisal, bond, note or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties. The Seller
shall not be under any obligation to appear in, prosecute, or defend any legal
action that shall not be incidental to its obligations under this Agreement, and
that in its reasonable judgment may involve it in any expense or liability.
SECTION 7.5. Seller May Own Certificates. The Seller, and any
Affiliate of the Seller, may in its individual or any other capacity become the
owner or pledgee of Certificates with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as otherwise provided in the
definition of "Certificateholder", "Class A Certificateholder" and "Class B
Certificateholder" in Section 1.1. Except as set forth herein, Certificates so
owned by or pledged to the Seller or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority, or distinction as among all of the Certificates.
SECTION 7.6. Limitation on Incurrence of Indebtedness. The Seller
shall not incur any indebtedness in accordance with Section 8(ii)(D) of the
Seller's Certificate of Incorporation unless the Seller shall have received
confirmation in writing from the Rating Agencies prior to the incurrence of such
debt that the incurrence of such debt will not result in a lowering of or a
withdrawal of the then current rating of the Class A Certificates and, if then
rated, the Class B Certificates.
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ARTICLE VIII
The Servicer
SECTION 8.1. Representations and Warranties of Servicer. The
Servicer makes the following representations and warranties on which the Trustee
is relying in accepting the Receivables and the other Trust Property in trust
and in executing and authenticating the Certificates. The representations and
warranties speak as of the execution and delivery of this Agreement and shall
survive the sale of the Receivables and the other Trust Property to the Trustee:
(i) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a corporation in good standing under
the laws of the state of its incorporation, with power and authority to
own its properties and to conduct its business as such properties shall be
currently owned and such business is presently conducted, and had at all
relevant times, and has, power, authority, and legal right to service the
Receivables and to hold the Receivable Files as custodian on behalf of the
Trustee.
(ii) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business (including
the servicing of the Receivables as required by this Agreement) shall
require such qualifications, except where the failure of the Servicer so
to qualify or obtain such licenses or approvals would not have a material
adverse effect on the Servicer, the Trust or any Receivable.
(iii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and to carry out its
terms; and the execution, delivery and performance of this Agreement have
been duly authorized by the Servicer by all necessary corporate action.
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(iv) Binding Obligation. This Agreement constitutes a legal,
valid, and binding obligation of the Servicer, enforceable against the
Servicer in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation or other similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles.
(v) No Violation. The execution, delivery and performance by
the Servicer of this Agreement, the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Servicer, or conflict
with, or breach any of the terms or provisions of, or constitute (with or
without notice or lapse of time) a default under, any indenture,
agreement, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which the Servicer is bound or to which any of
its properties are subject, or result in the creation or imposition of any
lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument (other
than this Agreement), or violate any law, order, rule, or regulation
applicable to the Servicer or its properties of any federal or state
regulatory body, any court, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or, to the Servicer's knowledge, threatened,
before any court, regulatory body, administrative agency, or tribunal or
other governmental instrumentality having jurisdiction over the Servicer
or its properties: (a) asserting the invalidity of this Agreement or the
Certificates, (b) seeking to prevent the issuance of the Certificates or
the consummation of any of the transactions contemplated by this
Agreement, (c) seeking any determination or ruling that might
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materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this Agreement or
the Certificates, or (d) that may adversely affect the federal or state
income, excise, franchise or similar tax attributes of the Certificates.
SECTION 8.2. Liability of Servicer; Indemnities. The Servicer shall
be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.
(i) The Servicer shall defend, indemnify and hold harmless the
Trustee, the Trust, and the Certificateholders from and against any and
all costs, expenses, losses, damages, claims, and liabilities, arising out
of or resulting from the use, ownership, or operation by the Servicer or
any Affiliate thereof of a Financed Vehicle.
(ii) The Servicer shall indemnify, defend and hold harmless
the Trustee and the Trust from and against any taxes that may at any time
be asserted against the Trustee or the Trust with respect to the
transactions contemplated herein including, without limitation, any sales,
gross receipts, general corporation, tangible personal property,
privilege, or license taxes (but, in the case of the Trust, not including
any taxes asserted with respect to, and as of the date of, the sale of the
Receivables to the Trust or the issuance and original sale of the
Certificates, or asserted with respect to ownership of the Receivables,
and in the case of the Trust and the Trustee, not including income,
franchise or other taxes measured by net income, arising out of
distributions on the Certificates, payment of any fees or any other
transactions contemplated by this Agreement) and costs and expenses in
defending against the same.
(iii) The Servicer shall indemnify, defend and hold harmless
the Trustee, the Trust, and the Certificateholders from and against any
and all costs, expenses, losses, claims, damages, and liabilities to the
extent that such cost, expense, loss, claim, damage, or liability arose
out of, or was imposed upon the Trustee, the Trust, or the Cer-
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tificateholders through, the negligence, willful misfeasance, or bad faith
of the Servicer in the performance of its duties under this Agreement.
(iv) The Servicer shall indemnify, defend, and hold harmless
the Trustee from and against all costs, expenses, losses, claims, damages,
and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained herein except
to the extent that such cost, expense, loss, claim, damage, or liability:
(a) shall be due to the willful misfeasance, bad faith, or negligence of
the Trustee; (b) relates to any tax other than the taxes with respect to
which the Servicer shall be required to indemnify the Trustee; (c) shall
arise from the Trustee's breach of any of its representations or
warranties set forth in Section 10.14; (d) shall be one as to which the
Seller is required to indemnify the Trustee; or (e) shall arise out of or
be incurred in connection with the performance by the Trustee of the
duties of successor Servicer hereunder.
Notwithstanding the foregoing, such indemnification shall not extend
to any credit losses on any Receivables.
Indemnification under this Section 8.2 by any Person, with respect
to the period such Person was (or was deemed to be) the Servicer, shall survive
the termination of such Person as Servicer or a resignation by such Person as
Servicer as well as the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts to the Servicer, without interest (except to
the extent such amounts from others include interest).
SECTION 8.3. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (i) into which the Servicer may be merged
or consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Servicer shall be a party, or (iii) that may succeed by purchase and
assumption to all
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or substantially all of the business of the Servicer, which Person in any of the
foregoing cases executes an agreement of assumption to perform every obligation
of the Servicer under this Agreement, will be the successor to the Servicer
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement; provided, however, that
(x) the Servicer shall have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel each stating that such merger, conversion,
consolidation or succession and such agreement of assumption comply with this
Section 8.3, and (y) the Servicer shall have delivered to the Trustee an Opinion
of Counsel either (A) stating that, in the opinion of such Counsel, all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Trustee in the Receivables, and reciting the details of such
filings, or (B) stating that, in the opinion of such Counsel, no such action
shall be necessary to fully preserve and protect such interest. The Servicer
shall provide notice of any merger, conversion, consolidation or succession
pursuant to this Section 8.3 to the Rating Agencies. Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement or assumption
and compliance with clauses (x) or (y) above shall be conditions to the
consummation of the transactions referred to in clauses (i), (ii), or (iii)
above.
SECTION 8.4. Limitation on Liability of Servicer. (a) The Servicer
may rely and shall be protected in acting or refraining from acting upon any
resolution, certificate of auditors or accountants or any other certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, appraisal, bond, note or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(b) Except as provided in this Agreement, the Servicer shall not be
under any obligation to appear in, prosecute, or defend any legal action that
shall not be incidental to its duties to service the Receivables in accordance
with this Agreement, and that in its opinion may involve it in any expense or
liability; provided, however, that the Servicer may undertake any reasonable
action that it may deem necessary or desirable in respect
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of this Agreement and the rights and duties of the parties to this Agreement and
the interests of the Certificateholders under this Agreement. In such event, the
legal expenses and costs of such action and any liability resulting therefrom
shall be expenses, costs, and liabilities of the Servicer.
SECTION 8.5. Servicer Not to Resign. Subject to the provisions of
Section 8.3, the Servicer shall not resign from its obligations and duties under
this Agreement except upon a determination that the performance of its duties is
no longer permissible under applicable law. Any such determination permitting
the resignation of the Servicer shall be evidenced by an Opinion of Counsel to
such effect delivered to the Trustee.
SECTION 8.6. Servicer May Own Certificates. The Servicer, and any
Affiliate of the Servicer, may, in its individual or any other capacity, become
the owner or pledgee of Certificates with the same rights as it would have if it
were not the Servicer or an Affiliate thereof, except as otherwise provided in
the definition of "Certificateholder", "Class A Certificateholder" and "Class B
Certificateholder" in Section 1.1. Except as set forth herein, Certificates so
owned by or pledged to the Servicer or such Affiliate shall have an equal and
proportionate benefit under the provisions of this Agreement, without
preference, priority or distinction as among all of the Certificates.
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ARTICLE IX
Servicing Termination
SECTION 9.1. Events of Servicing Termination. (a) If any one of the
following events ("Events of Servicing Termination") shall occur and be
continuing:
(i) Any failure by the Servicer to deliver to the Trustee the
Servicer's Certificate for any Collection Period, which shall continue
beyond the earlier of three Business Days from the date such Servicer's
Certificate was due to be delivered and the related Distribution Date, or
any failure by the Servicer (or, for so long as the Servicer is an
Affiliate of the Seller, the Seller) to deliver to any of the Accounts any
proceeds or payment required to be so delivered under the terms of the
Certificates, the Shortfall Amount Agreement (so long as MBCC is the
Servicer) and this Agreement, which shall continue unremedied for a period
of five Business Days following the due date therefor (or, in the case of
a payment or deposit to be made no later than a Distribution Date, the
failure to make such payment or deposit by such Distribution Date); or
(ii) Any failure on the part of the Servicer (or, for so long as the
Servicer is an Affiliate of the Seller, the Seller) duly to observe or to
perform in any material respect any other covenants or agreements set
forth in the Certificates or in this Agreement, which failure shall (A)
materially and adversely affect the rights of Certificateholders and (B)
continue unremedied for a period of 90 days after the date on which
written notice of such failure, requiring the same to be remedied, shall
have been given (1) to the Servicer (or, for so long as the Servicer is an
affiliate of the Seller, the Seller) by the Trustee, or (2) to the Trustee
and the Servicer by the Holders of Certificates (excluding any
Certificates held by the Seller or any Affiliate of the Seller) evidencing
not less than 25% of the sum of the Class A Principal Balance and the
Class B Principal Balance (excluding any Certificates held by the Seller
or any Affiliate of the Seller); or
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(iii) The entry of a decree or order by a court or agency or
supervisory authority of competent jurisdiction for the appointment of a
conservator, receiver, liquidator or trustee for the Servicer in any
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities, or similar proceedings, or for the winding up or liquidation
of its affairs, and any such decree or order continues unstayed and in
effect for a period of 60 consecutive days; or
(iv) The consent by the Servicer to the appointment of a
conservator, receiver, liquidator or trustee in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities,
or similar proceedings of or relating to the Servicer or relating to
substantially all of its property, the admission in writing by the
Servicer of its inability to pay its debts generally as they become due,
the filing by the Servicer of a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, the making by
the Servicer of an assignment for the benefit of its creditors or the
voluntary suspension by the Servicer of payment of its obligations; or
(v) The failure by the Servicer to be an Eligible Servicer;
then, and in each and every case and so long as such Event of Servicing
Termination shall not have been remedied, either the Trustee, or the Holders of
Certificates (excluding any Certificates held by the Seller or any Affiliate of
the Seller) evidencing not less than a majority of the sum of the Class A
Principal Balance and the Class B Principal Balance (excluding any Certificates
held by the Seller or any Affiliate of the Seller), by notice then given in
writing to the Servicer (with a copy to the Trustee if given by the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement. On or after the receipt by the Servicer of such
written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Certificates or the Trust Property or otherwise,
shall pass to and be vested in the Trustee or a successor Servicer appointed
under Section 9.2; and without limitation the Trustee shall be authorized and
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empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivable Files, the certificates of title to the Financed
Vehicles, or otherwise. The Servicer shall cooperate with the Trustee or such
successor Servicer in effecting the termination of its responsibilities and
rights as Servicer under this Agreement, including the transfer to the Trustee
or such successor Servicer for administration of all cash amounts that are at
the time held by the Servicer for deposit, or thereafter shall be received with
respect to a Receivable, all Receivable Files and all information or documents
that the Trustee or such successor Servicer may require. In addition, the
Servicer shall transfer its electronic records relating to the Receivables to
the successor Servicer in such electronic form as the successor Servicer may
reasonably request and shall cooperate with the successor servicer in the
enforcement of the Dealer Agreements. All reasonable costs and expenses incurred
by the successor Servicer, including allowable compensation of employees and
overhead costs, in connection with the transfer of servicing shall be paid by
the outgoing Servicer upon presentation of reasonable documentation of such
costs and expenses.
(b) If any of the foregoing Events of Servicing Termination occurs,
the Trustee shall have no obligation to notify Certificateholders or any other
Person of such occurrence prior to the continuance of such event through the end
of any cure period specified in Section 9.1(a).
SECTION 9.2. Trustee to Act; Appointment of Successor Servicer. Upon
the Servicer's resignation pursuant to Section 8.5 or upon the Servicer's
receipt of notice of termination as Servicer pursuant to Section 9.1, the
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement, and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions of this Agreement. In the ordinary course of
business, the Trustee and any other Person, in either case acting as successor
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Servicer, may at any time delegate any of its duties hereunder to any Person,
including any of its affiliates, who agrees to conduct such duties in accordance
with standards comparable to those that the Servicer executes pursuant to
Section 3.1 hereof. Such delegation shall not relieve the Trustee and any other
Person, in either case acting as successor Servicer, of its liabilities and
responsibilities with respect to such duties and shall not constitute a
resignation within the meaning of Article VIII of the Agreement. The Trustee and
any other Person, in either case acting as successor Servicer, shall provide
each Rating Agency and the Trustee with written notice prior to the delegation
of any of its duties to any Person. As compensation therefor, the Trustee shall
be entitled to such compensation (whether payable out of the Collection Account
or otherwise) as the Servicer would have been entitled to under this Agreement
if no such notice of termination or resignation had been given. Notwithstanding
the above, the Trustee may, if it shall be unwilling so to act or shall, if it
is legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, an Eligible Servicer as the successor to the terminated
Servicer under this Agreement. In connection with such appointment, the Trustee
may make such arrangements for the compensation of such successor Servicer out
of payments on Receivables as it and such successor shall agree, which, in no
event, shall be greater than that payable to MBCC as Servicer hereunder. The
Trustee and such successor shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession. The Trustee
shall not be relieved of its duties as successor Servicer under this Section
until a newly appointed Servicer shall have assumed the responsibilities and
obligations of the terminated Servicer under this Agreement.
SECTION 9.3. Effect of Servicing Transfer. (a) After the transfer of
servicing hereunder, the Trustee or successor Servicer shall notify Obligors to
make directly to the successor Servicer payments that are due under the
Receivables after the effective date of such transfer.
(b) Except as provided in Section 8.2, after the transfer of
servicing hereunder, the outgoing Servicer shall have no further obligations
with respect
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to the management, administration, servicing, custody or collection of the
Receivables and the successor Servicer shall have all of such obligations,
except that the outgoing Servicer shall continue to cooperate with the successor
Servicer as provided in Section 9.1(a).
(c) Any successor Servicer shall provide the Seller with access to
the Receivable Files and to the successor Servicer's records (whether written or
automated) with respect to the Receivable Files. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the successor Servicer. Nothing in this Section shall
affect the obligation of the successor Servicer to observe any applicable law
prohibiting disclosure of information regarding the Obligors, and the failure of
the Servicer to provide access to information as a result of such obligation
shall not constitute a breach of this Section.
SECTION 9.4. Notification to Certificateholders. Upon any notice of
an Event of Servicing Termination or upon any termination of, or appointment of
a successor to, the Servicer pursuant to this Article IX, the Trustee shall give
prompt written notice thereof to Certificateholders at their respective
addresses of record, and to the Rating Agencies.
SECTION 9.5. Waiver of Past Events of Servicing Termination. The
Holders of Certificates evidencing not less than a majority of the sum of the
Class A Principal Balance and the Class B Principal Balance may, on behalf of
all Holders of Certificates, waive any Event of Servicing Termination hereunder
and its consequences, except an event resulting from the failure to make any
required deposits to, or payments from, any of the Accounts in accordance with
this Agreement. Upon any such waiver of a past Event of Servicing Termination,
such event shall cease to exist, and shall be deemed to have been remedied for
every purpose of this Agreement. No such waiver shall extend to any subsequent
or other event or impair any right arising therefrom, except to the extent
expressly so waived.
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ARTICLE X
The Trustee
SECTION 10.1. Duties of Trustee. (a) The Trustee, both prior to and
after the curing of an Event of Servicing Termination, undertakes to perform
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the Trustee.
If an Event of Servicing Termination shall have occurred and shall not have been
cured, the Trustee shall exercise such of the rights and powers vested in it by
this Agreement, and shall use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs; provided, however, that if the Trustee assumes the
duties of the Servicer pursuant to Section 9.2, the Trustee in performing such
duties shall use the degree of skill and attention required by Section 3.1.
(b) The Trustee, upon receipt of all resolutions, certificates,
statements, opinions, reports, documents, orders, or other instruments furnished
to the Trustee that are required specifically to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith; provided, however, that:
(i) Prior to the occurrence of an Event of Servicing Termination,
and after the curing of all such Events of Servicing Termination that may
have occurred, the duties and obligations of the Trustee shall be
determined solely by the express provisions of this Agreement, the Trustee
shall not be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement, no implied
covenants or obligations shall be read into this Agreement against the
Trustee, the permissible right of the Trustee (solely in its capacity as
such) to do things enumerated in this Agreement shall not be construed as
a duty and, in
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the absence of bad faith on the part of the Trustee, or manifest error,
the Trustee (solely in its capacity as such) may conclusively rely on the
truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement;
(ii) The Trustee shall not be personally liable for an error of
judgment made in good faith by an officer of the Trustee, unless it shall
be proved that the Trustee shall have been negligent in performing its
duties in accordance with the terms of this Agreement; and
(iii) The Trustee shall not be personally liable with respect to any
action taken, suffered, or omitted to be taken in good faith in accordance
with the direction of the Holders of Class A Certificates and Class B
Certificates (excluding any Certificates held by the Seller or any
Affiliate of the Seller) evidencing not less than a majority of the sum of
the Class A Principal Balance and the Class B Principal Balance (excluding
any Certificates held by the Seller or any Affiliate of the Seller),
relating to the time, method and place of conducting any proceeding or any
remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Agreement.
(d) The Trustee shall not be required to expend or risk its own
funds or otherwise incur any 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 for believing that the repayment of such funds or
adequate indemnity against such risk or liability shall not be reasonably
assured to it, and none of the provisions contained in this Agreement shall in
any event require the Trustee to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Trustee shall be the successor to, and
be vested with the rights, duties, powers and privileges of, the Servicer in
accordance with the terms of this Agreement.
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(e) Except for actions expressly authorized by this Agreement, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or Financed Vehicle or to impair the
value of any Receivable or Financed Vehicle.
(f) All information obtained by the Trustee pursuant hereto, whether
upon the exercise of its rights under this Agreement or otherwise, shall be
maintained by the Trustee in confidence and shall not be disclosed to any other
Person or used, unless such disclosure or use is required by this Agreement or
any applicable law or regulation.
(g) The Trustee shall sign the federal and other income tax returns
of the Trust in accordance with Section 10.16.
SECTION 10.2. Trustee's Certificate. As soon as practicable after
each Distribution Date on which Receivables shall be assigned to the Seller
pursuant to Section 2.5 or to the Servicer pursuant to Section 3.2, 3.6 or 11.2,
as applicable, the Trustee shall execute a certificate, prepared by the
Servicer, including its date and the date of this Agreement, which shall be
accompanied by (i) a copy of the Servicer's certificate for the related
Collection Period and (ii) a certificate from the Servicer specifying each
Receivable so assigned on such Distribution Date. The Trustee's certificate
shall operate, as of such Distribution Date, as an assignment pursuant to
Section 10.3.
SECTION 10.3. Trustee's Assignment of Purchased Receivables. With
respect to all Receivables repurchased by the Seller pursuant to Section 2.5, or
purchased by the Servicer pursuant to Section 3.2, 3.6 or 11.2, the Trustee
shall assign, without recourse, representation, or warranty, to the Seller or
Servicer, as the case may be, all the Trustee's right, title, and interest in
and to such Receivables, and all security and documents and all other Trust
Property conveyed pursuant to Section 2.2 with respect to such Receivables. Such
assignment shall be a sale and assignment outright, and not for security. If, in
any enforcement suit or legal proceeding, it is held that the Seller or the
Servicer, as the case may be, may not enforce any such Purchased Receivable on
the ground that it shall not be a real party
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in interest or a holder entitled to enforce the Purchased Receivable, the
Trustee shall, at the expense of the Seller or the Servicer, as the case may be,
take such steps as the Seller or the Servicer, as the case may be, deems
necessary to enforce the Purchased Receivable, including bringing suit in the
Trustee's name or the names of the Certificateholders.
SECTION 10.4. Certain Matters Affecting the Trustee. Except as
otherwise provided in Section 10.1:
(i) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate of auditors or
accountants or any other certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, appraisal, bond, note
or other paper or document believed by it to be genuine and to have been
signed or presented by the proper party or parties.
(ii) The Trustee may consult with counsel and any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken or suffered or omitted by it under this Agreement, the
Shortfall Amount Agreement or the Servicing Guaranty Agreement, if any, in
good faith and in accordance with such Opinion of Counsel.
(iii) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation under this Agreement or in relation to
this Agreement, at the request, order or direction of any of the
Certificateholders pursuant to the provisions of this Agreement, unless
such Certificateholders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses, and liabilities that
may be incurred therein or thereby. Nothing contained in this Agreement,
however, shall relieve the Trustee of the obligations, upon the occurrence
of an Event of Servicing Termination that is not timely cured or waived
pursuant to Section 9.5, to exercise such of the rights and powers vested
in it by this Agreement, and to use the same degree of care and skill in
their exercise as a prudent man would exercise or
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use under the circumstances in the conduct of his own affairs.
(iv) The Trustee shall not be personally liable for any action
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion, rights or powers conferred upon it by
this Agreement.
(v) Prior to the occurrence of an Event of Servicing Termination and
after the curing of all Events of Servicing Termination that may have
occurred, the Trustee shall not be bound to make any investigation into
the facts of any matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, unless requested in
writing so to do by Holders of Class A Certificates and Class B
Certificates evidencing not less than a majority of the sum of the Class A
Principal Balance and the Class B Principal Balance; provided, however,
that if the payment within a reasonable time to the Trustee of the costs,
expenses, or liabilities likely to be incurred by it in the making of an
investigation requested by the Certificateholders is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require
reasonable indemnity against such cost, expense, or liability as a
condition to so proceeding. The reasonable expense of every such
examination shall be paid by the Servicer, or, if paid by the Trustee,
shall be reimbursed by the Servicer upon demand. Nothing in this clause
(v) shall affect the obligation of the Servicer to observe any applicable
law prohibiting disclosure of information regarding the Obligors.
(vi) The Trustee may execute any of the trusts or powers hereunder
or perform any duties under this Agreement either directly or by or
through agents, attorneys, nominees or a custodian, and shall not be
liable for the acts of such agents, attorneys, nominees or custodians
provided that they have been appointed with due care.
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(vii) The Trustee shall not be required to make any initial or
periodic examination of any documents or records related to the
Receivables or Financed Vehicles for the purpose of establishing the
presence or absence of defects, the compliance by the Seller with its
representations and warranties or for any other purpose.
SECTION 10.5. Trustee Not Liable for Certificates or Receivables.
The Trustee shall make no representations as to the validity or sufficiency of
this Agreement or of the Certificates (other than the execution by the Trustee
on behalf of the Trust of, or the certificate of authentication on, the
Certificates), or of any Receivable or related documents. The Trustee shall have
no obligation to perform any of the duties of the Seller or the Servicer unless
explicitly set forth in this Agreement. The Trustee shall at no time have any
responsibility or liability for or with respect to the legality, validity and
enforceability of any security interest in any Financed Vehicle or any
Receivable, or the perfection and priority of such a security interest or the
maintenance of any such perfection and priority, or for or with respect to the
efficacy of the Trust or its ability to generate the payments to be distributed
to Certificateholders under this Agreement, including without limitation, the
existence, condition, location and ownership of any Financed Vehicle; the
existence and enforceability of any physical damage or credit life or credit
disability insurance; the existence and contents of any Receivable or any
computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the completeness of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Seller or the Servicer with any covenant or the breach by the Seller or
the Servicer of any representation or warranty made under this Agreement or in
any related document and the accuracy of any such representation or warranty
prior to the Trustee's receipt of notice or other discovery of any noncompliance
therewith or any breach thereof; any investment of monies by the Servicer or the
Seller or any loss resulting therefrom (it being understood that the Trustee
shall remain responsible for any Trust Property that it may hold); the acts or
omissions of the Seller, the Servicer or any Obligor; any action of the Servicer
taken in the name of or as the agent of the Trustee; or
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any action by the Trustee taken at the instruction of the Servicer; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement. Except with respect to a claim based on
the failure of the Trustee to perform its duties under this Agreement or based
on the Trustee's negligence or willful misconduct or bad faith, no recourse
shall be had for any claim based on any provision of this Agreement, the
Certificates or any Receivable or assignment thereof against the institution
serving as Trustee in its individual capacity. The Trustee shall not have any
personal obligation, liability or duty whatsoever to any Certificateholder or
any other Person with respect to any such claim, and any such claim shall be
asserted solely against the Trust or any indemnitor who shall furnish indemnity
as provided in this Agreement. The Trustee shall not be accountable for the use
or application by the Seller of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Servicer or any subservicer in respect of the Receivables. The Trustee shall
have no responsibility for filing any financing or continuation statement in any
public office at any time or to otherwise perfect or maintain the perfection of
any security interest or lien granted to it hereunder (unless the Trustee shall
have become the successor Servicer) or to prepare or file any Securities and
Exchange Commission filing for the Trust or to record this Agreement.
SECTION 10.6. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
with the same rights as it would have if it were not Trustee.
SECTION 10.7. Trustee's Fees and Expenses. The Servicer agrees to
pay (or cause to be paid) to the Trustee, and the Trustee shall be entitled to,
compensation in an amount as separately agreed by the Trustee and the Servicer
(which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by it
in the execution of the trusts created by this Agreement and in the exercise and
performance of any of the powers and duties under this Agreement as the Trustee,
and the Servicer shall pay or reimburse (or cause to be paid or reimbursed) the
Trustee upon its request for all reasonable expenses (including, without
limitation,
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expenses incurred in connection with notices or other communications to
Certificateholders) and disbursements (including the reasonable fees and the
reasonable expenses and disbursements of its outside counsel and of all persons
not regularly in its employ but excluding general overhead expenses) incurred or
made by the Trustee in accordance with any of the provisions of this Agreement,
the Shortfall Amount Agreement or the Servicing Guaranty Agreement, if any, or
in defense of any action brought against it in connection with this Agreement,
the Shortfall Amount Agreement or the Servicing Guaranty Agreement, if any,
except any such expense, disbursement, or advance as may arise from its
negligence, willful misfeasance, or bad faith. The provisions of this Section
10.7 shall survive the termination of this Agreement.
SECTION 10.8. Indemnity of Class A Agent, Class B Agent and Payahead
Agent. The Class A Agent, Class B Agent and the Payahead Agent shall be
indemnified by the Servicer and held harmless against any loss, liability, fee,
disbursement, or expense arising out of or incurred in connection with the
acceptance or performance of its duties contained in this Agreement except to
the extent that such loss, liability, fee, disbursement, or expense shall have
been incurred by reason of the Class A Agent's, Class B Agent's or Payahead
Agent's willful misfeasance, bad faith or negligence; provided, however, that
notwithstanding the foregoing, the Class A Agent, the Class B Agent and the
Payahead Agent shall be entitled to indemnification pursuant to this Section
10.8 with respect to any actions of the Class A Agent, Class B Agent and the
Payahead Agent taken in accordance with the written instructions of the Servicer
or of the Trustee.
SECTION 10.9. Eligibility Requirements for Trustee. The Trustee
under this Agreement shall at all times have an office in the same state as the
Corporate Trust Office is located on the date of this Agreement. The Trustee
shall be duly organized, validly existing and doing business under the banking
laws of such state or of the United States of America, shall be authorized under
such laws to exercise corporate trust powers, shall have a combined capital and
surplus of at least $50,000,000, and shall be subject to supervision or
examination by federal or state banking authorities. If such corporation shall
publish reports of condition at least annually, pursuant to law or to the
requirements of the afore-
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said supervising or examining authority, then for the purpose of this Section
10.9, the combined capital and surplus of such corporation shall be deemed to be
its combined consolidated capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section 10.9, the Trustee
shall resign immediately in the manner and with the effect specified in Section
10.10.
SECTION 10.10. Resignation or Removal of Trustee. (a) The Trustee
may at any time resign and be discharged from the trusts hereby created by
giving 30 days' prior written notice thereof to the Servicer. Upon receiving
such notice of resignation, the Servicer shall promptly appoint a successor
Trustee, by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor Trustee. If
no successor Trustee shall have been so appointed and have accepted appointment
within 30 days after the giving of such notice of resignation, the resigning
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 10.9 and shall fail to resign after
written request therefor by the Servicer, or if at any time the Trustee shall be
legally unable to act, or shall be adjudged bankrupt or insolvent, or a
receiver, conservator or liquidator of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Trustee or
of its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer may remove the Trustee. If the Trustee is removed
under the authority of the immediately preceding sentence, the Servicer shall
promptly appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor Trustee and shall promptly pay all fees owed to the
outgoing Trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 10.10 shall
not become effective until acceptance of appointment by the succes-
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sor Trustee pursuant to Section 10.11 and payment of all fees and expenses owed
and any other amounts due hereunder to the outgoing Trustee. The Servicer shall
provide notice of such resignation or removal of the Trustee to the Rating
Agencies.
SECTION 10.11. Successor Trustee. (a) Any successor Trustee
appointed pursuant to Section 10.10 shall execute, acknowledge, and deliver to
the Servicer and to its predecessor Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become fully vested with all
rights, powers, duties, and obligations of its predecessor under this Agreement,
with like effect as if originally named as Trustee. The predecessor Trustee
shall, upon payment of its fees and expenses and any other amounts due it
hereunder, deliver to the successor Trustee all documents and statements held by
it under this Agreement, and the Servicer and the predecessor Trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for fully and certainly vesting and confirming in the successor
Trustee all such rights, powers, duties, and obligations.
(b) No successor Trustee shall accept appointment as provided in
this Section 10.11 unless at the time of such acceptance such successor Trustee
shall be eligible pursuant to Section 10.9.
(c) Upon acceptance of appointment by a successor Trustee pursuant
to this Section 10.11, the Servicer shall mail notice of such acceptance by the
successor Trustee under this Agreement to all Certificateholders at their
respective addresses as shown in the Certificate Register. If the Servicer shall
fail to mail such notice within 10 days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
SECTION 10.12. Merger or Consolidation of Trustee. Any corporation
or banking association which is eligible to be a successor Trustee under Section
10.9 (i) into which the Trustee may be merged or consolidated,
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(ii) that may result from any merger, conversion, or consolidation to which the
Trustee shall be a party, or (iii) that may succeed to all or substantially all
of the corporate trust business of the Trustee, which corporation or banking
association executes an agreement of assumption to perform every obligation of
the Trustee under this Agreement, shall be the successor of the Trustee
hereunder, without the execution or filing of any instrument or any further act
on the part of any of the parties hereto, anything herein to the contrary
notwithstanding. The Trustee shall promptly notify the Servicer and the Rating
Agencies of any such merger, conversion, consolidation or succession.
SECTION 10.13. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Trust Property or any Financed Vehicle may at the time be located, the
Servicer and the Trustee acting jointly shall have the power and shall execute
and deliver all instruments to appoint one or more Persons approved by the
Trustee to act as co-trustee, jointly with the Trustee, 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 Certificateholders, such
title to the Trust, or any part thereof, and, subject to the other provisions of
this Section 10.13, such powers, duties, obligations, rights, and trusts as the
Servicer and the Trustee may consider necessary or desirable. If the Servicer
shall not have joined in such appointment within 15 days after the receipt by it
of a request so to do, or in case an Event of Servicing Termination shall have
occurred and be continuing, the Trustee alone shall have the power to make such
appointment. No co-trustee or separate trustee under this Agreement shall be
required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.9 and no notice to Certificateholders of the appointment of any
co-trustee or separate trustee shall be required pursuant to Section 10.11.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
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(i) All rights, powers, duties, and obligations conferred or imposed
upon the Trustee shall be conferred upon and exercised or performed by the
Trustee and such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee, is not authorized to
act separately without the Trustee joining in such act), except to the
extent that under any law of any jurisdiction in which any particular act
or acts are to be performed (whether as Trustee under this Agreement or as
successor to the Servicer under this Agreement), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties, and obligations (including the holding of
title to the Trust Property or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Trustee.
(ii) No trustee under this Agreement shall be personally liable by
reason of any act or omission of any other trustee under this Agreement.
(iii) The Servicer and the Trustee acting jointly (or during the
continuation of an Event of Servicing Termination, the Trustee alone) 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
in particular to the provisions of this Article. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Each such instrument shall be filed with
the Trustee and a copy thereof given to the Servicer.
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(d) Any separate trustee or co-trustee may, at any time, appoint the
Trustee its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 10.14. Representations and Warranties of Trustee. The
Trustee makes the following representations and warranties on which the Seller
and Certificateholders may rely:
(i) Organization and Good Standing. The Trustee is duly organized,
validly existing, and in good standing under the laws of the jurisdiction
of its incorporation;
(ii) Power and Authority. The Trustee has full power, authority and
legal right to execute, deliver, and perform this Agreement and has taken
all necessary action to authorize the execution, delivery, and performance
by it of this Agreement; and
(iii) Enforceability. This Agreement has been duly executed and
delivered by the Trustee and this Agreement constitutes a legal, valid and
binding obligation of the Trustee enforceable against the Trustee in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
SECTION 10.15. Reports by Trustee. The Trustee shall provide to
any Certificateholder or Certificate Owner who so requests in writing (addressed
to the Corporate Trust Office) a copy of any Servicer's Certificate, the
annual statement described in Section 3.10, and the
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annual accountant's examination described in Section 3.11. The Trustee may
require any Certificateholder or Certificate Owner requesting such report to pay
a reasonable sum to cover the cost of the Trustee's complying with such request.
SECTION 10.16. Tax Returns. The Servicer shall prepare or shall
cause to be prepared any tax returns required to be filed by the Trust and shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed. The Trustee, upon request, will furnish the
Servicer with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust, and
shall, upon request, execute such returns.
SECTION 10.17. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements, and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
SECTION 10.18. Suits for Enforcement. If an Event of Servicing
Termination shall occur and be continuing, the Trustee may, subject to the
provisions of Section 10.01, proceed to protect and enforce its rights and the
rights of the Certificateholders under this Agreement by a suit, action, or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or in aid
of the execution of any power granted in this Agreement or for the enforcement
of any other legal, equitable, or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of the rights of
the Trustee or the Certificateholders.
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SECTION 10.19. Rights of Certificateholders to Direct Trustee.
Holders of Class A Certificates and Class B Certificates (excluding any
Certificates held by the Seller or any Affiliate of the Seller) evidencing not
less than a majority of the sum of the Class A Principal Balance and the Class B
Principal Balance (excluding any Certificates held by the Seller or any
Affiliate of the Seller) shall have the right to direct the time, method, and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee; provided, however, that,
subject to Section 10.1, the Trustee shall have the right to decline to follow
any such direction if the Trustee being advised by counsel determines that the
action so directed may not lawfully be taken, or if the Trustee in good faith
shall, by an Authorized Officer, determine that the proceedings so directed
would be illegal or subject it to personal liability or be unduly prejudicial to
the rights of Certificateholders not parties to such direction; and provided
further that nothing in this Agreement shall impair the right of the Trustee to
take any action deemed proper by the Trustee and which is not inconsistent with
such direction by the Certificateholders.
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ARTICLE XI
Termination
SECTION 11.1. Termination of the Trust. (a) The Trust and the
respective obligations and responsibilities of the Seller, the Servicer, the
Trustee, the Payahead Agent, the Class A Agent and the Class B Agent hereunder
shall terminate upon the earliest of: (i) the Distribution Date next succeeding
the purchase by the Servicer at its option, pursuant to Section 11.2, of the
Receivables remaining in the Trust, (ii) the payment to Certificateholders of
all amounts required to be paid to them pursuant to this Agreement and (iii) the
Distribution Date next succeeding the month which is six months after the
maturity or the liquidation of the last Receivable held in the Trust and the
distribution of all amounts received upon liquidation of any property remaining
in the Trust; provided, however, that in no event shall the Trust created by
this Agreement continue beyond the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late ambassador to
the Court of St. James, living on the date of this Agreement. The Servicer shall
promptly notify the Trustee of any prospective termination pursuant to this
Section 11.1.
(b) Notice of any termination, specifying the Distribution Date upon
which the Certificateholders may surrender the Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders and the Rating Agencies mailed not
earlier than the 20th day and not later than the 25th day of the month next
preceding the specified Distribution Date (or, if such payment is to be made
from Scheduled Payments and the Trustee shall not have had prior actual
knowledge, promptly upon receipt of the Servicer's Certificate but in no event
later than three Business Days following receipt of such Servicer's Certificate
specifying that the final payment of principal with respect to the Certificates
will be made on the related Distribution Date) stating (i) the Distribution Date
upon which final payment of the Certificates shall be made upon presentation and
surrender of the Certificates at the office of the Trustee therein designated,
(ii) the amount of any such final payment, and (iii) if applicable, that the
Record
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Date otherwise applicable to such Distribution Date is not applicable, payments
being made only upon presentation and surrender of the Certificates at the
office of the Trustee therein specified. Upon presentation and surrender of the
Certificates, the Trustee shall cause to be distributed to Certificateholders
amounts distributable on such Distribution Date pursuant to Section 4.6.
(c) In the event that all of the Certificateholders shall not
surrender their Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Servicer may take appropriate
steps, or may appoint an agent to take appropriate steps, to contact the
remaining Certificateholders concerning surrender of their Certificates, and the
cost thereof shall be paid out of the funds and other assets that shall remain
subject to this Agreement. Any funds remaining in the Trust after exhaustion of
such remedies and any other remedies required by law shall be distributed by the
Trustee to The Julliard Association, or a similar charitable organization
located or operating in the New York metropolitan area as specified by the
Servicer, whereupon the rights of the Certificateholders in any such funds shall
cease.
SECTION 11.2. Optional Purchase of All Receivables. (a) On each
Distribution Date following the last day of a Collection Period as to which the
Pool Balance shall be equal to or less than the Optional Purchase Percentage
multiplied by the Original Pool Balance, the Servicer shall have the option to
purchase the corpus of the Trust. To exercise such option, the Servicer shall
notify the Trustee no later than the twentieth day of the month immediately
preceding the month in which such repurchase is to be effected and shall deposit
an amount equal to the aggregate Purchase Amount for the Receivables into the
Collection Account on the Distribution Date occurring in the month in which such
repurchase is to be effected. Upon such payment the Servicer shall succeed to
and own all interests in and to the Trust and the Trust Property. The Purchase
Amount and any Short-
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fall Amounts for such Distribution Date, plus to the extent necessary all
amounts in the Reserve Funds, shall be used to make payments in full to
Certificateholders in the manner set forth in Article IV, except that following
distribution of all amounts payable to Class A Certificateholders and Class B
Certificateholders as provided in Article IV, all remaining available amounts
(including the amounts remaining in the Class A Reserve Fund and the Class B
Reserve Fund) shall be distributed to the Seller in payment of the Retained
Yield.
(b) Unless waived by Moody's, if at the time the Servicer exercises
its purchase option hereunder the Servicer's long-term unsecured debt has a
rating lower than Baa3 by Moody's, the Servicer shall deliver to the Trustee on
such Distribution Date an Opinion of Counsel to the effect that, based upon
certain assumptions with respect to the value of the Receivables and as to the
solvency of the Servicer, the purchase of the Receivables would not be
considered a fraudulent conveyance under applicable law.
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ARTICLE XII
Miscellaneous Provisions
SECTION 12.1. Amendment. (a) This Agreement may be amended by the
Seller, the Servicer, MBCC, the Trustee, the Class A Agent, the Class B Agent
and the Payahead Agent, and the Purchase Agreement may be amended by the Seller
and MBCC, without the consent of any of the Certificateholders, to cure any
ambiguity, to correct or supplement any provisions in this Agreement or the
Purchase Agreement, as applicable, which may be inconsistent with any other
provisions in this Agreement or the Purchase Agreement, as applicable, or to
add, change or eliminate any other provisions with respect to matters or
questions arising under this Agreement or the Purchase Agreement, as applicable,
that shall not be inconsistent with the provisions of this Agreement or the
Purchase Agreement, as applicable; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel, materially and adversely affect the
interests of any Certificateholder. This Agreement and the Purchase Agreement
also may be amended by the Seller, the Servicer, the Trustee, the Class A Agent,
the Class B Agent and the Payahead Agent, and the Purchase Agreement may be
amended by the Seller and MBCC without the consent of any of the
Certificateholders, to provide for the transfer of the Class B Certificate;
provided, however, that the conditions specified in Section 6.3 shall be
satisfied prior to such transfer; provided, further, that such amendment shall
not change the timing of, or the amount of, any distributions that the Class A
Certificateholders are entitled to receive hereunder.
(b) This Agreement may also be amended from time to time by the
Seller, the Servicer, MBCC, the Trustee, the Class A Agent, the Class B Agent
and the Payahead Agent, and the Purchase Agreement may be amended by the Seller
and MBCC, with the consent of the Holders of Class A Certificates and Class B
Certificates, each voting as a Class (which consent of any Holder of a
Certificate given pursuant to this Section or pursuant to any other provision of
this Agreement shall be conclusive and binding on such Holder and on all future
Holders of such Certificate and of any Certificate issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon
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the Certificate), evidencing not less than a majority of the Class A and Class B
Principal Balance, respectively, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement or
the Purchase Agreement, as applicable, or of modifying in any manner the rights
of the Holders of Certificates; provided, however, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Receivables or distributions that shall be
required to be made on any Certificate or change the Pass-Through Rate or the
Specified Class A Reserve Balance, without the consent of the Holders of all
Certificates then outstanding, or change the Specified Class B Reserve Balance
without the consent of the Holders of all Class B Certificates then outstanding,
(b) reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the Holders of all Certificates then outstanding or (c)
adversely affect the rating of the Class A Certificates by the Rating Agencies,
without the consent of Class A Certificateholders evidencing not less than
66 2/3% of the Class A Principal Balance or the rating, if any, of the Class B
Certificates by any rating agency then rating the Class B Certificates, without
the consent of Class B Certificateholders evidencing not less than 66 2/3% of
the Class B Principal Balance.
(c) Prior to the execution of any such amendment or consent, the
Servicer shall provide and the Trustee shall distribute written notification of
the substance of such amendment or consent to each Rating Agency.
(d) Promptly after the execution of any such amendment or consent,
the Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder. It shall not be necessary for
the consent of Certificateholders pursuant to this Section 12.1 to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof. The manner of obtaining
such consents (and any other consents of Certificateholders provided for in this
Agreement) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
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(e) Prior to the execution of any amendment to this Agreement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating
that the execution of such amendment is authorized or permitted by this
Agreement and will not cause the Trust to be classified as a partnership or as
an association taxable as a corporation for federal, Connecticut, Texas, and New
York tax purposes. The Trustee may, but shall not be obligated to, enter into
any such amendment which affects the Trustee's own rights, duties or immunities
under this Agreement or otherwise.
SECTION 12.2. Protection of Title to Trust. (a) The Seller shall
execute and file such financing statements and cause to be executed and filed
such continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
Certificateholders and the Trustee in the Receivables and in the proceeds
thereof. The Seller shall deliver (or cause to be delivered) to the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity, or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by the Seller in
accordance with paragraph (a) above seriously misleading within the meaning of
Section 9-402(7) of the UCC, unless it shall have given the Trustee at least 60
days' prior written notice thereof and shall have promptly filed appropriate
amendments to all previously filed financing statements or continuation
statements.
(c) The Seller and the Servicer shall give the Trustee at least 60
days' prior written notice of any relocation of its principal executive office
if, as a result of such relocation, the applicable provisions of the UCC would
require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment or new financing statement. The Servicer shall at all times
maintain each office from which it shall service Receivables, and its principal
executive office, within the United States of America.
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(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
and Payahead Account in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from
and after the time of sale under this Agreement of the Receivables to the Trust,
the Servicer's master computer records (including any back-up archives) that
refer to a Receivable shall indicate clearly the interest of Daimler-Benz Auto
Grantor Trust 1997-A in such Receivable and that such Receivable is owned by the
Trust. Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on the Servicer's computer systems when, and only when, the
Receivable shall have been paid in full or repurchased by the Seller or
purchased by the Servicer.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in any
automobile receivable to any prospective purchaser, lender, or other transferee,
the Servicer shall give to such prospective purchaser, lender, or other
transferee computer tapes, records, or print-outs (including any restored from
back-up archives) that, if they shall refer in any manner whatsoever to any
Receivable, shall indicate clearly that such Receivable has been sold and is
owned by the Trust unless such Receivable has been paid in full or repurchased
by the Seller or purchased by the Servicer.
(g) The Servicer shall permit the Trustee and its agents at any time
during normal business hours to inspect, audit, and make copies of and abstracts
from the Servicer's records regarding any Receivable, but, prior to the
occurrence of an Event of Servicing Termination or an event that with the
passage of time and delivery of notice would constitute an Event of Servicing
Termination, only to the extent that such activities do not disrupt the
Servicer's normal business operations and do
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not adversely affect the Servicer's ability to perform its obligations under
this Agreement.
(h) Upon request, the Servicer shall furnish to the Trustee, within
ten Business Days, a list of all Receivables (by contract number, vehicle
number, name and address of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Trust.
(i) The Servicer shall deliver to the Trustee:
(1) promptly after the execution and delivery of
each amendment to any financing statement, an Opinion of Counsel either
(A) stating that, in the opinion of such Counsel, all financing statements
and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) stating
that, in the opinion of such Counsel, no such action shall be necessary to
preserve and protect such interest; and
(2) within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning more than
three months after the Cutoff Date, an Opinion of Counsel, dated as of a
date during such 90-day period, either (A) stating that, in the opinion of
such Counsel, all financing statements and continuation statements have
been executed and filed that are necessary fully to preserve and protect
the interest of the Trustee in the Receivables, and reciting the details
of such filings or referring to prior Opinions of Counsel in which such
details are given, or (B) stating that, in the opinion of such Counsel, no
such action shall be necessary to preserve and protect such interest.
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Each Opinion of Counsel referred to in clause (i)(1) or (i)(2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable law,
cause the Certificates to be registered with the Securities and Exchange
Commission pursuant to Section 12(b) or Section 12(g) of the Securities Exchange
Act of 1934, as amended, within the time periods specified in such sections.
SECTION 12.3. Limitation on Rights of Certificateholders. (a) The
death or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties to
this Agreement or any of them.
(b) No Certificateholder shall have any right to vote (except as
specifically provided in this Agreement) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to this
Agreement, nor shall anything in this Agreement set forth, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association;
nor shall any Certificateholder be under any liability to any third person by
reason of any action taken pursuant to any provision of this Agreement.
(c) No Certificateholder shall have any right by virtue or by
availing itself of any provisions of this Agreement to institute any suit,
action, or proceeding in equity or at law upon or under or with respect to this
Agreement, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, and unless also the
Holders of Certificates evidencing not less than a majority of the sum of the
Class A Principal Balance and the Class B Principal Balance shall have made
written request upon the Trustee to institute such action, suit or proceeding in
its own name as Trustee under this Agreement and shall have offered to the
Trustee such reasonable indemnity as
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it may require against the costs, expenses, and liabilities to be incurred
therein or thereby, and the Trustee, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and during such 30-day period, no
request or waiver inconsistent with such written request has been given to the
Trustee pursuant to this Section or Section 9.5; no one or more Holders of
Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other Certificates, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right, under this Agreement except in the manner provided in
this Agreement and for the equal, ratable, and common benefit of all
Certificateholders. For the protection and enforcement of the provisions of this
Section 12.3, each Certificateholder and the Trustee shall be entitled to such
relief as can be given either at law or in equity.
SECTION 12.4. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION 12.5. Notices. All demands, notices, and communications
under this Agreement shall be in writing, personally delivered, sent by
telecopier, sent by courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller or the Servicer, to the agent for service as specified in
Section 12.14 hereof, or at such other address or facsimile number as shall be
designated by the Seller or the Servicer in a written notice to the Trustee, (b)
in the case of the Trustee, the Class A Agent, the Class B Agent or the Payahead
Agent at the Corporate Trust Office, facsimile number: (212) 480-1615; (c) in
the case of Moody's, at the following address: Moody's Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, New York, New York 10007,
facsimile number: (212) 553-0355 and (d) in the case of S&P, at the following
address: Standard & Poor's Ratings Services, A Division of The McGraw-Hill
Companies, Inc., 25 Broadway, 20th Floor, New York, New
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York 10004, Attention: Asset Backed Surveillance Department, facsimile number:
(212) 412-0323. Any notice required or permitted to be mailed to a
Certificateholder shall be given by first class mail, postage prepaid, at the
address of such Holder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in this Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder shall
receive such notice. Any notice to be delivered to the Rating Agencies hereunder
shall also be delivered to the Seller.
SECTION 12.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
SECTION 12.7. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.3 and 8.3 and as provided in
the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Seller or the Servicer without the
prior written consent of the Trustee and the Holders of Class A and Class B
Certificates evidencing not less than 66-2/3% of the sum of the Class A
Principal Balance and the Class B Principal Balance.
SECTION 12.8. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and, upon
authentication thereof by the Trustee pursuant to Section 6.2 or Section 6.3,
Certificates shall be deemed fully paid.
SECTION 12.9. Further Assurances. The Seller and the Servicer agree
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the
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Trustee more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
relating to the Receivables for filing under the provisions of the UCC of any
applicable jurisdiction.
SECTION 12.10. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Trustee or the
Certificateholders, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges therein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 12.11. Third-Party Beneficiaries. This Agreement will inure
to the benefit of and be binding upon the parties hereto, the
Certificateholders, and their respective successors and permitted assigns.
Except as otherwise provided in this Article, no other person will have any
right or obligation hereunder.
SECTION 12.12. Actions by Certificateholders. (a) Wherever in this
Agreement a provision is made that an action may be taken or a notice, demand,
or instruction given by Certificateholders, such action, notice, or instruction
may be taken or given by any Certificateholder, unless such provision requires a
specific percentage of Certificateholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Certificateholder shall bind such Certificateholder
and every subsequent holder of such Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Servicer in reliance
thereon, whether or not notation of such action is made upon such Certificate.
SECTION 12.13. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
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counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 12.14. Agent for Service. The agent for service of the
Seller and the Servicer in respect of this Agreement shall be c/o Harvey S.
Traison, Daimler-Benz North America Corporation, 375 Park Avenue, Suite 3001,
New York, New York 10152.
SECTION 12.15. No Bankruptcy Petition. The Trustee and the Servicer
each covenants and agrees that prior to the date which is one year and one day
after the payment in full of all securities issued by the Seller or by a trust
for which the Seller was the depositor which securities were rated by any
nationally recognized statistical rating organization it will not institute
against, or join any other Person in instituting against, the Seller any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any federal or state bankruptcy or similar law. This
Section shall survive termination of the Trust under this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Pooling and
Servicing Agreement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.
DAIMLER-BENZ VEHICLE
RECEIVABLES CORPORATION,
as Seller
By: ______________________________________
Name: Harvey S. Traison
Title: President
MERCEDES-BENZ CREDIT
CORPORATION, as Servicer and
in its individual capacity
By: ______________________________________
Name: David A. Klanica
Title: Director,
Accounting
Services
CITIBANK, N.A.,
as Trustee, as Payahead
Agent, as Class A Agent and
as Class B Agent
By: ______________________________________
Name:
Title:
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<PAGE> 125
SCHEDULE I
SCHEDULE OF RECEIVABLES WAS DELIVERED TO TRUSTEE AT CLOSING.
<PAGE> 126
SCHEDULE II
LOCATION OF RECEIVABLE FILES
Mercedes-Benz Credit Corporation
Seven Village Circle
Suite 300
P.O. Box 685
Roanoke, Texas 76262-0685
<PAGE> 127
EXHIBIT A
FORM OF CLASS A CERTIFICATE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), 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.
DAIMLER-BENZ AUTO GRANTOR TRUST 1997-A
% ASSET BACKED CERTIFICATE
CLASS A
evidencing a fractional undivided interest in the Trust, as defined below, the
property of which includes, among other things, a pool of retail installment
contracts secured by new and used Mercedes-Benz automobiles and sold to the
Trust by Daimler-Benz Vehicle Receivables Corporation.
(This Certificate represents an interest in the Trust and does not represent an
interest in or obligation of Daimler-Benz Vehicle Receivables Corporation or
Mercedes-Benz Credit Corporation or any of their respective affiliates, except
to the extent described below.)
NUMBER: ________ CUSIP ___________
FINAL SCHEDULED
DISTRIBUTION DATE: , 2002 $____________
THIS CERTIFIES THAT ____________ is the registered owner of a
________________________________________________ dollar nonassessable,
fully-paid, fractional undivided interest in the Daimler-Benz Auto Grantor Trust
1997-A (the "Trust") formed by Daimler-Benz Vehicle Receivables Corporation, a
Delaware corporation (the "Seller"). The Trust was created pursuant to a Pooling
and Servicing Agreement, dated as of , 1997 (the "Agreement"), among the
Seller, Mercedes-Benz Credit Corporation, in its individual capacity and as
Servicer (the "Servicer"), and Citibank,
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N.A., as Trustee (the "Trustee"), Payahead Agent, Class A Agent and Class B
Agent, a summary of certain of the pertinent provisions of which is set forth
below. To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Agreement. This Certificate is
one of the duly authorized Certificates designated as " % Asset Backed
Certificates, Class A" (herein called the "Class A Certificates"). Also issued
under the Agreement are Certificates designated as " % Asset Backed
Certificates, Class B" (the "Class B Certificates"). The Class B Certificates
and the Class A Certificates are herein collectively called the "Certificates."
The aggregate undivided interest in the principal amount of Receivables held by
the Trust evidenced by all Class A Certificates is %. This Class A Certificate
is issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which Agreement the Holder of this Class A Certificate by virtue
of the acceptance hereof assents and by which such Holder is bound. The property
of the Trust includes (as more fully described in the Agreement) a pool of
retail installment contracts (the "Receivables") for new and used Mercedes-Benz
automobiles together with all accessions thereto, securing the Receivables (the
"Financed Vehicles"), all monies due under the Receivables on or after
, 1997 (but excluding Excess Amounts), all of the Seller's security
interests in the Financed Vehicles, all rights to receive payments under certain
circumstances from the Reserve Funds, all of the Seller's rights under the
Shortfall Amount Agreement, the Seller's rights to receive proceeds from claims
on physical damage, credit, life and disability insurance policies relating to
the Financed Vehicles or the obligors under the Receivables, certain rights
under the Purchase Agreement, the Servicing Guaranty Agreement and certain other
property.
Under the Agreement, there will be distributed on the 20th day of each
month or, if such 20th day is not a Business Day, the next Business Day (the
"Distribution Date"), commencing on , 1997, to the person in whose
name this Class A Certificate is registered at either the close of business on
the 19th day of the current calendar month or, after the issuance of Definitive
Certificates pursuant to the Agreement, the last day of the Collection Period
immediately preceding the month in which such Distribution Date occurs (the
"Record Date"), an amount equal to interest at the Pass-Through Rate for a
period of 30 days on the Class A Principal Balance as of the first day of such
Collection Period (reduced by the amount of principal distributions to be made
on the Distribution Date in such Collection Period) plus the Class A Interest
Carryover Shortfall generally to the extent of funds available from (i) the
Available Interest remaining
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after payment of the Servicing Fee, (ii) the Class A Reserve Fund and (iii) the
Class B Percentage of Available Principal. The "Class A Principal Balance" shall
equal, initially, the Original Class A Principal Balance and thereafter will
equal the Original Class A Principal Balance, reduced by all amounts previously
distributed to Class A Certificateholders and allocable to principal. On each
Distribution Date, the Trustee will distribute to Class A Certificateholders as
of the related Record Date Class A Principal plus any Class A Principal
Carryover Shortfall generally to the extent of funds available from (i)
Available Principal, (ii) the Class A Reserve Fund and (iii) Available Interest
remaining after payment of the Servicing Fee, Class A Interest, Class A Interest
Carryover Shortfall, Class B Interest and Class B Interest Carryover Shortfall.
"Class A Principal" shall consist of the Class A Percentage of (a) the principal
portion of all scheduled payments due on Receivables during the preceding
Collection Period; (b) the Principal Balance of each Receivable that became a
Prepaid Receivable during the preceding Collection Period, except to the extent
included in (a) or (d); (c) the Principal Balance of each Receivable that was
purchased by the Servicer or repurchased by the Seller, in each case, under an
obligation that arose during the preceding Collection Period, except to the
extent included in (a); and (d) the Principal Balance of each Receivable
liquidated during the preceding Collection Period, except to the extent included
in (a) or (b). A "Collection Period" with respect to a Distribution Date will be
the calendar month preceding the month in which such Distribution Date occurs.
The "Class A Interest Carryover Shortfall" as of the close of any Distribution
Date means the excess, if any, of the Class A Interest for such Distribution
Date plus any outstanding Class A Interest Carryover Shortfall from the
preceding Distribution Date, over the amount of interest that the Holders of the
Class A Certificates actually received on such current Distribution Date (plus
thirty (30) days' interest on the amount of such excess, to the extent permitted
by law, at the Pass-Through Rate). The "Class A Principal Carryover Shortfall"
as of the close of any Distribution Date means the excess of Class A Principal
plus any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the Holders of the Class A
Certificates actually received on such current Distribution Date.
Distributions on this Class A Certificate will be made by the Trustee
by wire transfer or check mailed to the Class A Certificateholder of record in
the Certificate Register without the presentation or surrender of this Class A
Certificate or the making of any notation hereon except that with
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respect to Class A Certificates registered in the name of Cede & Co., the
nominee for the Clearing Agency, distributions will be made in the form of
immediately available funds. Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this Class A Certificate
will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class A
Certificate at the office or agency maintained for that purpose by the Trustee
in the Borough of Manhattan, The City of New York. The Record Date otherwise
applicable to such distribution shall not be applicable.
Reference is hereby made to the further provisions of this Class A
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Class A Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
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<PAGE> 131
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in its
individual capacity has caused this Class A Certificate to be duly executed.
DAIMLER-BENZ AUTO GRANTOR
TRUST 1997-A
By: CITIBANK, N.A.,
as Trustee
By: ______________________________________
Name:
Title:
DATED: _________
[SEAL]
ATTEST:
_________________________
Authorized Officer
A-5
<PAGE> 132
This is one of the Class A Certificates referred to in the
within-mentioned Agreement.
CITIBANK, N.A., as Trustee
By: _______________________
Authorized Officer
A-6
<PAGE> 133
REVERSE OF CERTIFICATE
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, the Trustee or any affiliate of any of them. The
Certificates are limited in right of payment to certain collections and
recoveries respecting the Receivables, all as more specifically set forth in the
Agreement. A copy of the Agreement may be examined during normal business hours
at the principal office of the Trustee, and at such other places, if any,
designated by the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller and the Trustee with the consent of the Holders of Class A
Certificates and Class B Certificates, each voting as a class, evidencing not
less than a majority of the Class A Principal Balance and Class B Principal
Balance, respectively. Any such consent by the Holder of this Certificate shall
be conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, in the Borough
of Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee.
The Class A Certificates are issuable only as registered Certificates
without coupons in denominations
A-7
<PAGE> 134
of $1,000 and integral multiples thereof; however, one Certificate may be issued
in a denomination equal to the residual amount. As provided in the Agreement and
subject to certain limitations therein set forth, Certificates are exchangeable
for new Certificates of authorized denominations evidencing the same aggregate
denomination, as requested by the Holder surrendering the same. No service
charge will be made for any such registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or governmental
charges payable in connection therewith.
The Trustee, the Certificate Registrar, and any agent of the Trustee or
the Certificate Registrar may treat the person in whose name this Class A
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Certificate Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only following the last day of any
Collection Period as of which the Pool Balance is equal to or less than 10% of
the Original Pool Balance.
The recitals contained herein (other than the certificate of
authentication herein) shall be taken as the statements of the Seller or the
Servicer, as the case may be, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representations as to the validity or
sufficiency of this Certificate (other than the certificate of authentication
herein), or of any Receivable or related document.
A-8
<PAGE> 135
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
______________________________________________________________________________
(Please print or typewrite name and address, including
postal zip code, of assignee)
______________________________________________________________________________
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
_______________________________________________________________________Attorney
to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated:
__________________________*
Signature Guaranteed
__________________________*
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed and the guarantor of the signature must be acceptable to the transfer
agent.
A-9
<PAGE> 136
EXHIBIT B
FORM OF CLASS B CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT
TO THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR SOLD
UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED AND THE SATISFACTION OF CERTAIN OTHER
REQUIREMENTS SPECIFIED IN THE AGREEMENT (AS DEFINED HEREIN).
DAIMLER-BENZ AUTO GRANTOR TRUST 1997-A
% ASSET BACKED CERTIFICATE
CLASS B
evidencing a fractional undivided interest in the Trust, as defined below,
the property of which includes, among other things, a pool of retail
installment contracts secured by new and used Mercedes-Benz automobiles
and sold to the Trust by Daimler-Benz Vehicle Receivables Corporation.
(This Certificate represents an interest in the Trust and does not
represent an interest in or obligation of Daimler-Benz Vehicle Receivables
Corporation or Mercedes-Benz Credit Corporation or any of their respective
affiliates, except to the extent described below.)
NUMBER: ________
FINAL SCHEDULED
DISTRIBUTION DATE: , 2002 $___________________
THIS CERTIFIES THAT ______________________________ is the registered owner
of a _____________________ dollar nonassessable, fully-paid, fractional
undivided interest in the Daimler-Benz Auto Grantor Trust 1997-A (the "Trust")
formed by Daimler-Benz Vehicle Receivables Corporation, a Delaware corporation
(the "Seller"). The Trust was created pursuant to a Pooling and Servicing
Agreement, dated as of ____________________________, 1997 (the "Agreement"),
among the Seller, Mercedes-Benz Credit Corporation, in its individual capacity
and as Servicer (the "Servicer"), and Citibank, N.A., as Trustee
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<PAGE> 137
(the "Trustee") and as Payahead Agent, Class A Agent and Class B Agent, a
summary of certain of the pertinent provisions of which is set forth below. To
the extent not otherwise defined herein, the capitalized terms used herein have
the meanings assigned to them in the Agreement. This Certificate is one of the
duly authorized Certificates designated as " % Asset Backed Certificates,
Class B" (herein called the "Class B Certificates"). Also issued under the
Agreement are Certificates designated as " % Asset Backed Certificates, Class
A" (the "Class A Certificates"). The Class B Certificates and the Class A
Certificates are herein collectively called the "Certificates." The aggregate
undivided interest in the Principal Balance of the Receivables held by the Trust
evidenced by the Class B Certificate is %. This Class B Certificate is
issued under and is subject to the terms, provisions, and conditions of the
Agreement, to which Agreement the Holder of this Class B Certificate by virtue
of the acceptance hereof assents and by which such Holder is bound. The property
of the Trust includes (as more fully described in the Agreement) a pool of
retail installment contracts (the "Receivables") for new and used Mercedes-Benz
automobiles together with all accessions thereto, securing the Receivables (the
"Financed Vehicles"), all monies due under the Receivables on or after ,
1997 (but excluding Excess Amounts), all of the Seller's security interests in
the "Financed Vehicles", all rights to receive payments under certain
circumstances from the Reserve Funds, all of the Seller's rights under the
Shortfall Amount Agreement, all of the Seller's rights to receive proceeds from
claims on physical damage, credit, life and disability insurance policies
relating to the Financed Vehicles and the obligors under the Receivables,
certain rights under the Purchase Agreement, the Servicing Guaranty Agreement
and certain other property. The rights of the Holders of the Class B
Certificates are subordinated to the rights of the Holders of the Class A
Certificates, to the extent set forth in the Agreement.
Under the Agreement, there will be distributed on the 20th day of
each month or, if such 20th day is not a Business Day, the next Business Day
(the "Distribution Date"), commencing on , 1997, to the person in
whose name this Class B Certificate is registered at either the close of
business on the 19th day of the current calendar month or, after the issuance of
Definitive Certificates pursuant to the Agreement, the last day of the
Collection Period immediately preceding the month in which such Distribution
Date occurs (the "Record Date"), interest at the Pass-
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<PAGE> 138
Through Rate for a period of 30 days on the Class B Principal Balance as of the
first day of such Collection Period (reduced by the amount of principal
distributions to be made on the Distribution Date in such Collection Period)
plus the Class B Interest Carryover Shortfall generally to the extent of funds
available from the Available Interest remaining after payments of Servicing Fee
and Class A Interest and Class A Interest Carryover Shortfall to the Class A
Certificateholders. The "Class B Principal Balance" shall equal, initially, the
Original Class B Principal Balance and thereafter will equal the Original Class
B Principal Balance, reduced by all amounts previously distributed to the Class
B Certificateholder and allocable to principal. On each Distribution Date, the
Trustee will distribute to the Class B Certificateholders as of the related
Record Date Class B Principal plus any Class B Principal Carryover Shortfall,
generally to the extent of funds available from the Class B Percentage of
Available Principal, from the Class B Reserve Fund, if any, and from Available
Interest remaining after payment of all prior amounts, subject to the
subordination of the Class B Certificate as provided in the Agreement. "Class B
Principal" shall consist of the Class B Percentage, respectively, of (a) the
principal portion of all scheduled payments due on Receivables during the
preceding Collection Period; (b) the Principal Balance of each Receivable that
became a Prepaid Receivable during the preceding Collection Period except to the
extent included in (a) or (d); (c) the Principal Balance of each Receivable that
was purchased by the Servicer or repurchased by the Seller, in each case, under
an obligation that arose during the preceding Collection Period, except to the
extent included in (a); and (d) the principal balance of each Receivable
liquidated during the preceding Collection Period, except to the extent included
in (a) or (b). A "Collection Period" with respect to a Distribution Date will be
the calendar month preceding the month in which such Distribution Date occurs.
The "Class B Interest Carryover Shortfall" as of the close of any Distribution
Date means the excess, if any, of the Class B Interest for such Distribution
Date plus any outstanding Class B Interest Carryover Shortfall from the
preceding Distribution Date, over the amount of interest that the Holders of the
Class B Certificates actually received on such current Distribution Date (plus
thirty (30) days' interest on the amount of such excess, to the extent permitted
by law, at the Pass-Through Rate). The "Class B Principal Carryover Shortfall"
as of the close of any Distribution Date means the excess of Class B Principal
plus any outstanding Class B
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<PAGE> 139
Principal Carryover Shortfall from the preceding Distribution Date over the
amount of principal that the Holders of the Class B Certificates actually
received on such current Distribution Date.
The Holder of this Class B Certificate by virtue of the acceptance
hereof assents to the appointment, pursuant to Section 4.7 of the Agreement, of
Citibank, N.A. acting solely as agent, and not as Trustee, for such Holder with
respect to the Class B Reserve Fund and the Class B Reserve Fund Property.
Each Holder of this Class B Certificate acknowledges and agrees that
its rights to receive distributions in respect of this Class B Certificate are
subordinated to the extent set forth in the Agreement to the rights of the Class
A Certificateholders to receive distributions in respect of the Class A
Certificates and the rights of the Servicer to receive the Servicing Fee (and
any unpaid Servicing Fees from prior Collection Periods) in the event of
delinquency or defaults on the Receivables.
Distributions on this Class B Certificate will be made by the
Trustee by wire transfer or check mailed to the Class B Certificateholder of
record in the Certificate Register without the presentation or surrender of this
Class B Certificate or the making of any notation hereon. Except as otherwise
provided in the Agreement and notwithstanding the above, the final distribution
on this Class B Certificate will be made after due notice by the Trustee of the
pendency of such distribution and only upon presentation and surrender of this
Class B Certificate at the office or agency maintained for that purpose by the
Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Class B
Certificate set forth on the reverse hereof, which further provisions shall for
all purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Trustee, by manual signature, this
Class B Certificate shall not entitle the holder hereof to any benefit under the
Agreement or be valid for any purpose.
B-4
<PAGE> 140
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in
its individual capacity has caused this Class B Certificate to be duly executed.
DAIMLER-BENZ AUTO GRANTOR
TRUST 1997-A
By: CITIBANK, N.A.,
as Trustee
By:
---------------------------------
Name:
Title:
DATED:
-----------------------
[SEAL]
ATTEST:
- ------------------
Authorized Officer
B-5
<PAGE> 141
This is one of the Class B Certificates referred to in the
within-mentioned Agreement.
CITIBANK, N.A., as Trustee
By:
------------------------------
Authorized Officer
B-6
<PAGE> 142
REVERSE OF CERTIFICATE
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, the Trustee or any affiliate of any of them. The
Certificates are limited in right of payment to certain collections and
recoveries respecting the Receivables, all as more specifically set forth in the
Agreement. A copy of the Agreement may be examined during normal business hours
at the principal office of the Trustee, and at such other places, if any,
designated by the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller and the Trustee with the consent of the Holders of Class A
Certificates and Class B Certificates, each voting as a class, evidencing not
less than a majority of the Class A Principal Balance and Class B Principal
Balance, respectively. Any such consent by the Holder of this Certificate shall
be conclusive and binding on such Holder and on all future Holders of this
Certificate and of any Certificate issued upon the transfer hereof or in
exchange herefor or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Agreement also permits the amendment thereof, in
certain limited circumstances, without the consent of the Holders of any of the
Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, in the Borough
of Manhattan, The City of New York, accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Certificate Registrar duly
executed by the Holder hereof or such Holder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate interest in the Trust will be issued to the
designated transferee.
The Class B Certificates are issuable only as registered Certificates
without coupons in denominations of $1000 and integral multiples thereof. As
provided in the Agreement
B-7
<PAGE> 143
and subject to certain limitations therein set forth, Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of transfer or
exchange, but the Trustee may require payment of a sum sufficient to cover any
tax or governmental charges payable in connection therewith.
The Trustee, the Certificate Registrar, and any agent of the Trustee
or the Certificate Registrar may treat the person in whose name this Class B
Certificate is registered as the owner hereof for all purposes, and neither the
Trustee, the Certificate Registrar, nor any such agent shall be affected by any
notice to the contrary.
The obligations and responsibilities created by the Agreement and the
Trust created thereby shall terminate upon the payment to Certificateholders of
all amounts required to be paid to them pursuant to the Agreement and the
disposition of all property held as part of the Trust. The Servicer of the
Receivables may at its option purchase the corpus of the Trust at a price
specified in the Agreement, and such purchase of the Receivables and other
property of the Trust will effect early retirement of the Certificates; however,
such right of purchase is exercisable only following the last day of any
Collection Period as of which the Pool Balance is equal to or less than 10% of
the Original Pool Balance of the Receivables.
The recitals contained herein (other than the certificate of
authentication herein) shall be taken as the statements of the Seller or the
Servicer, as the case may be, and the Trustee assumes no responsibility for the
correctness thereof. The Trustee makes no representations as to the validity or
sufficiency of this Certificate (other than the certificate of authentication
herein), or of any Receivable or related document.
B-8
<PAGE> 144
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells,
assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- -----------------------------------------------------------------------
(Please print or typewrite name and address, including postal
zip code, of assignee)
- -----------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing
- ----------------------------------------------------------------------- Attorney
to transfer said Certificate on the books of the Certificate Registrar, with
full power of substitution in the premises.
Dated:
*
-----------------------
Signature Guaranteed:
*
-----------------------
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Such signature must be
guaranteed and the guarantor of the signature must be acceptable to the transfer
agent.
B-9
<PAGE> 145
EXHIBIT C
FORM OF SERVICER'S CERTIFICATE
The undersigned certifies that he is a [title] of Mercedes-Benz
Credit Corporation, a corporation in good standing under the laws of the state
of its incorporation (the "Company"), and that as such he is duly authorized to
execute and deliver this certificate on behalf of the Company pursuant to
Section 3.8 of the Pooling and Servicing Agreement, dated as of ,
1997, among the Company, in its individual capacity and as Servicer,
Daimler-Benz Vehicle Receivables Corporation, as Seller, and Citibank, N.A., as
Trustee, Payahead Agent, Class A Agent and Class B Agent, of the Daimler-Benz
Auto Grantor Trust 1997-A (the "Pooling and Servicing Agreement") (all
capitalized terms used herein without definition have the respective meanings
specified in the Pooling and Servicing Agreement), and further certifies that:
1. The Servicer's report for the period from __________ to
____________ attached to this certificate is complete and accurate and
contains all information required by Section 3.8 of the Pooling and
Servicing Agreement; and
2. As of the date hereof, no Event of Servicing Termination
or event that with notice or lapse of time or both would become an
Event of Servicing Termination has occurred.
IN WITNESS WHEREOF, I have affixed hereunto my signature and the
corporate seal of the Company this ______ day of ____________, 19__.
_________________, for and on
behalf of
MERCEDES-BENZ CREDIT
CORPORATION
By: _________________________
Name:
Title:
C-1
<PAGE> 146
EXHIBIT E
Dated as of
, 1997
SHORTFALL AMOUNT AGREEMENT
Daimler-Benz Vehicle Receivables Corporation
1201 North Market Street, Suite 1406
Wilmington, Delaware 19801
Ladies and Gentlemen:
We (the "Seller") hereby confirm arrangements made as of the date
hereof with you (the "Purchaser") to be effective upon (i) receipt by the Seller
of the enclosed copy of this letter agreement (the "Shortfall Amount
Agreement"), executed by the Purchaser, and (ii) execution of the Purchase
Agreement dated as of , 1997 (the "Purchase Agreement"), between
the Seller and the Purchaser, and payment of the purchase price thereunder.
1. On or prior to the Determination Date preceding each Distribution
Date, the Servicer shall notify the Purchaser and the Seller of the Shortfall
Amounts for such Distribution Date.
2. In consideration of the purchase price paid under the Purchase
Agreement, the Seller agrees to establish the Class A Reserve Fund pursuant to
the Pooling and Servicing Agreement, dated as of , 1997 (the
"Pooling and Servicing Agreement") among the Seller in its individual capacity
and as Servicer, the Purchaser, and Citibank, N.A., as Trustee, Payahead Agent,
Class A Agent and Class B Agent and make a payment of the Shortfall Amounts to
the Purchaser, or to any assignee of the Purchaser referred to in Section 5
hereof, on each Distribution Date if and to the extent that such amounts shall
not have been paid at or prior to 12:00 noon, New York City time, pursuant to
subsection 4.7(f) of the Pooling and Servicing Agreement because of the insuf-
E-1
<PAGE> 147
Daimler-Benz Vehicle
Receivables Corporation
, 1997
Page 2
ficiency of amounts on deposit in the Class A Reserve Fund.
3. All payments pursuant hereto shall be made by federal wire
transfer (same day) funds or in immediately available funds, to such account as
the Purchaser, or any assignee of the Purchaser referred to in Section 5 hereof,
may designate in writing to the Seller prior to the relevant Distribution Date.
4. Our agreements set forth in this Shortfall Amount Agreement are
our primary obligations and such obligations are irrevocable, absolute and
unconditional, shall not be subject to any counterclaim, setoff or defense
(other than full and strict compliance by us with our obligations hereunder) and
shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstances or condition
whatsoever.
5. The Purchaser will sell, transfer, assign and convey its interest
in this Shortfall Amount Agreement to the Daimler-Benz Auto Grantor Trust 1997-A
(the "Trust"), and the Seller hereby acknowledges and consents to such sale,
transfer, assignment and conveyance. In addition, the Seller hereby agrees, for
the benefit of the Trust, that following such sale, transfer, assignment and
conveyance this Shortfall Amount Agreement shall not be amended, modified or
terminated without the consent of the Trustee.
6. THIS SHORTFALL AMOUNT AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
7. Except as otherwise provided herein, all demands, notices and
communications under this Shortfall Amount Agreement shall be in writing,
personally delivered, sent by facsimile, sent by courier or mailed by certified
mail, return receipt requested, and shall be deemed to have been duly given upon
receipt by the Pur-
E-2
<PAGE> 148
Daimler-Benz Vehicle
Receivables Corporation
, 1997
Page 3
chaser or the Seller. All notices shall be directed as set forth below, or to
such other address or to the attention of such other person as the relevant
party shall have designated for such purpose in a written notice.
The Purchaser:
Daimler-Benz Vehicle Receivables Corporation
1201 North Market Street
Suite 1406
Wilmington, Delaware 19801
Attention: Harvey S. Traison
Facsimile #: (302) 426-6520
The Seller:
Mercedes-Benz Credit Corporation
201 Merritt 7, Suite 700
Norwalk, Connecticut 06856-5425
Attention: David A. Klanica
Facsimile #: (203) 845-7542
8. This Shortfall Amount Agreement may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, all
of which shall be deemed to be one and the same document.
9. Capitalized terms used herein but not otherwise defined shall
have the meanings assigned thereto in the Pooling and Servicing Agreement.
E-3
<PAGE> 149
Daimler-Benz Vehicle
Receivables Corporation
, 1997
Page 4
If the foregoing satisfactorily sets forth the terms and conditions
of our agreement, please indicate your acceptance thereof by signing in the
space provided below and returning to us the enclosed duplicate original of this
letter.
Very truly yours,
MERCEDES-BENZ CREDIT
CORPORATION
By: _______________________
Name: _________________
Title: ________________
Agreed and accepted as of , 1997.
DAIMLER-BENZ VEHICLE
RECEIVABLES CORPORATION
By: _______________________
Name: _________________
Title: ________________
E-4
<PAGE> 150
EXHIBIT F
SERVICING GUARANTY AGREEMENT
This SERVICING GUARANTY AGREEMENT ("Guaranty Agreement") is executed
as of the ____ day of , 1997 by DAIMLER-BENZ NORTH AMERICA
CORPORATION, a corporation organized and existing under the laws of the State of
Delaware (the "Guarantor"), in favor of CITIBANK, N.A., as trustee (the
"Trustee") of Daimler-Benz Auto Grantor Trust 1997-A.
PRELIMINARY STATEMENTS
Daimler-Benz Vehicle Receivables Corporation, as seller (the
"Seller"), Mercedes-Benz Credit Corporation ("MBCC"), in its individual capacity
and as servicer (the "Servicer"), Citibank, N.A., as Payahead Agent, Class A
Agent, Class B Agent and as the Trustee are entering into a Pooling and
Servicing Agreement (the "Servicing Agreement") dated as of , 1997,
pursuant to which up to $ of % Asset Backed Certificates, Class A and
Class B (the "Certificates") will be issued;
The Guarantor is the owner of 100% of the capital stock of MBCC; and
It is a condition precedent to the Servicer's right to retain
collections on the Receivables for its personal use prior to each Distribution
Date that the Guarantor execute this Guaranty Agreement and deliver it to the
Trustee.
In consideration of the execution of the Servicing Agreement by the
Trustee and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
1. Definitions. Unless otherwise defined in this Guaranty Agreement,
all defined terms used in this Guaranty Agreement, including the Preliminary
Statements
F-1
<PAGE> 151
hereof, shall have the meanings ascribed to such terms in the Servicing
Agreement.
2. Guaranty of Obligations. The Guarantor unconditionally guarantees
the full and timely performance of all of the obligations of MBCC as Servicer to
make required remittances on each Distribution Date pursuant to subsections
4.1(d) and 4.2(a) of the Servicing Agreement (the "Obligations").
3. Validity of Obligations; Irrevocability. The Guarantor agrees
that its obligations under this Guaranty Agreement shall be unconditional,
irrespective of (i) the validity, enforceability, discharge, disaffirmance,
settlement or compromise (by any Person other than the Trustee, including a
trustee in bankruptcy or other similar official) of the Obligations or of the
Servicing Agreement, (ii) the absence of any attempt to collect the Obligations
from MBCC or any guarantor, (iii) the waiver or consent by the Trustee with
respect to any provision of any instrument evidencing the Obligations, (iv) any
change of the time, manner or place of payment or performance, or any other term
of any of the Obligations, (v) any law, regulation or order of any jurisdiction
affecting any term of any of the Obligations or rights of the Trustee with
respect thereto, (vi) the failure by the Trustee to take any steps to perfect
and maintain perfected its interest in the Receivables or other property
acquired by the Trustee from the Seller or any security or collateral related to
the Obligations, or (vii) any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. The
Guarantor agrees that the Trustee shall be under no obligation to marshall any
assets in favor of or against or in payment of any or all of the Obligations.
The Guarantor further agrees that, to the extent that MBCC makes a payment or
payments to the Trustee, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to MBCC, its estate, trustee, receiver or any other
party, including without limitation, the Guarantor, under any bankruptcy,
insolvency or similar state or federal law, common law or equitable cause, then
to the extent of such payment or repayment, the Obligation or part thereof which
has been paid, reduced or satisfied by such amount shall be reinstated and
continued in full force and effect as of the
F-2
<PAGE> 152
date such initial payment, reduction or satisfaction occurred. The Guarantor
waives all presentments, demands for performance, notices of dishonor and
notices of acceptance of this Guaranty. The Guarantor agrees that its
obligations under this Guaranty shall be irrevocable.
4. Representations and Warranties. The Guarantor hereby represents
and warrants to the Trustee, as of the date hereof, as follows:
(a) Organization, etc. The Guarantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power, authority and legal right to own or lease
all of its properties and assets, to carry on its business as it is now being
conducted and to execute, deliver and perform this Guaranty Agreement. The
Guarantor is duly qualified as a foreign corporation in good standing under the
laws of each other jurisdiction in which the nature of its business requires
such qualification and in which failure to so qualify would render this Guaranty
Agreement unenforceable or would have a material adverse effect on the
Guarantor's ability to perform its obligations under this Guaranty Agreement.
(b) Authorization; Valid Agreement. The execution, delivery
and performance of this Guaranty Agreement has been duly authorized by all
required corporate or other action on the part of the Guarantor, and this
Guaranty Agreement constitutes the legal, valid and binding obligation of the
Guarantor, enforceable in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
(c) No Conflicts. The execution, delivery and performance by
the Guarantor of this Guaranty Agreement does not and will not (a) contravene
its charter or by-laws, (b) in any material respect, violate any provision of,
or require any filing, registration, consent or approval under, any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to the Guarantor, (c) result in a
material breach of or constitute a material default or require any consent under
any
F-3
<PAGE> 153
material indenture or loan or credit agreement or any other material agreement,
lease or instrument to which the Guarantor is a party or by which it or its
properties may be bound or affected or (d) result in, or require, the creation
or imposition of any material lien upon or with respect to any of the properties
now owned or hereafter acquired by the Guarantor.
(d) No Proceedings. There are no proceedings or investigations
pending or, to the best knowledge of the Guarantor, threatened against the
Guarantor before any governmental authority (a) asserting the invalidity of this
Guaranty Agreement, (b) seeking to prevent the consummation of the transactions
contemplated by this Guaranty Agreement, (c) seeking any determination or ruling
that would materially adversely affect the performance by the Guarantor of its
obligations under this Guaranty Agreement or (d) seeking any determination or
ruling that would materially adversely affect the validity or enforceability of
this Guaranty Agreement.
IN WITNESS WHEREOF, this Guaranty Agreement has been duly executed
by the Guarantor as of the ____ day of , 1997.
DAIMLER-BENZ NORTH AMERICA
CORPORATION
By______________________________
Name:
Title:
By______________________________
Name:
Title:
Acknowledged and accepted
as of the ____ day of
, 1997
CITIBANK, N.A.
as Trustee
By________________________
Name:
Title:
F-4
<PAGE> 154
EXHIBIT G-1
TRANSFER CERTIFICATE
In connection with a transfer of Class B Certificates (the "Certificates")
issued under the Pooling and Servicing Agreement dated as of , 1997 (the
"Agreement"), among Daimler-Benz Vehicle Receivables Corporation, as Seller,
Mercedes-Benz Credit Corporation, as Servicer and in its individual capacity,
and Citibank, N.A., as Trustee, Class A Agent, Class B Agent and Payahead Agent,
the undersigned confirms that, without utilizing any general solicitation or
general advertising, the Certificates are being transferred:
CHECK ONE BOX BELOW
(1) / / to a person that the undersigned reasonably believes is a
"qualified institutional buyer" within the meaning of Rule
144A under the Securities Act of 1933, as amended (the
"Securities Act"), that is purchasing for its own account or
for the account of a "qualified institutional buyer", that is
aware that the transfer is being made in reliance on Rule 144A
and that is delivering to the Certificate Registrar a
Representation Letter in the form of Exhibit G-2 to the
Agreement;
(2) / / to an institutional investor that is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act that is delivering to the Certificate
Registrar a Representation Letter in the form of Exhibit G-3
to the Agreement; or
(3) / / to a person that the undersigned reasonably believes is not
a "U.S. person" within the meaning of Regulation S under the
Securities Act that is delivering to the Certificate Registrar
a Representation Letter in the form of Exhibit G-4 to the
Agreement.
G-1-1
<PAGE> 155
Unless one of the boxes is checked, the Certificate Registrar will refuse to
register any of the Certificates in the name of any person other than the
registered holder thereof; provided, however, that if box (2) is checked, the
Seller may require, prior to registering any such transfer of the Certificates,
in its sole discretion, such legal opinions, certifications and other
information as the Seller may reasonably request to confirm that such transfer
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act.
Capitalized terms used herein which are not defined herein shall
have the meanings used in the Agreement.
Date: ______________
Signature: ____________________
NAME OF TRANSFEROR
By:___________________________
Name:_________________________
Title:________________________
G-1-2
<PAGE> 156
EXHIBIT G-2
Form of Purchaser's Letter for
Qualified Institutional Buyers
Under Rule 144A
Daimler-Benz Vehicle
Receivables Corporation
1201 North Market Street
Suite 1406
Wilmington, Delaware 19801
Citibank, N.A.,
as Certificate Registrar
Re: Daimler-Benz Auto Grantor Trust 1997-A
Ladies and Gentlemen:
In connection with our proposed purchase of Class B Certificates (the
"Certificates") issued under the Pooling and Servicing Agreement dated as
of , 1997 (the "Agreement"), among Daimler-Benz Vehicle Receivables
Corporation, as Seller, Mercedes-Benz Credit Corporation, as Servicer and in
its individual capacity, and Citibank, N.A., as Trustee, Class A Agent, Class B
Agent and Payahead Agent, the undersigned (the "Purchaser") represents, warrants
and agrees that:
1. The Purchaser is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act"); it is purchasing the Certificates for its own account or for
the account of a "qualified institutional buyer" and not with a view to any
resale, distribution or other disposition of the Certificates in violation of
the United States securities laws; it is aware that the sale to it is being made
in reliance on Rule 144A; it has received such information regarding the
Certificates, the Agreement and the Trust (as defined in the Agreement) as it
has requested pursuant to Rule 144A or has determined not to request such
information; and it is aware that the transferor of the Certificates is relying
upon the Purchaser's foregoing representations in
G-2-1
<PAGE> 157
order to claim the exemption from registration provided by Rule 144A.
2. The Purchaser agrees, on its own behalf and on behalf of any
account for which it is acting, that should it sell, pledge or otherwise
transfer any Certificates, it will do so only (a) to a "qualified institutional
buyer" in accordance with Rule 144A that delivers to the Certificate Registrar a
representation letter in the form of this letter, (b) to an institutional
investor that is an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that delivers to the Certificate
Registrar a representation letter in the form of Exhibit G-3 to the Agreement,
or (c) to a person that is not a "U.S. person" in accordance with Regulation S
that delivers to the Certificate Registrar a representation letter in the form
of Exhibit G-4 to the Agreement.
3. Either (a) the Purchaser is not (i) an employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), whether or not it is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"), or (iii) an entity
that is using "plan assets" (as defined in Title 29 C.F.R. Section 2510.3-101)
by reason of a plan's investment in such entity, or (b) the Purchaser is
described in any of clause (3)(a)(i), (ii) or (iii), and represents that
(assuming less than 25% of the principal amount of the Class B Certificates is
held by entities described in clause (3)(a)(i), (ii) or (iii)) the purchase and
holding of the Certificates will either not constitute a "prohibited
transaction" within the meaning of section 406 of ERISA or section 4975 of the
Code, or there is a regulatory or administrative exemption available for such
prohibited transaction. If the Purchaser is making the representation contained
in clause (3)(b) of the preceding sentence, the Purchaser has so informed the
Seller, the Trustee and the Certificate Registrar prior to the date hereof.
4. The Purchaser [is/is not] described in any of clause (3)(a)(i),
(ii) or (iii) above.
G-2-2
<PAGE> 158
5. The Purchaser is purchasing the Certificates through ___________
as its nominee if applicable.
6. The Purchaser [is/is not] a Person (other than a benefit plan
investor) who has discretionary authority or control with respect to the assets
of the Trust or a Person who provides investment advice for a fee (direct or
indirect) with respect to such assets, or an affiliate of such a Person.
Capitalized terms used herein which are not defined herein shall
have the meanings used in the Agreement.
Dated:_______________
Very truly yours,
---------------------------
NAME OF PURCHASER
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
NOTE: To be executed by
an executive officer
G-2-3
<PAGE> 159
EXHIBIT G-3
Form of Purchaser's Letter for
Institutional Accredited Investors
Daimler-Benz Vehicle
Receivables Corporation
1201 North Market Street
Wilmington, Delaware 19801
Citibank, N.A.,
as Certificate Registrar
Re: Daimler-Benz Auto Grantor Trust 1997-A
Ladies and Gentlemen:
In connection with our proposed purchase of Class B Certificates (the
"Certificates") issued under the Pooling and Servicing Agreement dated as
of , 1997 (the "Agreement"), among Daimler-Benz Vehicle Receivables
Corporation, as Seller, Mercedes-Benz Credit Corporation, as Servicer and in its
individual capacity, and Citibank, N.A., as Trustee, Class A Agent, Class B
Agent and Payahead Agent, the undersigned (the "Purchaser") represents, warrants
and agrees that:
1. The Purchaser understands that the Certificates have not been, and
will not be, registered under the Securities Act of 1933, as amended (the
"Securities Act"), or any state securities laws and may not be sold except as
permitted in the following sentence. The Purchaser agrees that should it sell,
pledge or otherwise transfer any Certificates, it will do so only (a) to a
"qualified institutional buyer" in accordance with Rule 144A under the
Securities Act that delivers to the Certificate Registrar a representation
letter in the form of Exhibit G-2 to the Agreement, (b) to an institutional
investor that is an "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that delivers to the Certificate
Registrar a representation letter in the form of this letter or (c) to a person
that is not a "U.S. person" in accordance with Regulation S that delivers to the
Certif-
G-3-1
<PAGE> 160
icate Registrar a representation letter in the form of Exhibit G-4 to the
Agreement. The Purchaser further agrees, in the capacities stated above, that it
will provide to any person purchasing any of the Certificates from the Purchaser
a notice advising such person that resales of the Certificates are restricted as
stated herein, and that it will not make any general solicitation or
advertisement in connection with any resale of the Certificates.
2. The Purchaser understands that, on any proposed resale of any
Certificates, the Purchaser will be required to furnish to the Certificate
Registrar such certifications, legal opinions and other information as the
Certificate Registrar may reasonably require to confirm that the proposed sale
is being made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act. The Purchaser further
understands that the Certificates purchased by the Purchaser will bear a legend
to the foregoing effect.
3. The Purchaser is an institutional investor and an "accredited
investor" (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act). The Purchaser has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its
investment in the Certificates and the Purchaser is able to bear the economic
risk of its investment.
4. The Purchaser is acquiring the Certificates for its own account
for investment purposes and not with a view to, or for offer or sale in
connection with, any distribution in violation of the Securities Act.
[5. The Purchaser has received the Private Placement Memorandum
dated _______ relating to the private placement of the Certificates and the
Purchaser has received such other information as it deems necessary in order to
make its investment decision.]
6. Either (a) the Purchaser is not (i) an employee benefit plan
(within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), whether or not it is subject to the
provisions of Title I of ERISA, (ii) a plan described in Section 4975(e)(1) of
the Internal Revenue Code of 1986, as amended (the "Code"), or (iii) an entity
that is using "plan assets"
G-3-2
<PAGE> 161
(as defined in Title 29 C.F.R. Section 2510.3-101) by reason of a plan's
investment in such entity, or (b) the Purchaser is described in any of clause
(6)(a)(i), (ii) or (iii), and represents that (assuming less than 25% of the
principal amount of the Class B Certificates is held by entities described in
clause (6)(a)(i), (ii) or (iii)) the purchase and holding of the Certificates
will either not constitute a "prohibited transaction" within the meaning of
section 406 of ERISA or section 4975 of the Code, or there is a regulatory or
administrative exemption available for such prohibited transaction. If the
Purchaser is making the representation contained in clause (6)(b) of the
preceding sentence, the Purchaser has so informed the Seller, the Trustee and
the Certificate Registrar prior to the date hereof.
7. The Purchaser [is/is not] described in any of clause (6)(a)(i),
(ii) or (iii) above.
8. The Purchaser is purchasing the Certificates through ___________
as its nominee if applicable.
9. The Purchaser [is/is not] a Person (other than a benefit plan
investor) who has discretionary authority or control with respect to the assets
of the Trust or a Person who provides investment advice for a fee (direct or
indirect) with respect to such assets, or an affiliate of such a Person.
Capitalized terms used herein which are not defined herein shall
have the meanings used in the Agreement.
Dated:__________________
Very truly yours,
NAME OF PURCHASER
---------------------------
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
G-3-3
<PAGE> 162
EXHIBIT G-4
Form of Purchaser's Letter for
Non-U.S. Persons
Under Regulation S
Daimler-Benz Vehicle
Receivables Corporation
1201 North Market Street
Suite 1406
Wilmington, Delaware 19801
Citibank, N.A.,
as Certificate Registrar
Re: Daimler-Benz Auto Grantor Trust 1997-A
Ladies and Gentlemen:
In connection with our proposed purchase of Class B Certificates (the
"Certificates") issued under the Pooling and Servicing Agreement dated as
of , 1997 (the "Agreement"), among Daimler-Benz Vehicle Receivables
Corporation, as Seller, Mercedes-Benz Credit Corporation, as Servicer and in its
individual capacity, and Citibank, N.A., as Trustee, Class A Agent, Class B
Agent and Payahead Agent, the undersigned (the "Purchaser") represents, warrants
and agrees that:
1. The Purchaser is not a "U.S. person" within the meaning of
Regulation S under the Securities Act of 1933, as amended (the "Securities
Act").
2. The Purchaser agrees, on its own behalf and on behalf of any
account for which it is acting, that should it sell, pledge or otherwise
transfer any Certificates, it will do so only (a) to a "qualified institutional
buyer" in accordance with Rule 144A that delivers to the Certificate Registrar a
representation letter in the form of Exhibit G-2 to the Agreement, (b) to an
institutional investor that is an "accredited investor" within the meaning of
Rule 501(a)(1), (2), (3) or (7) under the Securities Act that delivers to the
Certificate Registrar a representation
G-4-1
<PAGE> 163
letter in the form of Exhibit G-3 to the Agreement, or (c) to a person that is
not a "U.S. person" in accordance with Regulation S that delivers to the
Certificate Registrar a representation letter in the form of this letter.
3. The Purchaser is purchasing the Certificates through ___________
as its nominee if applicable.
Capitalized terms used herein which are not defined herein shall
have the meanings used in the Agreement.
Dated:_______________
Very truly yours,
NAME OF PURCHASER
---------------------------
By:
---------------------------
Name:
---------------------------
Title:
---------------------------
NOTE: To be executed by
an executive officer
G-4-2
<PAGE> 164
EXHIBIT G-5
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER ANY STATE SECURITIES LAWS. THE HOLDER
HEREOF, BY PURCHASING THIS CERTIFICATE, AGREES THAT THIS CERTIFICATE MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (1) TO A PERSON THAT THE
SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A "QUALIFIED INSTITUTIONAL BUYER", THAT IS AWARE THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A AND THAT
DELIVERS TO THE CERTIFICATE REGISTRAR UNDER THE POOLING AND SERVICING AGREEMENT
DATED AS OF , 1997 AMONG DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION, AS
SELLER, MERCEDES-BENZ CREDIT CORPORATION, AS SERVICER AND IN ITS INDIVIDUAL
CAPACITY, AND CITIBANK, N.A., AS TRUSTEE, CLASS A AGENT, CLASS B AGENT, AND
PAYAHEAD AGENT, (THE "AGREEMENT"), A REPRESENTATION LETTER IN THE FORM OF
EXHIBIT G-2 TO THE AGREEMENT, (2) TO AN INSTITUTIONAL INVESTOR THAT IS AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) or (7)
UNDER THE SECURITIES ACT THAT DELIVERS TO THE CERTIFICATE REGISTRAR A
REPRESENTATION LETTER IN THE FORM OF EXHIBIT G-3 TO THE AGREEMENT, OR (3) TO A
PERSON THAT IS NOT A U.S. PERSON WITHIN THE MEANING OF REGULATION S THAT
DELIVERS TO THE CERTIFICATE REGISTRAR A REPRESENTATION LETTER IN THE FORM OF
EXHIBIT G-4 TO THE AGREEMENT. THE HOLDER MUST, PRIOR TO ANY TRANSFER PURSUANT TO
CLAUSE (2) ABOVE, FURNISH TO THE CERTIFICATE REGISTRAR SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE SELLER MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
G-5-1
<PAGE> 165
TABLE OF CONTENTS
ARTICLE I
Definitions.......................................................... 1
SECTION 1.1. Definitions............................................ 1
SECTION 1.2. Usage of Terms......................................... 25
SECTION 1.3. Calculations........................................... 25
SECTION 1.4. References............................................. 25
SECTION 1.5. Section References..................................... 26
SECTION 1.6. Action by or Consent of Certificateholders............. 26
ARTICLE II
The Trust and Trust Property......................................... 27
SECTION 2.1. Creation of Trust...................................... 27
SECTION 2.2. Conveyance of Trust Property........................... 27
SECTION 2.3. Acceptance by Trustee.................................. 27
SECTION 2.4. Representations and Warranties of the Seller
as to the Receivables.......................................... 28
SECTION 2.5. Repurchase upon Breach................................. 32
SECTION 2.6. Custody of Receivable Files............................ 33
SECTION 2.7. Duties of Servicer as Custodian........................ 34
SECTION 2.8. Instructions; Authority to Act......................... 35
SECTION 2.9. Custodian's Indemnification............................ 35
SECTION 2.10. Effective Period and Termination...................... 36
ARTICLE III
Administration and Servicing of the Trust Property................... 37
SECTION 3.1. Duties of Servicer..................................... 37
SECTION 3.2. Collection of Receivable Payments...................... 41
SECTION 3.3. Realization upon Receivables........................... 42
SECTION 3.4. Maintenance of Security Interests in Financed
Vehicles....................................................... 43
SECTION 3.5. Covenants of Servicer.................................. 43
SECTION 3.6. Purchase by Servicer upon Breach....................... 44
SECTION 3.7. Servicing Compensation................................. 44
SECTION 3.8. Servicer's Certificate................................. 45
SECTION 3.9. Annual Statement as to Compliance...................... 45
SECTION 3.10. Annual Independent Certified Public
Accountants' Reports........................................... 46
SECTION 3.11. Access to Certain Documentation and
Information Regarding Receivables.............................. 46
SECTION 3.12. Reports to the Commission............................. 47
SECTION 3.13. Reports to the Rating Agency.......................... 47
i
<PAGE> 166
ARTICLE IV
Distributions; Reserve Funds; Statements to Certificateholders....... 48
SECTION 4.1. Accounts............................................... 48
SECTION 4.2. Collections............................................ 50
SECTION 4.3. Application of Collections............................. 52
SECTION 4.4. Advances............................................... 52
SECTION 4.5. Additional Deposits.................................... 53
SECTION 4.6. Distributions.......................................... 53
SECTION 4.7. Subordination; Reserve Funds; Priority of
Distributions.................................................. 57
SECTION 4.8. Net Deposits........................................... 65
SECTION 4.9. Statements to Class A Certificateholders and
Class B Certificateholders..................................... 65
SECTION 4.10. Delivery of Eligible Investments................... 67
ARTICLE V
Reserved
..................................................................... 69
ARTICLE VI
The Certificates..................................................... 70
SECTION 6.1. The Certificates....................................... 70
SECTION 6.2. Authentication of Certificates......................... 70
SECTION 6.3. Registration of Transfer and Exchange of
Certificates................................................... 71
SECTION 6.4. Mutilated, Destroyed, Lost or Stolen Certificates...... 74
SECTION 6.5. Persons Deemed Owners.................................. 74
SECTION 6.6. Access to List of Certificateholders' Names
and Addresses.................................................. 75
SECTION 6.7. Maintenance of Office or Agency........................ 75
SECTION 6.8. Book Entry Certificates................................ 75
SECTION 6.9. Notices to Clearing Agency............................. 77
SECTION 6.10. Definitive Certificates............................... 77
ARTICLE VII
The Seller........................................................... 79
SECTION 7.1. Representations and Warranties of Seller............... 79
SECTION 7.2. Liability of Seller; Indemnities....................... 81
SECTION 7.3. Merger or Consolidation of, or Assumption of
the Obligations of, Seller..................................... 82
SECTION 7.4. Limitation on Liability of Seller...................... 83
SECTION 7.5. Seller May Own Certificates............................ 83
SECTION 7.6. Limitation on Incurrence of Indebtedness............... 83
ii
<PAGE> 167
ARTICLE VIII
The Servicer......................................................... 84
SECTION 8.1. Representations and Warranties of Servicer............. 84
SECTION 8.2. Liability of Servicer; Indemnities..................... 86
SECTION 8.3. Merger or Consolidation of, or Assumption of
the Obligations of, Servicer................................... 87
SECTION 8.4. Limitation on Liability of Servicer.................... 88
SECTION 8.5. Servicer Not to Resign................................. 89
SECTION 8.6. Servicer May Own Certificates.......................... 89
ARTICLE IX
Servicing Termination................................................ 90
SECTION 9.1. Events of Servicing Termination........................ 90
SECTION 9.2. Trustee to Act; Appointment of Successor
Servicer....................................................... 92
SECTION 9.3. Effect of Servicing Transfer........................... 93
SECTION 9.4. Notification to Certificateholders..................... 94
SECTION 9.5. Waiver of Past Events of Servicing Termination......... 94
ARTICLE X
The Trustee.......................................................... 95
SECTION 10.1. Duties of Trustee..................................... 95
SECTION 10.2. Trustee's Certificate................................. 97
SECTION 10.3. Trustee's Assignment of Purchased Receivables......... 97
SECTION 10.4. Certain Matters Affecting the Trustee................. 98
SECTION 10.5. Trustee Not Liable for Certificates or Receivables....100
SECTION 10.6. Trustee May Own Certificates..........................101
SECTION 10.7. Trustee's Fees and Expenses...........................101
SECTION 10.8. Indemnity of Class A Agent, Class B Agent and
Payahead Agent.................................................102
SECTION 10.9. Eligibility Requirements for Trustee..................102
SECTION 10.10. Resignation or Removal of Trustee....................103
SECTION 10.11. Successor Trustee....................................104
SECTION 10.12. Merger or Consolidation of Trustee...................104
SECTION 10.13. Appointment of Co-Trustee or Separate Trustee........105
SECTION 10.14. Representations and Warranties of Trustee............107
SECTION 10.15. Reports by Trustee...................................107
SECTION 10.16. Tax Returns..........................................108
SECTION 10.17. Trustee May Enforce Claims Without
Possession of Certificates.....................................108
SECTION 10.18. Suits for Enforcement................................108
iii
<PAGE> 168
SECTION 10.19. Rights of Certificateholders to Direct
Trustee........................................................109
ARTICLE XI
Termination..........................................................110
SECTION 11.1. Termination of the Trust..............................110
SECTION 11.2. Optional Purchase of All Receivables..................111
ARTICLE XII
Miscellaneous Provisions.............................................113
SECTION 12.1. Amendment.............................................113
SECTION 12.2. Protection of Title to Trust..........................115
SECTION 12.3. Limitation on Rights of Certificateholders............118
SECTION 12.4. GOVERNING LAW.........................................119
SECTION 12.5. Notices...............................................119
SECTION 12.6. Severability of Provisions............................120
SECTION 12.7. Assignment............................................120
SECTION 12.8. Certificates Nonassessable and Fully Paid.............120
SECTION 12.9. Further Assurances....................................120
SECTION 12.10. No Waiver; Cumulative Remedies.......................121
SECTION 12.11. Third-Party Beneficiaries............................121
SECTION 12.12. Actions by Certificateholders........................121
SECTION 12.13. Counterparts.........................................121
SECTION 12.14. Agent for Service....................................122
SECTION 12.15. No Bankruptcy Petition...............................122
SCHEDULES
Schedule I - Schedule Of Receivables..............................I-1
Schedule II - Location Of Receivable Files........................II-1
EXHIBITS
Exhibit A - Form of Class A Certificate......................... A-1
Exhibit B - Form of Class B Certificate......................... B-1
Exhibit C - Form of Servicer's Certificate...................... C-1
Exhibit D - Form of Depository Agreement........................ D-1
Exhibit E - Form of Shortfall Amount Agreement.................. E-1
Exhibit F - Form of Servicing Guaranty Agreement................ F-1
Exhibit G-1 - Form of Transfer Certificate...................... G-1-1
Exhibit G-2 - Form of Purchaser's Letter for
Qualified Institutional Buyers
Under Rule 144A................................... G-2-1
Exhibit G-3 - Form of Purchaser's Letter for
Institutional Accredited
Investors......................................... G-3-1
iv
<PAGE> 169
Exhibit G-4 - Form of Purchaser's Letter for
Non-U.S. Persons Under Regulation S............. G-4-1
Exhibit G-5 - Form of Legend for Class B
Certificates.................................... G-5-1
v
<PAGE> 1
October __, 1997
Daimler-Benz Vehicle Receivables Corporation
1201 Market Street, 14th Floor
Wilmington, DE 19801
Re: Daimler-Benz Auto Grantor Trust 1997-A
Ladies and Gentlemen:
We have acted as counsel to Daimler-Benz Vehicle Receivables Corporation (the
"Company") in connection with the proposed issuance by Daimler-Benz Auto Grantor
Trust 1997-A, a trust originated by the Company, of asset-backed certificates
(the "Certificates") in a public offering being registered with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, pursuant
to a registration statement of the Company on Form S-1 (Registration No.
333-35525), as amended to the date hereof (the "Registration Statement"). Any
capitalized term not defined herein shall have the same meaning ascribed to it
in the Registration Statement.
We have examined originals or copies certified to our satisfaction of such
corporate records, agreements, instruments and other documents as we have deemed
necessary in order to render the opinion expressed below. In such examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity with the originals of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all facts material
to the opinion expressed below that have not been independently established, we
have relied upon certificates of officers and representatives of the Company and
Mercedes-Benz Credit Corporation.
The opinion expressed below is limited to the laws of the State of New York and
the federal laws of the United States of America, and we express no opinion on
the effect on the matters covered by such opinion of the laws of any other
jurisdiction.
<PAGE> 2
Daimler-Benz Vehicle Receivables Corporation
October __, 1997
Page 2
Based upon and subject to the foregoing, we are of the opinion that the
Certificates have been duly and validly authorized by the Company, and when the
Certificates are issued and sold as contemplated by the Agreement, they will be
legally issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to be named therein.
Very truly yours,
/s/ MORGAN, LEWIS & BOCKIUS LLP
<PAGE> 1
October __, 1997
Daimler-Benz Vehicle Receivables Corporation
1201 Market Street, 14th Floor
Wilmington, DE 19801
Re: Daimler-Benz Auto Grantor Trust 1997-A
Ladies and Gentlemen:
We have acted as special tax counsel to Daimler-Benz Vehicle Receivables
Corporation (the "Company") in connection with the proposed issuance by
Daimler-Benz Auto Grantor Trust 1997-A, a trust to be formed pursuant to a
Pooling and Servicing Agreement to be entered into among the Company, as Seller,
Mercedes-Benz Credit Corporation, in its individual capacity and as Servicer,
and Citibank, N.A., as Trustee, Payahead Agent, Class A Agent and Class B Agent,
of asset-backed certificates in a public offering being registered with the
Securities and Exchange Commission under the United States Securities Act of
1933, as amended (the "Securities Act"), pursuant to a registration statement of
the Company on Form S-1 (Registration No. 333-35525), as amended to the date
hereof (the "Registration Statement"). Capitalized terms used herein and not
otherwise defined herein have the respective meanings ascribed to them in the
Registration Statement.
In arriving at the opinion expressed below, we have examined originals or copies
certified to our satisfaction of such corporate records, agreements, instruments
and other documents as we have deemed necessary in order to render the opinion
expressed below.
In our examination, we have assumed the authenticity of original documents, the
accuracy of copies and the genuineness of signatures. We understand and assume
that (i) any agreement which we have examined will represent the valid and
binding obligation of the respective parties thereto, enforceable in accordance
with its respective terms, and the entire agreement between the parties with
respect to the subject matter thereof, (ii) the parties to each such agreement
will comply with all of their respective covenants, agreements and undertakings
<PAGE> 2
Daimler-Benz Vehicle Receivables Corporation
October __, 1997
Page 2
contained therein, and (iii) the transactions provided for by each such
agreement will be carried out in accordance with its terms.
Our opinion is based upon existing United States federal income tax laws,
regulations, administrative pronouncements and judicial decisions. All such
authorities are subject to change, either prospectively or retroactively. No
assurance can be provided as to the effect of any such change upon our opinion.
Based upon and subject to the foregoing, we hereby confirm the opinion referred
to in the first sentence under the sub-heading "Tax Status as a Grantor Trust;
Scope of Tax Opinion" and, furthermore, we are of the opinion that the
descriptions of matters of law and legal conclusions set forth in the
Registration Statement under the heading "Certain Federal Income Tax
Consequences" are correct in all material respects. While such descriptions
discuss the material anticipated United States federal income tax consequences
applicable to certain Class A Certificate Owners, they do not purport to discuss
all federal income tax consequences and our opinion is limited to those federal
income tax consequences specifically discussed therein.
In giving the foregoing opinion, we express no opinion other than as to the
federal income tax law of the United States of America.
We are furnishing this letter in our capacity as counsel to the Company and this
letter is solely for the Company's benefit. This letter is not to be used,
circulated, quoted or otherwise referred to for any other purpose, except as set
forth below.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and we further consent to the use of our name under the
captions "Prospectus Summary - Tax Status" and "Certain Federal Income Tax
Consequences" in the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required to be filed with the Registration Statement under the provisions of the
Securities Act or the rules and regulations promulgated thereunder.
Very truly yours,
/s/ MORGAN, LEWIS & BOCKIUS LLP
<PAGE> 1
PURCHASE AGREEMENT
This Purchase Agreement is made as of the ___ day of October, 1997, by and
between MERCEDES-BENZ CREDIT CORPORATION, a Delaware corporation (the "Seller"),
having its principal executive office at 201 Merritt 7, Suite 700, Norwalk,
Connecticut 06856-5425, and DAIMLER-BENZ VEHICLE RECEIVABLES CORPORATION, a
Delaware corporation (the "Purchaser"), having its principal executive office at
1201 North Market Street, Wilmington, Delaware 19801.
WHEREAS, in the regular course of its business, the Seller purchases
certain retail installment contracts for, and retail loans evidenced by notes
secured by, new and used Mercedes-Benz automobiles from motor vehicle dealers.
WHEREAS, the Seller and the Purchaser wish to set forth the terms pursuant
to which the Receivables (as hereinafter defined) are to be sold by the Seller
to the Purchaser, which Receivables will be transferred by the Purchaser,
pursuant to the Pooling and Servicing Agreement (as hereinafter defined), to the
Daimler-Benz Auto Grantor Trust 1997-A (the "Trust") to be created thereunder,
which Trust will issue certificates representing fractional undivided interests
in such Receivables and the other property of the Trust (the "Certificates").
NOW, THEREFORE, in consideration of the foregoing and the mutual terms and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Agreement shall have the meanings assigned to
such terms in the Pooling and Servicing Agreement. As used in this Agreement,
the following terms shall, unless the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Agreement" shall mean this Purchase Agreement and all amendments hereof
and supplements hereto.
"Assignment" shall mean an assignment in the form of Exhibit A hereto.
"Pooling and Servicing Agreement" shall mean the Pooling and Servicing
Agreement dated as of the date hereof by and among Mercedes-Benz Credit
Corporation, in its individual capacity and as servicer, the Purchaser, as
seller, and Citibank, N.A., as trustee, as payahead agent and as agent for the
holders of the Class A Certificates and the Class B Certificates.
<PAGE> 2
"Prospectus" shall have the meaning assigned to such term in the
Underwriting Agreement.
"Receivable" shall mean each retail installment contract which appears on
Exhibit B hereto and all amendments thereof and supplements thereto.
"Receivables Purchase Price" shall mean $_______________.
"Schedule of Receivables" shall mean the list of Receivables annexed
hereto as Exhibit B.
"Underwriting Agreement" shall mean the Underwriting Agreement dated
October __, 1997 by and between J.P. Morgan Securities Inc., as representative
of the Underwriters, the Purchaser, as seller, and Daimler-Benz North America
Corporation.
"Underwriters" shall mean the several underwriters listed in Schedule I to
the Underwriting Agreement.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 Purchase and Sale of Receivables.
(a) Sale of Receivables. On the Closing Date, subject to the terms
and conditions of this Agreement, the Seller shall sell, transfer, assign and
otherwise convey to the Purchaser, without recourse, and the Purchaser shall
purchase, all right, title and interest of the Seller, whether now owned or
hereafter acquired, in and to the following: (i) the Receivables, and all monies
due thereunder on or after the Cutoff Date (including any monies received prior
to the Cutoff Date that are due on or after the Cutoff Date and were not used to
reduce the principal balance of the Receivables but excluding Excess Amounts);
(ii) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables; (iii) all of the Seller's rights to receive
proceeds from claims on physical damage, credit life and disability insurance
policies covering Financed Vehicles or the Obligors; (iv) the rights of recourse
of the Seller against Dealers arising out of breaches by Dealers with respect to
the Receivables; (v) all of the Seller's rights to all documents contained in
the Receivable Files; and (vi) all proceeds of any and all of the foregoing. The
sale, transfer, assignment and conveyance made hereunder shall not constitute
and is not intended to result in an assumption by the Purchaser of any
obligation of the Seller to the Obligors, the Dealers or any other Person in
connection with the Receivables and the property transferred under this Section
2.1(a) or any agreement, document or instrument related thereto.
-2-
<PAGE> 3
(b) Receivables Purchase Price. In consideration for the Receivables
and other properties described in Section 2.1(a), the Purchaser shall, on the
Closing Date, pay to the Seller the Receivables Purchase Price. An amount equal
to $_____________ of the Receivables Purchase Price shall be paid to the Seller
in cash. The remaining $_____________ of the Receivables Purchase Price shall be
deemed paid and returned to the Purchaser and be considered a contribution to
the capital of the Purchaser. The portion of the Receivables Purchase Price to
be paid in cash shall be paid by federal wire transfer (same day) funds to such
account in New York, New York as the Seller shall designate.
2.2 The Closing. The sale and purchase of the Receivables shall take place
at a closing (the "Closing") at the offices of Skadden, Arps, Slate, Meagher &
Flom LLP, 919 Third Avenue, New York, New York 10022 on the Closing Date,
simultaneously with the closings under: (a) the Pooling and Servicing Agreement
pursuant to which the Purchaser will transfer to the Trust all of the
Purchaser's right, title and interest in and to the Receivables and other
property described in Section 2.1(a) in exchange for the Class A Certificates
and Class B Certificates; and (b) the Underwriting Agreement, pursuant to which
the Purchaser will sell to the Underwriters the Class A Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Purchaser. The Purchaser makes
the following representations and warranties:
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of Delaware.
(b) Power and Authority. The Purchaser has the power and authority
to execute and deliver this Agreement and to carry out its terms. The Purchaser
has full power and authority to purchase the property to be sold and assigned by
the Seller and has duly authorized such purchase by all necessary corporate
action; and the execution, delivery and performance of this Agreement has been
duly authorized by the Purchaser by all necessary corporate action.
(c) Binding Obligations. This Agreement constitutes the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except as enforceability may be eliminated by
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles.
(d) No Violation. The execution, delivery and performance by the
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby and the
-3-
<PAGE> 4
fulfillment of the terms hereof do not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without notice or
lapse of time) a default under, the certificate of incorporation or bylaws of
the Purchaser, or conflict with, or breach any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under, any
indenture, agreement, mortgage, deed of trust or other instrument to which the
Purchaser is a party or by which the Purchaser is bound or any of its properties
are subject, or result in the creation or imposition of any lien upon any of its
properties pursuant to the terms of any such indenture, agreement, mortgage,
deed of trust or other instrument or violate any law, order, rule or regulation,
applicable to the Purchaser or its properties, of any federal or state
regulatory body, any court, administrative agency, or other governmental
instrumentality having jurisdiction over the Purchaser or any of its properties.
(e) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Purchaser, threatened, before any court,
regulatory body, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Purchaser or its properties: (a)
asserting the invalidity of this Agreement, (b) seeking to prevent the
consummation of any of the transactions contemplated by this Agreement, or (c)
seeking any determination or ruling that might materially and adversely affect
the performance by the Purchaser of its obligations under, or the validity or
enforceability of, this Agreement.
3.2 Representations and Warranties of the Seller
(a) The Seller makes the following representations and warranties to
the Purchaser:
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties shall be
currently owned and such business is currently conducted, and had at all
relevant times, and has, power, authority, and legal right to acquire and
own the Receivables.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications, except where the failure of the Seller to so
qualify or obtain such licenses or approvals would not have a material
adverse effect on the Seller or any Receivable.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms. The Seller has full power and authority to sell and assign the
property to be sold and assigned to the Purchaser and has duly authorized
such sale and assignment to the
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Purchaser by all necessary corporate action; and the execution, delivery,
and performance of this Agreement have been duly authorized by the Seller
by all necessary corporate action.
(iv) Valid Sale; Binding Obligations. This Agreement and the
Assignment effect a valid sale, transfer, and assignment of the
Receivables and the other property conveyed by the Seller to the Purchaser
hereunder, enforceable against creditors of and purchasers from the
Seller; and this Agreement and the Assignment constitute legal, valid and
binding obligations of the Seller, enforceable against the Seller in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles.
(v) No Violation. The execution, delivery and performance by
the Seller of this Agreement and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the certificate of incorporation or bylaws of the Seller, or conflict
with, or breach any of the terms or provisions of, or constitute (with or
without notice or lapse of time) a default under, any indenture,
agreement, mortgage, deed of trust or other instrument to which the Seller
is a party or by which the Seller is bound or any of its properties are
subject, or result in the creation or imposition of any lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, or violate any law, order,
rule, or regulation, applicable to the Seller or its properties, of any
federal or state regulatory body, any court, administrative agency, or
other governmental instrumentality having jurisdiction over the Seller or
any of its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of the Seller, threatened,
before any court, regulatory body, administrative agency, or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties: (a) asserting the invalidity of this Agreement,
(b) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement, or (c) seeking any determination or ruling
that might materially and adversely affect the performance by the Seller
of its obligations under, or the validity or enforceability of, this
Agreement.
(b) The Seller makes the following representations and warranties as
to the Receivables on which the Purchaser relies in accepting the Receivables.
Such representations and warranties speak as of the execution and delivery of
this Agreement, but shall survive the
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sale, transfer, and assignment of the Receivables to the Purchaser and the
subsequent assignment and transfer pursuant to the Pooling and Servicing
Agreement:
(i) Characteristics of Receivables. Each Receivable (a) was
originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business,
was fully and properly executed by the parties thereto, was purchased by
the Seller from such Dealer under an existing Dealer Agreement with the
Seller, was validly assigned by such Dealer to the Seller, (b) contains
customary and enforceable provisions such that the rights and remedies of
the holder thereof shall be adequate for realization against the
collateral of the benefits of the security, (c) provides for level monthly
payments (provided that the payment in the first or last month in the life
of the Receivable may be minimally different from the level payment) that
fully amortize the Amount Financed by maturity and yields interest at the
APR of such Receivable, (d) is a retail installment contract, (e) is
secured by a Financed Vehicle, and (f) except to the extent any Receivable
may become a Prepaid Receivable, provides for allocation of payments in
accordance with the Actuarial Method.
(ii) Schedule of Receivables. The information set forth in
Exhibit B to this Agreement was true and correct in all material respects
as of the opening of business on the Cutoff Date, and no selection
procedures believed by the Seller to be adverse to the Certificateholders
were utilized in selecting the Receivables.
(iii) Compliance with Law. Each Receivable and the sale of the
related Financed Vehicle complied at the time it was originated or made,
and complies at the execution of this Agreement, in all material respects
with all requirements of applicable federal, State, and local laws, and
regulations thereunder, including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair
Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal
Trade Commission Act, the Magnusson-Moss Warranty Act, the Federal Reserve
Board's Regulations B and Z, and State adaptations of the National
Consumer Act and of the Uniform Consumer Credit Code, and other consumer
credit laws and equal credit opportunity and disclosure laws.
(iv) Binding Obligation. To the best of the Seller's
knowledge, each Receivable represents the legal, valid, and binding
payment obligation in writing of the related Obligor, enforceable by the
holder thereof in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, reorganization, conservatorship,
receivership, liquidation or other similar laws
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affecting the enforcement of creditors' rights generally and by general
equitable principles.
(v) No Government Obligor. Neither the United States of
America nor any State or any agency, department, or instrumentality of the
United States of America or any State is an Obligor.
(vi) Security Interest in Financed Vehicle. To the best of
the Seller's knowledge, immediately prior to the sale, assignment, and
transfer of each Receivable to the Purchaser hereunder, such Receivable
shall be secured by a validly perfected first priority security interest
in the related Financed Vehicle in favor of the Seller as secured party.
Such security interest is being assigned by the Seller to the Purchaser
pursuant to this Agreement except that no certificate of title or
certificate of ownership with respect to such Financed Vehicle has been or
will be amended to identify the Purchaser as a secured party. At such time
as enforcement of such security interest is sought, there shall exist a
valid, subsisting and enforceable first priority security interest in such
Financed Vehicle. The foregoing representations and warranties with
respect to perfection and enforceability of a security interest in a
Financed Vehicle do not cover statutory or other liens arising after the
Closing Date by operation of law or any rights of third parties arising
after the Closing Date as a result of the fraud or forgery of the vehicle
owner or administrative error by state recording officials which are prior
to such security interest.
(vii) No Defenses. No right of rescission, setoff,
counterclaim, or defense has been asserted or, to the best of the Seller's
knowledge, threatened with respect to any Receivable.
(viii) No Liens. To the best of Seller's knowledge, no liens
or claims have been field for work, labor, or materials relating to a
Financed Vehicle that are liens prior to, or equal or on a parity with,
the secured interest in the Financed Vehicle granted by the related
Receivable.
(ix) No Default, Repossession. Except for payment defaults
continuing for a period of not more than thirty days as of the Cutoff
Date, to the best of the Seller's knowledge, no default, breach,
violation, or event permitting acceleration under the terms of any
Receivable and no event that with notice or the lapse of time would
constitute such a default, breach, violation, or event permitting
acceleration under the terms of any Receivable has occurred; and no
Financed Vehicle was repossessed on or prior to the Cutoff Date.
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(x) Insurance. The Seller, in accordance with its
customary procedures, has determined that each Obligor has obtained or
agreed to obtain physical damage insurance covering such Obligor's
Financed Vehicle.
(xi) Title. It is the intention of the Seller that the
transfer and assignment of the Receivables herein contemplated constitute
a sale of the Receivables from the Seller to the Purchaser and that the
beneficial interest in and title to the Receivables not be part of the
Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. No Receivable has been sold,
transferred assigned, or pledged by the Seller to any Person other than
the Purchaser. The Seller is transferring title to each Receivable free
and clear of all Liens and rights of others and has perfected such
transfer under the UCC.
(xii) Valid Assignment. No Receivable was originated in, or
is subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under this Agreement is
unlawful, void, or voidable. The Seller has not entered into any agreement
with any Obligor that prohibits, restricts or conditions the assignment of
any portion of the Receivables.
(xiii) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Purchaser a first priority perfected security interest in the Receivables
have been made.
\ (xiv) Chattel Paper. Each Receivable constitutes "chattel
paper" as defined in the UCC.
(xv) One Original. There is only one original executed copy
of each Receivable.
(xvi) Principal Balance. Each Receivable had a remaining
Principal Balance as of the Cutoff Date of not more than $__________ and
not less than $______.
(xvii) No Bankrupt Obligors. To the best of the Seller's
knowledge, no Obligor under any Receivable was, as of the Cutoff Date, the
subject of a proceeding under the Bankruptcy Code of the United States or
was bankrupt.
(xviii) New and Used Vehicles. Approximately ___% of the
aggregate Principal Balance of the Receivables, constituting ___% of the
Receivables as of the Cutoff Date relate to new Financed Vehicles, and the
remainder of the Receivables represented used Financed Vehicles.
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(xix) Maturity of Receivables. Each Receivable had a
remaining maturity, as of the Cutoff Date, of not more than __ months and
an original maturity of not more than __ months.
(xx) Annual Percentage Rate. Each Receivable has an APR of
at least ___% and not more than ____%.
(xxi) Payments. No Receivable had a payment that was more
than 30 days overdue as of the Cutoff Date.
(xxii) Billing Address. The Obligor under each Receivable had
a current billing address in the United States as of the Cutoff Date.
ARTICLE IV
CONDITIONS
4.1 Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to purchase the Receivables is subject to the satisfaction of the
following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the Closing Date
with the same effect as if then made, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on
or prior to the Closing Date, indicate in its computer files that the
Receivables have been sold to the Purchaser pursuant to this Agreement and
deliver to the Purchaser the Schedule of Receivables certified by an officer of
the Seller to be true, correct and complete.
(c) Documents to be delivered by the Seller at the Closing.
(i) The Assignment. At the Closing, the Seller will execute
and deliver the Assignment.
(ii) Evidence of UCC Filing. On or prior to the Closing Date,
the Seller shall record and file, at its own expense, a UCC-1 financing
statement in each jurisdiction in which it is required by applicable law,
executed by the Seller, as seller or debtor, and naming the Purchaser, as
purchaser or secured party, naming the Receivables and the other property
conveyed hereunder as collateral, meeting the requirements of the laws of
each such jurisdiction and in such manner as is necessary to perfect the
sale, transfer, assignment and
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conveyance of such Receivable to the Purchaser. The Seller shall deliver a
file- stamped copy, or other evidence satisfactory to the Purchaser of
such filing, to the Purchaser on or prior to the Closing Date.
(iii) Other Documents. Such other documents as the Purchaser
may reasonably request.
(d) Other Transactions. The transactions contemplated by the Pooling
and Servicing Agreement shall be consummated on the Closing Date.
4.2 Conditions to Obligation of the Seller. The obligation of the Seller
to sell the Receivables to the Purchaser is subject to the satisfaction of the
following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Purchaser shall have
performed all obligations to be performed by it hereunder on or prior to the
Closing Date.
(b) Receivables Purchase Price. On the Closing Date, the Purchaser
will deliver to the Seller the Receivables Purchase Price, as provided in
Section 2.1(b).
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows, provided, however, that
to the extent that any provision of this ARTICLE V conflicts with any provision
of the Pooling and Servicing Agreement, the Pooling and Servicing Agreement
shall govern:
5.1 Protection of Right, Title and Interest.
(a) The Seller shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain, and
protect the interest of the Purchaser in the Receivables and in the proceeds
thereof. The Seller shall deliver (or cause to be delivered) to the Purchaser
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) The Seller shall not change its name, identity or corporate
structure in any manner that would, could, or might make any financing statement
or continuation statement filed by the Seller in accordance with Section 5.1(a)
above seriously misleading within the meaning of Section 9-402(7) of the UCC,
unless it shall have given the Purchaser at least five days' prior written
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notice thereof and shall have promptly filed appropriate amendments to all
previously filed financing statements or continuation statements.
(c) The Seller shall give the Purchaser at least 60 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment.
5.2 Costs and Expenses. The Seller agrees to pay all reasonable costs and
disbursements in connection with the perfection, as against all third parties,
of the Purchaser's right, title and interest in and to the Receivables.
5.3 Indemnification. The Seller shall indemnify and hold harmless the
Purchaser from and against any and all taxes that may at any time be asserted
against the Purchaser with respect to the transactions contemplated herein,
including, without limitation, any sales, gross receipts, general corporation,
tangible personal property, privilege, or license taxes and costs and expenses
in defending against the same except for income, franchise or other taxes
measured by net income. These indemnity obligations shall be in addition to any
obligation that the Seller may otherwise have.
5.4 Sale. The Seller agrees to treat this conveyance for all purposes
(including without limitation tax and financial accounting purposes) as a sale
on all relevant books, records, tax returns, financial statements and other
applicable documents.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1 Obligations of Seller. The obligations of the Seller under this
Agreement shall not be affected by reason of any invalidity, illegality or
irregularity of any Receivable.
6.2 Repurchase upon Breach. The Purchaser shall inform the Seller
promptly, in writing, upon the discovery of any breach or failure to be true of
the representations and warranties made by the Seller pursuant to Section 3.2(b)
and, in the case of subsections 3.2(b)(iv), (vi), (vii), (ix) and (xvii), any
breach or failure which would have occurred if such warranty had not been made
to the best knowledge of the Seller. Unless the breach or failure shall have
been cured by the last day of the Collection Period which includes the 60th day
after the date on which the Seller becomes aware of, or receives written notice
from the Purchaser of, such breach or failure, the Seller shall repurchase from
the Purchaser any Receivable, the interests of the Purchaser in which are
materially and adversely affected by the breach or failure, on the Distribution
Date immediately following such Collection Period but with effect from the first
day of the Collection Period in which such Distribution Date occurs. In
consideration of the
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purchase of a Receivable hereunder, the Seller shall remit the Purchase Amount
of such Receivable to the Purchaser. The sole remedy of the Purchaser with
respect to a breach or failure to be true of the representations and warranties
made by the Seller pursuant to Section 3.2(b) shall be to require the Seller to
repurchase the relevant Receivable pursuant to this Section 6.2.
6.3 Purchaser's Assignment of Repurchased Receivables. With respect to all
Receivables purchased by the Seller pursuant to Section 6.2, the Purchaser shall
assign, without recourse, representation, or warranty, to the Seller all the
Purchaser's right, title, and interest in and to such Receivables, and all
security and documents and all other property conveyed pursuant to Section
2.1(a) with respect to such Receivables. Such assignment shall be a sale and
assignment outright, and not for security. If, in any enforcement suit or legal
proceeding, it is held that the Seller may not enforce any such Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce the Receivable, the Purchaser and any transferee or assignee of the
Purchaser shall, at the expense of the Seller, take such steps as the Seller
deems necessary to enforce the Receivable, including bringing suit in the
Purchaser's name or in the name of any transferee or assignee of the Purchaser.
6.4 Trust. The seller acknowledges that: the Purchaser will, pursuant to
the Pooling and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Agreement to the Trustee for the benefit of the
Certificateholders. The Seller hereby consents to such sale and assignment.
6.5 Amendment. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Seller and the Purchaser.
6.6 Accountants' Letters.
(a) KPMG Peat Marwick will review the characteristics of the
Receivables described in the Schedule of Receivables hereto and will compare
those characteristics to the information with respect to the Receivables
contained in the Prospectus.
(b) The Seller will cooperate with the Purchaser and KPMG Peat
Marwick in making available all information and taking all steps reasonably
necessary to permit such accountants to complete the review set forth in Section
6.6(a) above and to deliver the letters required of them under the Underwriting
Agreement.
(c) KPMG Peat Marwick will deliver to the Purchaser a letter, dated
the date of the Prospectus, in the form previously agreed to by the Seller and
the Purchaser, with respect to the financial and statistical information
contained in the Prospectus under the caption "Delinquency and Loss Experience"
and with respect to such other information as may be agreed in the form of
letter.
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6.7 Waivers. No failure or delay on the part of the Purchaser in
exercising any power, right or remedy under this Agreement or the Assignment
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or remedy preclude any other or further exercise thereof
or the exercise of any other power, right or remedy.
6.8 Notices. All demands, notices and communications under this Agreement
shall be in writing, personally delivered, sent by telecopier, sent by courier
or mailed by certified mail, return receipt requested, and shall be deemed to
have been given upon receipt to either party at its address shown in the opening
portion of this Agreement or at such other address as may be designated by a
party by notice to the other party.
6.9 Costs and Expenses. The Seller will pay all expenses incident to the
performance of its obligations under this Agreement and the Seller agrees to pay
all reasonable out-of-pocket costs and expenses of the Purchaser, excluding fees
and expenses of counsel, in connection with the perfection as against third
parties of the Purchaser's right, title and interest in and to the Receivables
and the enforcement of any obligation of the Seller hereunder.
6.10 Confidential Information. The Purchaser agrees that it will neither
use nor disclose to any person the names and addresses of the Obligors, except
in connection with the performance by the Purchaser of its obligations, or the
enforcement of the Purchaser's rights, under this Agreement, the Receivables or
the Pooling and Servicing Agreement or as required by law.
6.11 Governing Law. THIS AGREEMENT AND THE ASSIGNMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES THEREOF, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES UNDER THIS AGREEMENT AND THE ASSIGNMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date and year first above written.
MERCEDES-BENZ CREDIT CORPORATION
By
----------------------------------
Name:
Title
DAIMLER-BENZ VEHICLE RECEIVABLES
CORPORATION
By
----------------------------------
Name:
Title
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<PAGE> 15
EXHIBIT A
ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as of
October __, 1997, between the undersigned and DAIMLER-BENZ VEHICLE RECEIVABLES
CORPORATION (the "Purchaser") (the "Purchase Agreement"), the undersigned does
hereby sell, assign transfer and otherwise convey unto the Purchaser, without
recourse, all right, title and interest of the undersigned whether nor owned or
hereafter acquired, in and to the following: (i) the Receivables, and all monies
due thereunder on or after the Cutoff Date (including any monies received prior
to the Cutoff Date that are due on or after the Cutoff Date and were not used to
reduce the Principal Balance of the Receivables but excluding Excess Amounts);
(ii) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables; (iii) all of the Seller's rights to receive
proceeds from claims on physical damage, credit life and disability insurance
policies covering Financed Vehicles or the Obligors; (iv) the rights of recourse
against Dealers arising out of breaches by Dealers with respect to the
Receivables; (v) all of the Seller's rights to all documents contained in the
Receivable Files; and (vi) all proceeds of any and all of the foregoing. The
foregoing sale does not constitute and is not intended to result in any
assumption by the Purchaser of any obligation of the undersigned to the
Obligors, insurers or any other person in connection with the Receivables,
Receivable Files, any insurance policies or any agreement or instrument relating
to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Purchase Agreement and is to be governed by the Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in or pursuant to the Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be duly
executed as of October __, 1997.
MERCEDES-BENZ CREDIT CORPORATION
By
---------------------------------
Name:
Title
<PAGE> 16
Exhibit B
Schedule of Receivables
DELIVERED TO PURCHASER
AT CLOSING
